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Building Principles: Construction Contracting
As a facility owner and operator, you are faced with the task of contracting with professionals and contractors on a regular basis to accomplish many of your maintenance and development needs. The importance of a contract, which is a legal agreement, is often overlooked because:
These are often the mindsets that set the stage for a very sour relationship with a contractor. How many times are you as the operator under the gun to complete a facility project where your primary concern is having it done before camp opens? The last thing on your mind may be the legal agreement between you and your contractor. This agreement is often analogous to a marriage, and everyone knows that for a marriage to be successful there must be an understanding and communication of the rules between both parties. Incorrect assumptions by any of the parties with no written backup spelling out the conditions, time frames, and project specifications are inherent in a verbal agreement and are destined for conflict. What steps, as an owner, operator, or director of a camp, should you take to insure that your expectations of your contractor, and more importantly your project, are properly conveyed and realized?
Read the Fine Print
Standards for Contracts
There are several published standards for contracts between owners and engineers and owners and contractors and standard agreements for the actual construction of the improvement. These are published by organizations such as The American Institute of Architects (AIA), the National Society of Professional Engineers (NSPE), and the Associated General Contractors of America (AGC) and are available for a relatively small cost. Although each document bears the slant of the organization that prepared it, they are time tested and offer a reasonable starting point for owner-contractor agreements.
A typical contract document for a construction project consists of several different sections. Generally it contains:
The agreement, bonds and insurance, and general conditions are what we refer in the industry as the “boiler plate,” since these sections are typically not modified from project to project. Your facility should have a standard “boiler plate” that it utilizes for each and every construction contract. The special provisions, specifications, and plans are the project specific portions of your project and are tailored to meet the demands of the scope of work and your facility. The project specific portions are as indicated project specific and can be prepared to varying degrees of detail depending on the project.
Bonds and insurance
Bonds can include bid, labor and material, performance, and maintenance bonds. For example, a bid bond may not typically be required by a camp facility, as it only provides a guaranty that the contractor will accept his bid if awarded. This provides some compensation for the owner (5 percent of the bid price, typically) if a contractor rescinds his bid. A performance bond, however, will protect your investment if the road that was built last fall falls apart in the following spring, after you have issued your final payment to the contractor. You can think of the performance bond as a materials and workmanship warranty, which is being insured by a third party. The performance bond will typically be in the amount of 100 percent of the contract price and provide a means for you to repair any work, which was not satisfactory. Remember that bonds will ultimately be a hidden cost, so be cognizant of what bonds you require in your contract.
These issues are extremely important no matter the size of the project, because they provide provisions and methods for handling what might otherwise be very sticky issues. These also help transfer liability from you and your facility to the contractor. Your contract must include details for time of completion, insurance, change orders, and dispute resolution.
Special provisions and/or supplementary conditions
Project specifications and contract plans
A Well-Written Contract Provides Protection
In the end, it is impossible to rub the crystal ball and predict what might go wrong during your construction or development project. No project is immune to problems, no matter how well written the agreement, or how carefully the plans are drawn. However, a thorough set of construction documents spells out the rules and provides for a fair method of dispute resolution. Combining your facilities experience with advice and support from professionals can tailor an agreement for each of your projects to help reduce the potential for change orders, cost overruns, scheduling problems, and liability.
Michael W. Weeks, PE, is a professional engineer with Camp Facilities Consulting providing study, design, permitting, and construction consultation services to the camp and conference center community. Camp personnel may contact him at 570-296-2765 or by e-mail at firstname.lastname@example.org.
Originally published in the 2002 May/June issue of Camping Magazine.