Contractual Front-End Planning

Contractual Front-End Planning: An Ounce of Prevention is Worth a Pound of Cure

By Bill Cotter

I had the good fortune to moderate a “virtual” roundtable discussion at the Association of Corporate Counsel’s Annual Meeting this past October. The discussion focused on avoiding perils that may trap unwary construction project owners. As the COVID-19 pandemic has persisted over the intervening months, and with the arrival of a vaccine, I find myself returning to a theme that resonated throughout the October discussion—that the effort invested to avoid an undesired outcome is preferable to the effort necessitated to respond to it.

In the context of a construction project the “ounce of prevention” is administered during the planning stages, and in several different ways:

Identify the Desired Project Delivery Method

Identifying what project delivery method will best serve the owner’s project goals should occur before design begins or as early as possible. For example, a design-build approach may be beneficial for a project with a tight schedule, while using a construction manager (at-risk or as agent) may be more appropriate for larger, more complicated projects. It is important to note that state statutes or the policies of a government entity may limit what project delivery methods can be used in the public sector. Where a project owner has the discretion to choose its desired delivery method, committing to that method as early as possible will promote a collaborative process throughout the design, budgeting, and bidding process, thus minimizing the likelihood of surprises on bid day. An additional benefit of effective front-end planning includes providing the appropriately customized General Conditions and Owner-Contractor agreements in the bid documents. This will ensure that all respondents are fully informed of the terms and conditions expected by the owner before submitting a proposal.

Ensure Shared Understanding of Project Scope and Contract Terms

Before design commences, the owner and architect should share a clear understanding of the project scope—what work will be done, in accordance with articulated standards and contract terms, and at what cost to the owner. Where a project is built is another critical early-phase consideration—a thorough pre-bid site evaluation will identify adverse site conditions that could prompt delays or remedial measures. It is important to remember that the most cost-effective time to make changes to a project is during the planning phase, not after construction has begun.

Establish Dispute Resolution Processes

Another important aspect of contractual front-end planning efforts is anticipating issues that may arise during the project and establishing ways to resolve them. Such issues can range from the predictable—weather impacts on construction projects—to unpredictable, force majeure events such as the onset of a global pandemic. With the end goals of completing the project on-time and on-budget, establishing how issues will be resolved when, (not if) they arise, will keep the project moving forward.

Focus on Due Diligence to Ensure a Highly Capable Team

A final, critical planning step for a project owner to take is to assemble a capable, qualified team. Vetting professional references and project experience is a key component of an evaluation process, for the design team as well as the construction team. A deep dive into bonding capacity and litigation history can serve owners well, especially during difficult economic times. As a former colleague once observed, likening construction projects to marriage, that the honeymoon period will end at some point, and it is important to partner with someone who will be there with you to the end (of the project).

Investing time before the first shovelful of dirt is turned, and capturing that effort in contracts with project team members, may allow a project owner to enjoy a successful project outcome, and avoid project-derailing errors that are painful and expensive to remedy.