review questions

Chapter 7 Contract Administration

Contract administration is all about managing the business details and relationships. When you consider all of the general conditions, supplemen‐ tal conditions, and specifications associated with the contract, you can understand what a challenge this is. Every statement and every clause in the contract sets forth rules, regulations, and procedures for every aspect of the construction process. Nothing goes forward without some paperwork leading the way: written requests for information, change orders, submittal logs, shop drawings, pay requests, lien waivers, progress reports, and on and on. Staying on top of it all is a huge task and a critical one.

It is virtually impossible for one person to accomplish the job; sup‐ port from the main office and the job site is required. Although one person may be the contract administrator, it takes the efforts of the entire project team to accomplish the task. From the notice to proceed to the certificate of completion, every notification, clarification, correc‐ tion, approval, request, change, letter, e‐mail, phone call, and admin‐ istrative transaction must be tracked. Without proper attention to the contract details, the whole job could end up in one big lawsuit. No mat‐ ter how good your concrete finishers or carpenters might be, you can’t really fulfill the requirements of the project without strong contract administration.

In This Chapter

◆◆ How you get questions answered ◆◆ How you make changes to the

contract ◆◆ How to maintain a reliable

paper trail ◆◆ How the contractor gets paid ◆◆ What to do when things go wrong

174 Chapter 7

Starting Off Right

By now, you are well aware that the owner of the project really sets the stage for how the construction game is going to be played. The owner establishes the project program (along with the architect), decides which project delivery method to use, and selects a contract form. Each of these decisions has an influence on how the players relate to one another in general terms. However, once everyone—architect, contractor, subcontractors, and vendors—is on board for the project, it is time to flesh out the details about how the team is going to work together for the duration of the project. It is very important that the owner take a leadership role in directing the team and make sure that everyone gets started on the right foot. Virtually all construction projects start with a formal preconstruction meeting led by the owner.

The Preconstruction Conference

The purpose of this initial meeting is to establish the rules by which the game is to be played and to clarify the lines of authority and communication. It is critically important that the owner’s representatives, the architect, the primary engineers, and the contractor’s project manager and supervisory staff be present at this first meeting. It is important to have the major subcontractors and vendors attend as well. There may even be some outside agencies that should be called in, especially if they have a substantial influence on the project, which they often do. Public utility personnel, fire marshals, and highway department representatives are some of the more common public agency players brought in on the initial discussions.

The agenda for this meeting usually covers all of the items listed in the general conditions and supplemental conditions of the contract (think back to Chapter 4, “The Construction Contract”) but in much greater detail. This initial precon‐ struction meeting is an opportunity for the parties to be introduced and primary relationships to be established. The agenda covers the fundamental administra‐ tive and coordination issues associated with the construction project. A number of common discussion items are listed next:

◆◆ Introductions and accountabilities ◆◆ Mobilization and site logistics

◆◆ Site access ◆◆ Temporary utilities ◆◆ Temporary facilities ◆◆ Site security ◆◆ Traffic and pedestrian issues

◆◆ Construction coordination issues ◆◆ Subcontracts

◆◆ Submittals

◆◆ Shop drawings

◆◆ Requests for information ◆◆ Schedule issues

◆◆ Notice to proceed ◆◆ Sequence of work ◆◆ Work hours ◆◆ Liquidated damages

◆◆ Payment issues ◆◆ Schedules of value

◆◆ Applications for payment ◆◆ Change orders and extra work ◆◆ Dispute issues

◆◆ Claims

◆◆ Alternative dispute resolution ◆◆ Completion procedures

◆◆ Substantial completion ◆◆ Final inspection ◆◆ Final payment

The Contract Administration Function

Contract administration has to do with the management of the details and informa‐ tion presented in the general and supplemental conditions of the contract and at the preconstruction meeting. Sometimes this role is handled by an individual identified as a contract administrator, and sometimes the function is handled by numerous individuals associated with the project team. For example, applications for payment are often handled by a contract administrator back at the main office, but requests for information and submittals are handled by field engineers located on the job site.

The need for a clear and accurate paper trail in construction is paramount, and the individuals charged with the contract administration duties must be particularly dedicated to the chore if the job is to move along smoothly. Poor performance here can be devastating. For example, inaccurate payment applications or delayed infor‐ mation attainment will cause havoc with the entire construction process. The work‐ flow will suffer and affect both the schedule and the budget. That of course puts the entire project at risk. So, you can see how important the contract administration function is to the overall project success even though it has very little to do with the actual bricks and sticks of building. You will get an even better sense of how these administrative and organizational issues impact the job in Chapter 8, “Construction Operations and Job Site Management.”

Contract Administration 175

176 Chapter 7

partnering

A team-building technique, calling upon the parties to the construction contract to establish a common set of project goals and objectives and develop a mutually acceptable pro- tocol for communication and conflict resolution through a formal agreement.

Keeping up with all of the paperwork and red tape of the contract is a real chal- lenge, and it cannot be taken lightly. Poor contract administration procedures are one of the main reasons that projects get into trouble. And if the project should go to court, the party with the most organized managerial procedures will win the majority of the time. The contractor must train all of his management personnel in good administrative practices.

Setting the Tone

The tone expressed by the owner and their representatives at the initial precon‐ struction meeting will set the tone for the entire project. I cannot stress enough how very important it is for this meeting to be conducted in a spirit of trust, coopera‐ tion, and fairness. Any hints of heavy‐handedness on the part of the owner or the architect will only cause distrust and apprehension on the part of the workforce. This is not the way to start off the job. Owners who understand the importance of setting a positive tone up front sometimes employ a team‐building technique called partnering. Partnering has been used successfully to build cooperative relationships between the owner, the design team, and the construction team on numerous proj‐ ects of every size and type, resulting in improved communication, speedier decision making, fewer change orders, improved quality, shorter schedules, lower costs, fewer disputes, less litigation, and higher satisfaction all around. Let me give you a brief synopsis of what partnering is and how it works.

Partnering

The concept of partnering is not new, but it really didn’t start showing up in the construction arena until the Army Corps of Engineers embraced it in 1988 on a project in Alabama. Then in January 1991, the Associated General Contractors of America (AGC) took hold of the Corps of Engineers’ concepts and started promoting the technique on a regular basis.

The reality of the traditional owner‐designer‐contractor relationship is this: the environment can often turn antagonistic and adversarial. The intent of part‐ nering is to gather together all stakeholders—owner, contractor, designers, sub‐ contractors, and material suppliers—early in the project to establish a mutually acceptable protocol for communication and conflict resolution through a formal agreement. The goal of partnering is to create a win‐win situation for all involved.

The partnering process itself starts with a few intensive planning meetings before the construction ever gets started. Led by a qualified facilitator, the team first develops a mission statement for the project. Then they knock out a charter identifying specific goals and objectives for the project. They continue by devel‐ oping an effective communication system, a reliable method for monitoring and evaluating the system, and, finally, an effective conflict resolution system. Once

this structure is in place, all members of the team confirm their commitment by signing a formal agreement.

The key to partnering is to embrace it as a process, not just a one‐ or two‐day event. It is an everyday practice that needs to be maintained and monitored through‐ out the duration of the project. For the partnering agreement to have meaning and merit, the leadership of the team must be steadfast in their commitment to the pro‐ cess. AGC defines seven essential elements of partnering for it to be successful:

· ◆◆  Commitment to partnering by the top management of every organization involved in the project

· ◆◆  Equity in considering all stakeholders’ interests to create shared goals and commitment by all stakeholders

· ◆◆  Trust among all parties through personal relationships and open communica‐ tion, with mutual sharing and understanding of each party’s risks and goals

· ◆◆  A partnering charter developed jointly by all parties that identifies specific mutual goals and objectives

· ◆◆  Implementation of mutual goals and a mechanism for problem solving

· ◆◆  Continuous evaluation based on the goals to ensure that the plan is proceed‐

ing as intended and all stakeholders are carrying their share of responsibilities

· ◆◆  Timely resolution of all disputes at the lowest level possible during the project

I will be the first to tell you that carrying a complex project from start to finish, while working with a wide array of personalities and diverse agendas, is no easy task. However, the proper implementation of partnering and other team‐building efforts before the work begins can help in a big way. Several studies have shown that partnered projects outperform nonpartnered projects in practically every cat‐ egory tested. Obviously, partnering is one way to set a tone that really works.

To learn more about partnering in construction, I recommend checking out Partnering: Changing Attitudes in Construction (Associated General Contractors of America, 1995) or Partnering Manual for Design and Construction by William C. Ronco and Jean S. Ronco (McGraw-Hill, 1996).

Who’s on First?

In any game, not only do you need to know what the rules are, but you also need to know who is playing what position. As stated earlier, construction presents new challenges every day, and as a construction manager, you must be prepared to take on these challenges. Well, you can’t do that all by yourself. You must depend on your team. And you can’t depend on your team unless you know who they are and how to get hold of them, fast.

Contract Administration 177

178

Chapter 7

T a b l e

7 . 1

The very first task in contract administration is to create a contact list for every single person associated with the project. That includes the owner of the project, the project architect, the project manager, the superintendent, the field engineer, every subcontractor, every vendor, every material supplier, the lumberyard foreman, and even the driver of the mobile lunch van. This list becomes the lifeline for the project; the communication chain is an integral part of the management plan. The contact list must contain all of the information needed to reach each person at any time, day or night. Office, cell, home, and fax numbers must be listed along with e‐mail addresses and mailing addresses. I have found that it is also a good idea to list secre‐ tary and assistant phone numbers as well.

Many issues come up on a project that require a fast response from exactly the right person in order to keep the work flowing. Solving problems doesn’t happen in a vacuum, and you can’t have too many contact numbers or too many people on your team. In addition to the contact list, it is important to know the specific accountabilities for the primary players on the list. Therefore, it is wise to also create a responsibility matrix as a quick reference for everyone on the project team. Table 7.1 illustrates a sample responsibility matrix.

One of the things that new field engineers get nervous about when they first go to work on the job site is their inexperience in construction. All of a sudden they go from working summers cleaning up construction debris for their father’s home-building business to being smack dab in the middle of a multimillion-dollar high-rise project somewhere. And on top of that, now they are actually account- able for something important. My advice to new recruits is always the same. “No one expects you to know everything there is to know about construction, but they do expect you to know where to go to get the information you need.”

Sample Responsibility Matrix

OWNER REPS (Peabody Industrial)	ARCHITECT (Keller & Hendricks)	UTILITIES (Various)	SUBCONTRACTORS (Various)
President Tom Peabody (805) 768-0674 (O) (805) 768-5220 (C)	Project Architect Sandra Keller (805) 891-1723 (O) (805) 891-4590 (C)	SO-CAL Electric Co. Diane Eppersen (805) 768-0674 (O) (805) 768-5220 (C)	Brian Hap Electric Brian Hap (805) 617-8944 (O) (805) 617-9332 (C)
Clerk of the Works Bob Stevens (805) 768-0098 (O) (805) 768-5411 (C)	Project Manager Ron Michaels (805) 891-2234 (O) (805) 891-1144 (C)	Cal State Gas Wayne Koppel (805) 268-0554 (O) (805) 268-1772 (C)	Thompson Mechanical Kyle Gibbons (805) 459-9008 (O) (805) 469-4571 (C)
Resident Manager Steve Bosco (805) 768-1134 (O) (805) 768-7604 (C)	Design Administrator George White (805) 891-8278 (O) (805) 891-7306 (C)	Beaumont Water/ Sewer John Dirk (805) 445-0974 (O) (805) 445-0610 (C)	Vander Excavation Mike Shepard (805) 768-3331 (O) (805) 768-8200 (C)

The one sure thing about construction is that problems are going to arise every single day on the job site. Regardless of your position on the team, you must be able to respond quickly when the problems arise. In construction man‐ agement, you don’t need to have all of the answers, but you do need to know where to find them. So, probably the most valuable tool in your tool belt is the telephone. The second is the contact list and responsibility matrix that you create for the project, and the third is your own personal “special resource” list created over time. (See the sidebar “Help Is Just a Phone Call Away.”)

Contract Administration 179

Help Is Just a Phone Call Away

Some of the most valuable resources that I had when working as a construction manager were ven- dors and manufacturers of products. Many problems that arise on a project stem from not knowing exactly how a material or product is going to react to various conditions.

For example, one time we were trying to install a synthetic concrete topping compound to about 20,000 square feet of an existing manufacturing plant floor. Having never used the product before, we read the installation instructions very carefully and proceeded to apply the material exactly as stipulated. Well, it wasn’t working. Even though we had scarified the floor, as directed, to give the product better “sticking” power, it would still just chip right off. We contacted the architect, the product manufacturer, and the owner. No one had a clue as to why it wasn’t working.

Finally, I called a friend of mine, Charlie, who was a sales rep for another manufacturer (not of the prod- uct that I was using). Charlie was an expert when it came to anything to do with concrete and concrete products. As soon as I told him what I was trying to do, the product I was using, and what was happen- ing, he immediately explained that the old concrete floor had probably been cleaned numerous times with a particular cleaning solution that had penetrated deep into the concrete. Therefore, I needed to spray the floor with a household vinegar and water solution before the topping compound would stick.

Sure enough, Charlie’s suggestion fixed the problem. Thank goodness for Charlie, and thank goodness for my “special” contact list! Charlie knew more about concrete problems than any person I had ever met in construction, and I knew that he would always help me out when I ran up against a problem I couldn’t solve. He always said, “All you need to do is ask.” It is a lesson that I learned early on in my career.

Spend time developing relationships with people who know more than you do and learn from them. There were a number of great people on my “special” contact list, and they helped me solve tough problems more than once in my career as a construction manager.

180 Chapter 7

request for information (RFI)

A written request for clarification regarding the details presented in the plans or specifications. The requests are usually made by subcontractors through the general contractor to the architect.

Coordinating Construction Details

You’ve probably heard the expression “The devil is in the details.” That couldn’t be truer than it is in construction. The amount of information that must be pro‐ cessed on a construction project is tremendous. It is probably one of the biggest and most arduous challenges of the job and one of the primary contract adminis‐ tration functions.

There are literally thousands of bits of information and approvals pertaining to the construction that must be checked and rechecked, clarified, and confirmed. Just think for a minute about the details that you would have to consider if you were to build a new home. Even though you already have decided upon the house design and have the plans in hand, there are still numerous decisions and approvals that you would have to make. (Those of you who have already built a home will know exactly what I am talking about!) For example, you would have to decide on and approve the color of the siding, color of the trim, color of the front door, door hardware style and finish, garage door style, type of garage door opener, type of windows, type of glass in the windows, roof shingle color, color of the gutters and downspouts, exterior lighting styles and finish, and so on. And we haven’t even moved to the interior of the house yet, where we would have to approve dozens of details regarding each room and its features. Then, of course, there are all of the technical approvals associated with the heating, air conditioning, electrical, plumb‐ ing, and other equipment. Do you get my drift? Multiply this process about 100 to 1,000 times, and you will get a sense of what it takes to manage and coordinate all of the approvals and information associated with the details of construction.

This is no easy task. Keeping things straight is a real challenge, and it is vital that this job be handled in the most expeditious way to keep the work moving along smoothly. For that reason, there are two key process tools that are used to track all of the inquiries, decisions, and approvals that occur during the con‐ struction process. They are requests for information (RFIs) and submittals.

Requests for Information (RFI)

Getting questions answered fast is one of the biggest challenges of the construction process. I know that this may seem like a very simple thing, but believe me—it is no simple thing! In construction there is a formal document used for asking ques‐ tions called the request for information (RFI). There is also a formal procedure for processing and keeping up with these forms. It is critical that every single inquiry and every single response be tracked and documented. There must be a clear and accurate paper trail to reference and confirm all correspondence related to requests for information, especially if there is a dispute over specific directives.

RFIs primarily stem from questions regarding the details of the design. They often originate from a craftsperson or subcontractor needing information or clarification from the designer to keep working. Most general contractors develop their own RFI forms and require their subcontractors to use the same form. This way, the information is consistent. A sample RFI is shown here.

Contract Administration 181

ABC Construction Company REQUEST FOR INFORMATION

Project: Spinnaker’s Restaurant RFI No. 042

Required Response Date: May 20, 2010 To: Tony Parisi

Parisi & McDylan Architects 1650 First Street, Suite 2A San Piatra, CA 96744 (701) 667-9871

Subject: Grout color in men’s & women’s restrooms

Description of Request: The finish schedule shown on sheet #A-17 indicates that the grout color for the men’s and women’s restrooms is to be "Buff #032." The specifications call for all tile grout to be "Charcoal #016" throughout. The tile setters will be starting tile work on May 25, 2004. Please advise regarding correct grout color.

Support Documents Attached: Drawings A-17, Spec Section 09310 REPLY: The grout in the Men’s and Women’s restrooms is to be Charcoal # 016 as indicated

in the specifications. Please correct the finish schedule to reflect this change. We assume that this change is a non-cost item.

Signed: Date: May 17, 2010 Parisi & McDylan Architects

From:

Date: May 14, 2010

A.L. Jackson ABC Construction 1400 Elm Grove Carpenter, CA 83347 (509) 711-8223

Many times, an RFI is of an urgent nature, meaning that the subcontractor needs the answer now! Unfortunately, the RFI process is cumbersome, slow, and a real source of frustration for everyone involved. And although technology has assisted with the actual tracking of the RFIs, we are still at the mercy of the “human response.” In other words, you still have to track down the person who can actually answer the question. There are instances where some minor piece of information ends up holding up a major portion of work. The job can be delayed

182 Chapter 7

submittals

Data, samples, details, colors, and product literature required by the terms of the contract to be presented to the architect by the contractor for approval prior to ordering and install- ing them.

mock-up

Physical models or small samples constructed to allow the architect and owner to review the appearance and function of materials, colors, textures, and other aesthetic features before incorporating them into the actual project.

and even stopped because of a failure to expedite RFI responses. Real schedule and budget issues with serious consequences can result if the process isn’t man‐ aged properly.

Some projects require few RFIs, as few as 10 or 15. And some projects are an RFI nightmare, requiring hundreds or even thousands of clarifications, correc‐ tions, or directions. It is usually the charge of an entry‐level field engineer to keep up with the communications, track their progress, and coordinate the results with the subcontractors and field personnel as required. Most field offices make use of electronic tracking systems, and RFI logs will be kept on the job site. As tedious as the job may sound, it is a critical contract administration function, and if you work in construction management, you will indeed get a turn at pro‐ cessing RFIs. Of this you can be certain!

Good RFI tracking methods have saved more than one contractor in a claims dispute, and poor tracking has sunk many a contractor as well. Some RFIs result in extra work and changes in the contract cost, but we’ll talk about this later in the chapter. When an RFI does result in a price adjustment, the process can take even longer because the estimators have to get involved.

Submittals

Submittals are similar to RFIs but are processed with a different purpose in mind. Submittals contain information concerning products and equipment that are to be used in the building of the project. Submittals provide a means by which the architect and owner can confirm the intent of the design. The architect checks for conformance with the plans and specs and confirms dimensions, colors, texture, sheen, pattern, details, and installation procedures. As a general rule, everything that will be installed in the facility requires a submittal.

Although many submittals consist of a simple catalog description, diagram, or data sheet, others are quite substantial. For example, if a building is to have brick as an exterior finish, a mock-up of the wall must be constructed for the architect’s approval. Sometimes the contractor has to build several mock‐ups with various colors and textures before they develop one that satisfies the designer and the owner.

The submittal process requires the same tenacity as the RFI process and must be managed as competently. It is a big chore; the project team must stay on top of the process, or it will get away from them in a hurry.

Shop Drawings

Many items associated with construction cannot be ordered out of a product cata‐ log or off the shelf. Many items have to be fabricated in a shop or manufactured

specifically for the job. In these instances, a special type of submittal called a shop drawing is required. Shop drawings include details, dimensions, and configura‐ tions of the item to be fabricated. Shop drawings are typically prepared by a sub‐ contractor or a vendor and then submitted to the general contractor for review. The general contractor sends them off to the architect for a final approval. The drawing moves back down the chain, eventually reaching the subcontractor or vendor, authorizing fabrication to begin. Steel rebar bends, steel beams, ornamen‐ tal handrails, trusses, and architectural woodwork are all examples of construc‐ tion products that require shop drawings.

Shop drawings require extra time to process, and this effort must be managed in a timely fashion. As a matter of fact, they are so important that they often show up on the construction schedule as a work item.

The Information Flow

RFIs, submittals, and shop drawings must all be routed up and down a similar approval chain. That approval chain is illustrated next. As with any associative pro‐ cess, the actions (or inactions) of one party clearly impact the actions of another. A bottleneck at any one of the stops along the way will most likely mean a delay in the work progress.

shop drawing

A supplemental drawing to the plans and specifications that details fabrica- tion methods, materials, and models of a product or installation associated with the project.

Contract Administration 183

Vendor prepares submittal.

Subcontractor reviews submittal.

Subcontractor submits to contractor.

Contractor reviews submittal.

Contractor submits to architect.

Architect reviews submittal for compliance.

Architect approves submittal.

Architect returns submittal to contractor.

Contractor returns submittal to subcontractor.

Subcontractor places order with vendor.

184 Chapter 7

Bottlenecks in the RFI, submittal, and shop drawing process are the scourge of construction management. Trying to stay on top of the flow of information up and down the chain is a huge challenge but a manageable one. The ability to expedite the process will increase the overall reliability of both the schedule and the budget. That’s why good contract administration is so important.

Nothing is more frustrating to the contractor than having to deal with paper‐ work that slows work progress. The temptation to bypass an approval or a change order is high. But whenever contractors decide to go forward without proper autho‐ rization, as they sometimes do, they are taking a risk that could backfire on them. On the other hand, if work is held up while they wait for authorization, the conse‐ quences could be even worse. It is a constant struggle between trying to maintain the schedule while dealing with administrative requirements that can drive you crazy. However, it is exactly the kind of struggle that the team has to face throughout the construction process.

Recently I was told by a large national contractor that they would no longer take on small school district projects because the owners were simply unable to manage the pace of the jobs and respond to RFIs in a timely fashion. This lack of management capability and decision‐making expediency placed too high a risk on the contractor, and the contractor was no longer willing to take on that risk.

In situations where an owner lacks the management experience and expertise to handle their own construction process, a professional construction management firm can be hired as an agent of the owner. The agency CM firm works with the general contractor on the owner’s behalf. This arrangement mitigates risks for both the owner and the contractor.

Getting Paid

One of the most important contract administration functions from the contrac‐ tor’s perspective is getting paid on time. This doesn’t just happen automatically. There is a formal payment request process involved that must be followed to the letter; otherwise, the payment request may be kicked back to the contractor, delaying receipt of the payment by a whole billing cycle. Missing even one pay‐ ment cycle can cause severe cash flow problems, especially for smaller contrac‐ tors or subcontractors, and can even jeopardize the solvency of a company.

Many construction projects are very, very large and represent millions and even hundreds of millions of dollars under a single contract with one general contrac‐ tor. For this reason, the perception is that all of this money is collected month after month and just sits around somewhere in a special contractor account, adding to

the company coffers—right? Wrong. The reality is that the money is just passing through the company accounts—coming in one end and going out the other. On a monthly basis, there is actually little or no revenue being retained during construc‐ tion. The payments made by the owner to the contractor are being passed directly on to the subcontractors doing the work and to the vendors and suppliers provid‐ ing the material on a monthly basis. Furthermore, the contractor gets paid only for work already completed. So in truth, most contractors are, in essence, fronting money to the owners, covering as much as 30 to 60 days of bills and expenses for work completed before receiving even one payment from the owner. This point is illustrated here.

Payments made to Work

Contract Administration 185

subs and vendors

completed

Bills from subs and vendors

Payment from owner received

30-day billing cycle

Application for payment

I hope you can see how critical it is for payment requests to be handled cor‐ rectly. Sloppy administrative work here means big trouble, especially on those multimillion‐dollar jobs. The superintendent and project team have enough to worry about just keeping the work going. They sure don’t need to be worrying about delayed payments or cash flow. Let’s take a little closer look at exactly how the payment request process works.

The Payment Request Process

Requests for payment are made by the contractor to the owner via the architect on a monthly basis. The project manager or contract administrator is usually responsible for compiling the request. The payment request is due by a certain day each month, usually at the end of the month (for example, the 25th day of each

186 Chapter 7

schedule of values

A budget template established early in the project against which progress payments are measured. The schedule summarizes the total project cost by the various divisions of work.

month). That means the project manager must determine a cutoff date (probably the 20th of each month) by which the project manager must receive all bills from subcontractors and vendors, and payroll data for self‐performed work, in order to meet the submittal deadline.

After the payment request is submitted, the architect reviews the applica‐ tion and either recommends it for payment by the owner or sends it back to the contractor for revisions. You do not want a payment request returned. Even the simplest revision can result in a missed payment, and not many contractors can absorb the financial hit. However, if everything goes well, the contractor should receive payment by the 10th of the following month if the pay request is submit‐ ted by the end of the current month. Unfortunately, this is not always the case, and some owners are notoriously late with their payments. Consistently late pay‐ ments not only put a financial strain on the contractor but also put a real strain on the contractor‐owner relationship.

Once the payment is received from the owner, the contractor is obligated to promptly pay their subcontractors and vendors. Many subcontractors run rela‐ tively small operations and cannot afford to wait longer than just a few days before receiving payment. In instances where the owner’s payment to the con‐ tractor is delayed, it is important that the contractor go ahead and pay their sub‐ contractors and vendors anyway. Delaying payments to smaller subcontractors can add a significant burden to an already stretched payroll and end up damag‐ ing this very important working relationship.

Owners who are slow payers get the attention of the construction community. Word gets around, and a slow-paying or cantankerous owner should not be surprised when there are few bidders on their future projects. This can be a real problem for owners because fewer bids usually mean less competition, and sometimes less competition results in higher bids. It’s not a good thing for an owner with a strict budget.

The official payment request requires the assemblage of three specific docu‐ ments: the schedule of values, the pay request continuation sheet, and the appli‐ cation for payment. Each of these documents is described next.

The Schedule of Values

The first step in the progress payment process is to complete a document called a schedule of values. This schedule represents the project budget derived from the origi‐ nal project estimate. (You will learn more about the project budget in Chapter 10, “Monitoring Project Performance.”) The schedule of values is typically organized by

CSI MasterFormat divisions. Each line item on the schedule represents a complete dollar amount, including overhead and profit, for each section of work. The sched‐ ule of values is one of the administrative submittals that must be approved by the architect very early on, before construction actually begins. The schedule provides the benchmark measure for each payment throughout the project duration. Every payment will be a reflection of the percentage complete for each section of work shown on the schedule. A sample schedule of values is shown here.

Contract Administration 187

March 17, 2010

ABC Construction Company

1400 Elm Grove Carpenter, CA 83347

Schedule of Values Spinnaker’s Restaurant

Line Item 1 2 3

4

5

6

7

8

9

10

11

12

13

14

15

16

Description General Conditions Site Work Concrete Masonry Metals Carpentry Thermal & Moisture Protection Doors, Windows, Glass Finishes Specialties Equipment Furnishings Special Construction Conveying Systems Mechanical Systems Electrical Systems

Contract Value* $175,550 $196,000 $137,000 $16,500 $5,500 $427,000 $76,400 $58,600 $154,000 $49,500 $106,000 $126,000 $0 $0 $243,000 $162,000

$1,933,050

% of Total 9.08

10.14 7.08 0.85 0.28 22.09 3.95 3.04 7.97 2.56 5.48 6.53 0.00 0.00 12.57 8.38

100.00

TOTAL CONTRACT AMOUNT * Includes overhead and profit

The Pay Request Continuation Sheet

This form is simply a continuation of the schedule of values, tracking previ‐ ous payments and change orders as well as identifying the current payment due. The American Institute of Architects publishes a standard continuation sheet

188 Chapter 7

(AIA Form G703) as part of its application for payment form described in the next section. An updated continuation sheet must accompany the application for payment form each month. The form shown here is similar to the AIA G703 document.

ABC Construction Company 1400 Elm Grove Carpenter, CA 83347 Continuation Sheet Spinnaker’s Restaurant AB CDEFGH (D + E) (F/C) (C-F) Date: June 1, 2010 Billing Period: 05/01/10 – 05/31/10 Payment Request: No. 5

LINE GENERAL CONTRACT PREVIOUS COMPLETE COMPLETE PERCENT CONTRACT ITEM DESCRIPTION VALUE COMPLETION THIS MONTH TO DATE COMPLETE BALANCE

1 General Requirements 2 Site Conditions 3 Concrete 4 Masonry 5 Metals 6 Wood, Plastics & Composites 7 Thermal & Moisture Protection 8 Openings 9 Finishes 10 Specialties 11 Equipment 12 Furnishings 13 Special Construction 14 Conveying Stystems 21 Fire Suppression 22 Plumbing 23 HVAC 25 Integrated Automation 26 Electrical 27 Communications 28 Electronic Safety & Security 31 Earthwork 32 Exterior Improvements 33 Utilities CURRENT TOTALS $175,550 $89,600 $16,000 $16,000 $137,000 $137,000 $16,500 $9,800 $5,500 $1,700 $427,000 $207,500 $76,400 $33,600 $58,600 $47,800 $224,000 $- $49,500 $- $106,000 $33,600 $126,000 $- $9,500 $650 $16,700 $4,100 $44,000 $18,000 $129,000 $31,000 $114,000 $10,590 $48,250 $3,690 $162,000 $54,900 $55,000 $10,590 $16,000 $1,980 $159,500 $134,000 $90,500 $34,000 $57,000 $23,000 $2,319,500 $903,100 $23,600 $113,200 64.48 $- $16,000 100.00 $- $137,000 100.00 $5,500 $15,300 92.73 $2,100 $3,800 69.09 $67,800 $275,300 64.47 $3,200 $36,800 48.17 $2,180 $49,980 85.29 $- $- 0.00 $- $- 0.00 $7,945 $41,545 39.19 $- $- 0.00 $- $650 6.84 $1,290 $5,390 32.28 $3,300 $21,300 48.41 $36,000 $67,000 51.94 $19,600 $30,190 26.48 $2,100 $5,790 12.00 $27,444 $82,344 50.83 $12,766 $23,356 42.47 $5,132 $7,112 44.45 $11,290 $145,290 91.09 $- $34,000 37.57 $7,600 $30,600 53.68 $238,847 $1,141,947 49.23 $62,350 $- $- $1,200 $1,700 $151,700 $39,600 $8,620 $224,000 $49,500 $64,455 $126,000 $8,850 $11,310 $22,700 $62,000 $83,810 $42,460 $79,656 $31,644 $8,888 $14,210 $56,500 $26,400 $1,177,553

Application for Payment

The application for payment is the final document needed to process a payment request. This form summarizes the actual payment amounts and provides the official approvals required before the payment can be released. The American Institute of Architects also publishes a standard application for payment form called an application and certificate for payment (AIA Form G702). This stan‐ dard form is commonly used across the industry, although some projects may provide their own customized form.

A document similar to the AIA Form G702 is shown here.

Contract Administration 189

ABC Construction Company

1400 Elm Grove Carpenter, CA 83347

Application and Certificate for Payment

Contractor’s Application for Payment:

Application is made for payment as shown below, in connection with the Contract Continuation Sheet attached.

Project: Spinnaker’s Restaurant Billing Period: 05/01/10 - 05/31/10 Application Date: June 1, 2010 Payment Request: No. 5

1. Original Contract Sum

2. Net Change by Change Orders

3. Contract Sum To Date (1 + 2)

4. Total Completed to Date (Column F)

5. Retainage:

5% of Completed Work

6. Total Earned Less Retainage (4 - 5)

7. Less Previous Payments (Column D)

8. Current Payment Due

9. Balance to Finish, Including Retainage (3 - 6)

$ 2,319,500 $0 $ 2,319,500 $ 1,141,947

$ 57,097 $1,084,850 $903,100

$181,750

$1,234,650

CHANGE ORDER SUMMARY: Total Changes Approved in Previous Month Total Approved This Month Totals Additions Subtractions $0 $0 $0 $0 $0 $0

NET CHANGES by Change Order: $0.00

The undersigned Contractor certifies that to the best of the Contractor’s knowledge, the work covered by the Application for Payment has been completed in accordance with the Contract Documents.

CONTRACTOR: By:________________________________________ Date: _____________________

ARCHITECT’S CERTIFICATE FOR PAYMENT: In accordance with the Contract Documents, based on on-site observations and the data comprising this application, the Architect certifies to the Owner that to the best of the Architect’s knowledge, the Work has progressed as indicated, the quality of the Work is in accordance with the Contract Documents, and the Contractor is entitled to payment of the AMOUNT CERTIFIED.

AMOUNT CERTIFIED: $ 181,750

ARCHITECT: By: _____________________________________ Date: _________________________

You will notice a line item on the application for payment identified as retain- age. Retainage is an amount of money that is commonly withheld from each pay‐ ment as an incentive for the contractor to complete the project, including all of

retainage

A certain percentage of money owed to the contractor for work progress that is held back by the owner to encourage completion of the project.

190 Chapter 7

the final paperwork and submittals at the end of the job. The retainage amount is typically calculated as 10 percent of the contract payments for the duration of the job. Release of the retainage is tied to substantial completion, which you learned about in Chapter 5, “Project Stages.” Once substantial completion is achieved, the entire amount of retainage is paid to the contractor.

It is a common practice for the general contractor to impose retainage on their subcontractors as well. Once again, though, consideration is often given to the smaller contractors, especially the ones who complete their work very early in the construction. It seems quite unfair to withhold 10 percent of a subcontrac- tor’s money for the entire duration of the project when their work was completed in the first 30 days or so. Most general contractors try to work with their subcon- tractors as best they can to see to it that they receive all of their money upon completion of their work.

The Final Payment

I told you in Chapter 5 that the job startup and job closeout are two of the most difficult stages to manage. I want to discuss the final payment as a separate issue because, administratively, it is indeed a real challenge. Once the job starts clos‐ ing down, the punch list work is complete, and the trades start pulling off the job one after another, it is really hard to stay focused. Like everyone else, the project team wants to move on to the next job. As a matter of fact, several members of the team have probably already been reassigned to the next job. However, the few remaining folks (probably the superintendent and a field engineer), along with contract administration support from the main office, still have plenty of work to do. The job is not complete until all of the paperwork and final submittals have been delivered to the architect. Only then is the final payment released. The typi‐ cal contract documentation needed to wrap up the job includes the following:

◆◆ As‐built drawings ◆◆ Operation and maintenance manuals ◆◆ Product and equipment warranties ◆◆ Test reports ◆◆ Surplus materials ◆◆ Permits ◆◆ Lien waivers

These final little details usually leave a lasting impression. In other words, no matter how well the rest of the job went, the owner has a tendency to remember

only the latest event. If it goes smoothly and is completed in a timely fashion, the owner will remember how efficient and expeditious you were. However, if you drag this process out in an agonizingly delinquent fashion, they will only remem‐ ber that. When I was running my construction firm, I regularly reminded my project teams that they always had to start strong and finish strong. No matter what happens in the middle, it is the first impression and the last impression that establish your reputation.

Schedule Issues

Remember the three‐legged stool mentioned in Chapter 2 (“What Is Construction Management?”)—time, cost, and quality? You already know that these three factors are at the heart of every project. However, on most projects, one of these factors shows up as more important than the other two. Time is often the one. You’ve heard the expression “Time is money,” right? Well, I’m sure you under‐ stand by now that when time becomes an issue in construction, it can mean a lot of money!

There are many scenarios where the construction schedule becomes the all‐ important issue in the process. For example, school projects must be completed by August or September, when the facility opens for the new academic year. There is typically little to no flexibility in these schedules, period. The work must be done! The completion dates are critical, and school buses will be arriving with children whether the contractor is ready or not. Another example is the opening of a new retail facility. Often these projects are designed around a pro forma that calcu‐ lates a particular return on investment tied to the date when the operation opens for business. In some instances, even a single day’s delay can cost the owner a sig‐ nificant amount of revenue. So, it is pretty easy to see why an owner might want to try to influence the contractor’s performance relative to time of completion for their project, and they often do.

A Stick or a Carrot?

The owner can take one of two basic philosophical approaches in an attempt to influence contractor performance. They can threaten with a stick, or they can coax with a carrot—and, believe it or not, there are actually standard procedures for both actions in construction. The construction manager must be fully aware of how each works and plan accordingly. The stick approach calls for liquidated damages to be imposed if the contractor does not meet the completion date. The carrot approach gets more creative, providing performance incentives for work completed in advance of the completion date or for other criteria deemed impor‐ tant by the owner. Let’s take a look at each of these techniques.

Contract Administration 191

192 Chapter 7

Liquidated Damages

Liquidated damages are an amount of money that is assessed to the contractor for a failure to meet a specified contract completion date. The theory behind this mechanism is that the payments would mitigate the losses that the owner would experience if the project is not completed on time. It is unlawful for them to be instigated in an amount in excess of actual damages to the owner.

The specific amount can be as little as a few hundred dollars a day or as much as several thousand dollars a day. When an owner opts to utilize this technique, it is presented in the contract documents right up front so the bidding contrac‐ tors are well aware of it. For example, the liquidated damages clause may state that the contractor must pay $1,000 per day in damages to the owner for each calendar day that the project is late.

Although liquidated damages cannot be legally used as a penalty, they sure show up that way for the contractor under the gun. This is not a position that contractors want to be in if they can avoid it. Liquidated damages are a risk that must be considered and managed just like any other risk in construction. But in most cases where a liquidated damages clause is imposed, the entire project man‐ agement scheme will be designed around the avoidance of this action kicking in.

When bidding on a job with liquidated damages, the estimating team tries to figure out how many days the project could possibly run past the completion deadline. Based on experience and a little research regarding the current industry conditions, they try to anticipate delivery delays, labor interruptions, weather con- ditions, and anything else that might cause a delay in the schedule. They make their best guess, multiply the number of days by the penalty, and add this amount to their bid, thus hedging their bets. This is a tricky thing to do, because the con- tractor must also remain competitive.

Project Incentives

I don’t know about you, but incentives have a tendency to motivate me more than techniques that I might perceive as penalties. And by nature, contractors really like a good challenge and love a good game. That’s why they are in the business in the first place. So if you want to influence positive behavior, why not come up with some positive incentives? Interestingly enough, the industry is starting to do just that.

One of the more common approaches is to reward contractors with a certain financial benefit if they complete the job before the dedicated completion date—sort of like reverse liquidated damages. For example, a contractor might receive $500 per day for each day substantial completion is achieved ahead of the project com‐ pletion date. Some contracts contain both clauses: a liquidated damages clause and an incentive clause. Furthermore, this same concept could be developed to create

incentives around any number of factors, such as safety, workmanship, quality, or value engineering. And what really makes this concept powerful is that it has the potential to affect the performance of the entire project team, not just the superin‐ tendent or project manager. When you have the whole team committed to superior performance, you really have the potential for extraordinary results.

Making Changes

It is extremely rare to find a project that is built exactly as it was originally designed without any changes. It is virtually impossible to present every detail needed to construct a complex (or even simple) project in a standard set of plans and specifications. There are always errors or omissions in the documents that are discovered during the construction process. But remember, the contractor bid on the job per the plans and specs. Therefore, when the deficiencies are noticed, the contractor is entitled to extra compensation for correcting the errors or com‐ pleting the missing details. Managing the many changes on a project is another one of the primary contract administration functions. The mechanism used to instigate these changes is called a change order, and there is a standard procedure for processing them. (Change orders were first discussed in Chapter 4.) Change orders either add work to the contract or, in some cases, delete work from the contract, but either way the contract will be changed. Let’s take a look at how this important process is handled.

The Change Order Process

As a rule, owners don’t like change orders very much; change orders often spawn many of the disputes that arise on a project. Therefore, it’s important to handle the process correctly to avoid disagreements or discrepancies associated with these changes down the road. The change order process is one of the key issues discussed at the preconstruction meeting. Mishandling or misuse of this process can result in all kinds of costly disputes, and the construction team must be vigilant in adminis‐ tering the process correctly.

The main rule in construction is to never execute the extra work or change without first receiving a written order to do so by the architect or the owner. A ver‐ bal approval is not enough. I don’t care if the project is as simple as a little storage building. The best way to ensure that you will be properly compensated for the extra work is to have a written change order in hand, signed by the proper authority. This can be harder to manage than you think. Remember, the building trades people are on‐site to get the job done. They are not inclined to sit around and wait while the owner makes up their mind. The temptation is very strong to just go ahead with the fix on a verbal cue from the architect because you want to keep the work going. Change orders take time to process, and whenever you decide to proceed without

Contract Administration 193

194 Chapter 7

one in hand, the contractor is taking a chance that they may not get paid for doing the extra work. Therefore, as the construction manager, you must insist that none of your workers or subcontractors proceed with a change in the work until the change order has been properly authorized.

A change order may be instigated by the architect or by the contractor. Once the deficiency is discovered, an estimate is computed to determine what the cost of the change will be. These estimates may require a simple computation that can be handled on‐site, or they may need to be sent to the main office where the esti‐ mator can perform the quantity takeoff and pricing necessary to come up with the price for the change. The estimate total, including overhead and profit, is pre‐ sented in a standard change order form that gets submitted to the architect. Some change orders also require that additional time be added to the contract. This request is made right along with the request for extra compensation. The archi‐ tect presents the change order to the owner, and a decision is made to authorize the change. The change order document is then rerouted back to the contractor, and the contractor orders the workforce to proceed with the work.

Design change is required.

Correct design error or omissions.

Add or modify scope.

Contractor calculates cost to make the change.

Contractor prepares change order document and sends it to architect.

Architect reviews change order and sends it to owner with recommendation.

Owner reviews change order, approves it, and sends it back to architect.

Architect authorizes change order and sends it back to contractor.

Contractor authorizes work to be performed.

Contract is modified.

Every change order changes the contract amount and becomes a binding, legal document. Sometimes the change increases the contract total, and sometimes the change actually reduces the amount. For example, an owner may choose to change a room full of floor tile to carpet. Carpet is usually less expensive than tile, and therefore the result would be a reduction in the contract amount. The contractor would go ahead and calculate the cost and process a change order accordingly.

Changes in Scope

Scope changes are some of the easiest change orders to process because they are normally instigated by the owner. Examples may range from upgrading the floor covering in the lobby to requesting more cabinets in the kitchen to adding more square footage to the whole facility.

This type of change typically starts with a request from the owner or architect for a cost estimate of the new work. The estimator comes up with a price based on the sketches and specifications provided. There may be some negotiation involved, but generally the owner simply decides whether they want to go forward with the additional work. If they do, a change order is processed, and the work is added to the contract. Depending on the size and complexity of the change, there may be a time extension associated with these change orders as well.

Time Extensions

There are occasions when the contractor is compelled to request a time extension to the contract. Time extensions are processed just like any other change order but are often more difficult to get approved. There are many reasons why a time extension might be appropriate:

· ◆◆  Delays resulting from severe weather

· ◆◆  Delays caused by slow responses to RFIs

· ◆◆  Delays caused by slow processing of submittals or shop drawings

· ◆◆  Delays caused by delinquent deliveries

· ◆◆  Delays caused by labor strikes

· ◆◆  Delays caused by slow permit processing

· ◆◆  Delays caused by the architect (poor quality contract documents, work interference)

· ◆◆  Delays caused by the owner (slow decision making, work interference)

· ◆◆  Delays caused by outside protests (political groups, environmental groups, others)

Contract Administration 195

196

Chapter 7

claim

An issue that occurs during construc- tion and remains unresolved after the job is complete.

Time extension change orders may consist of a simple request for extra time, or they may be more complex and include a request for cost reimbursement associated with the extra time. Simple time extension requests are relatively easy to process. For example, severe weather (especially unexpected) often results in a time exten‐ sion change order with little or no objection from the owner, as long as the bad weather days are properly documented and the owner has some schedule flexibility. On the other hand, the time extensions that include additional costs are usually quite difficult to negotiate and unfortunately often end up as disputed items at the end of the project. For example, it can be hard to prove that the owner or architect interfered with construction operations and therefore delayed work progress, result‐ ing in extra costs to the contractor and creating a need for extra time. But it is very important that the construction manager be alert to circumstances where delays beyond their control result in extra costs, especially if liquidated damages are at stake. Once again, this is a situation where having strong contract administration skills and the right paperwork makes all the difference.

I told you there was a lot more to this construction management job than just bricks and sticks!

Police officers, firefighters, and pilots are often exposed to something called awareness training. This training teaches a supersensitivity to circumstances that may pose a danger in a given situation. When I was running my construction business, I actually created a type of awareness training for my project manag- ers and site personnel. A lot of it focused on job site safety, but it also addressed risk points relative to the conditions of the contract, including change orders.

When Things Go Wrong

As hard as we may try to prevent it, the likelihood is high that there will be dis‐ agreements among the parties associated with the construction contract. As it turns out, construction is one of the most litigious industries out there. That is one of the reasons that alternative project delivery methods such as at‐risk CM and design‐build have become so popular—there tends to be less litigation with those methods.

As you might imagine, most of the disagreements that arise in construction have to do with money. When one of these disagreements reaches an impasse and cannot be resolved through the standard change order process during construc‐ tion, the contractor must file a claim after the job is complete. The rules regarding the submission of a claim are spelled out in the general conditions of the contract. There is a specified time during which the contractor must inform the architect and owner of their intentions to file the claim. Construction claims typically result from one of the following causes:

◆◆ Disagreements regarding the terms of the contract ◆◆ Defective or deficient contract documents

◆◆ Denied and unresolved change orders ◆◆ Denied time extensions resulting from delays beyond the contractor’s control ◆◆ Differing site conditions that resulted in extra cost to the contractor

The owner or architect must formally respond to the contractor’s claim. If they reject the contractor’s claim for additional compensation, the matter becomes a for‐ mal contract dispute. Some form of dispute resolution must be implemented; most construction contracts today call for methods other than traditional litigation.

Dispute Resolution

Earlier in this chapter, I indicated how important it is for the owner to kick off the construction project with a positive tone of trust and collaboration. I made reference to a formal management and communication technique called partnering. The whole premise behind partnering is to avoid the need for time‐ consuming and expensive dispute resolution at the end of the project. The idea behind partnering is to resolve issues along the way as they occur. Whether we employ partnering or not, once we get to the end of the project and are left with unresolved issues, we must find a way to resolve them. Several options are avail‐ able to us short of going through the full litigation process. Let’s consider a few of these options.

Mediation

In mediation, an impartial third party (the mediator) facilitates the negotiation between the disputing parties. Sometimes it just takes a new set of eyes and ears in the room to be able to move the disagreement to a settlement. The objective is to assist the parties in coming to a mutually acceptable agreement. Obviously, this methodology is going to be less time‐consuming and less expensive than going to court. There are no attorneys involved, and the basis of resolution is still negotia‐ tion between the parties who are most familiar with the matter at hand.

Minitrial

Minitrials are one step up from mediation in terms of the amount of time and cost invested. A minitrial is conducted as an informal private process that com‐ bines aspects of both mediation and litigation. As in mediation, a neutral outside advisor is engaged; as in litigation, an attorney is employed to represent each of the parties. The unique element in the process is that an executive from each of the firms involved in the dispute is brought into the mix.

Basically, the attorneys are charged with making an abbreviated case for each argument to the executives of the firms. In the best scenario, the executives are expected to come to a settlement after seeing all of the exhibits and hearing the evidence. If they can do that, fine; everyone shakes hands and goes home. If they

Contract Administration 197

198 Chapter 7

are unable to come to an agreement, the third‐party neutral advisor may offer an opinion upon which the parties may or may not settle. The outcome of a minitrial is nonbinding, and therefore the dispute could still end up in litigation, although every effort should be made to avoid that.

Arbitration

The use of binding arbitration in lieu of litigation is often stipulated in the general conditions of the contract for construction. Arbitration is a more formal process and is generally more costly and time‐consuming than either a mediation or a minitrial, but it is less expensive than litigation. (Having participated in three arbitration cases, I can tell you that they are very costly and very time‐consuming indeed.) Although the arbitration method employs a neutral third party to preside over the proceedings, everything else about the process is quite similar to a tra‐ ditional trial. Each party is represented by an attorney, witnesses are called, and exhibits and evidence are presented. The preparation involved can take months, and the hearings themselves can go on for days. In the end, the arbitrator makes

a ruling, and the decision is final. Although the process is indeed less demanding than a full‐blown trial, it is still an arduous exercise, and my recommendation would be to do whatever is necessary to settle the dispute before it ever gets to arbitration.

It’s All About the Relationships

It has been my experience that anything the contractor can do to avoid legal action and settle disagreements before they become disputes should be the first line of action. That’s why the contract administration function is so important. Although there will always be differences in the interpretation of the contract documents, adherence to the protocol spelled out in the general conditions and the rules set forth in the preconstruction meeting will at least explicate the argu‐ ment for the contractor.

One of the most important management tasks associated with construction is the management of good relations with the owner, the architects, the subcon‐ tractors, the vendors, and all other vested parties associated with the project. I cannot stress enough how vital it is to maintain clear and direct lines of commu‐ nication with everyone on the team. Communication is the key to any relation‐ ship, and construction is no different. As a matter of fact, construction may call for extraordinary measures of communication, given the level of detail that must be coordinated.

Every project has its share of problems; they cannot be avoided. However, if the parties can establish a firm trust through open communication and a cooperative attitude, many difficulties can be immediately defused. Otherwise, disagreements can escalate to a crisis level and end up being addressed in an arbitration hearing.

However, I believe that architecture, engineering, and construction management education is beginning to shed much more light on the relationship side of our industry, which should result in a much less adversarial environment in the future. Although we still have a way to go, progress is definitely being made.

Applying Technology

After reading this chapter I’m sure it is clear to you by now that there are a lot of details to keep track of when it comes to construction. It is vital to keep a record of the various contract and project interactions and activities that occur each day. It can be an overwhelming task to log, track, route, and review the thousands of documents associated with even a moderate‐size project. Quite frankly, if left to only rudimentary tools such as spreadsheets, log books, and paper forms, the con‐ tract administration task can easily overcome any project manager, even if they are managing only one project at a time—which is rare.

Before contract administration software programs were available, the track‐ ing and monitoring of these various interactions, obligations, and management tasks were not always performed as often or as effectively as they should have been—leaving companies and projects at risk. However, today this very impor‐ tant task is aided greatly by software tools designed specifically for the construc‐ tion industry.

Contract administration (CA) software saves time and paper by managing the contract administration phase of a project electronically. All files, commu‐ nications, daily log entries, RFIs, and submittals can be organized, tracked, and processed electronically. And because many CA programs are now web‐based, data files, project plans, and process information can easily be shared with all appropriate parties associated with the project while still providing the necessary level of security for any given project. Furthermore, with built‐in email capabili‐ ties, contract administration software can remind the construction manager and other project participants of actionable dates when reviews, renewals, reports, or special filings are required to keep a project on track to a successful completion.

There are many CA software programs on the market today. Here are some of the more popular ones:

◆◆ Primavera Expedition ◆◆ Prolog ◆◆ CMiC ◆◆ Newforma

◆◆ ConstructJob ◆◆ e‐Builder ◆◆ StatsLOG ◆◆ Construction Communicator

Contract Administration 199

200 Chapter 7

Construction administration software applications are common in midsize to large commercial construction companies. Small residential contractors and subcontractors may not yet have employed these methods. But this is exactly were tech‐savvy entry‐level employees can add real value to the smaller firms that they go to work for. You don’t have to know every aspect of construction to understand that recording, monitoring, and tracking these important contract administration tasks in a more efficient and effective way will add value to the construction man‐ agement process regardless of the project or firm size.

Terms to Know

claim mock‐up partnering request for information

Review Questions

retainage schedule of values shop drawing submittals

1. What is partnering?

2. How does the contractor receive clarification from the architect regarding

details of the design?

3. What is the purpose of a submittal?

4. What is a shop drawing?

5. What is the name of the document that establishes the template for mea‐ suring work progress as it relates to requests for payment?

6. What is the name of the document that formally and officially authorizes a payment to the contractor?

7. What are liquidated damages?

8. What is retainage?

9. Identify two instances when a change order might need to be initiated.

10. Name three alternatives to traditional litigation for resolving construction contract disputes.