Submitted by: Blane Stoddart, President and CEO, BFW Group, LLC
A developer and general contractor had successfully completed several projects together. They began socializing together, went out for drinks and had dinner on a regular basis. Eventually, they became good friends. A few years ago they were working on a $50 million dollar project. The developer decided to make several upgrades to the tune of $3 million dollars and the general contractor performed the work based on a history of good relations. Subsequently, the financial markets crashed, the bank refused to pay out for the upgrades and the project had problems leasing up. The former friends are now in court because of all the lawsuits. Here are seven things that developers, owners and non-profits can do to avoid this frequently played out scenario:
1. Avoid Losing Control of the Construction Process: Some developers and non-profits may forego control of their investment and look to their builder/general contractor as their primary source for guidance. Many times, the developer, owner or executive director is too busy running their business or organization and does not have time to be on the construction site. This reliance upon the general contractor may end in disappointment. If an owner is busy a good investment would be to hire an owner’s representative to be on the job looking out for their interests.
2. Avoid Losing Control of Design Development Process: Developers/owners should understand and compare their vision to that of the Design Team. The developer and architect must compromise to end with a unified vision before the bid process begins. Attempting to build competing visions lead to change orders, cost overruns and major disagreements that should be mitigated during the design/development process. The owner should investigate sustainable and green building practices to improve the environment and lower building operating costs. An owner’s representative/construction project manager could bring clarity and closure to this process in a timely manner.
3. Failure to Understand Site Conditions: Owners should understand site conditions before construction begins. Site conditions include soils, water table levels, environmental issues, surroundings, slopes and grades, and flood tables etc. Owners should read the reports and demand clarification from engineers and environmental experts retained to conduct site tests. The owner should investigate best practices to mitigate remediate and/or the sustain environment. Site remediation and preparation can easily exhaust project budgets and so all general contractor costs should be thoroughly reviewed. The costs of infrastructure should also be fully accounted for and reviewed. For existing buildings, the environmental reports and remediation of lead, asbestos, underground tanks and other contaminants should be reviewed and actual bids (with performance guarantees and environmental clearances) for the remediation should be obtained before the final budgets are established.
4. Making Progress Inspections: This problem is quite common – owners failing to make detailed progress inspections. It’s like asking the fox to guard the chicken coop. If a subcontractor makes a mistake, especially one that will cost him/her money to remedy, they may try to hide it rather than fix it. If the general contractor who hired this subcontractor, does not inspect or review this work and catch it, then the owner will bear this cost, either directly in dollars to remedy it at some point in the future when it is discovered, or indirectly thru a lower quality product and/or reduced aesthetic appeal. The owner should