{"id":30889,"date":"2017-03-27T12:39:41","date_gmt":"2017-03-27T16:39:41","guid":{"rendered":"https:\/\/www.constructionspecifier.com\/?p=30889"},"modified":"2017-05-04T12:20:35","modified_gmt":"2017-05-04T16:20:35","slug":"document-and-contract-management-part-two","status":"publish","type":"post","link":"https:\/\/www.constructionspecifier.com\/document-and-contract-management-part-two\/","title":{"rendered":"Document and contract management: Part two"},"content":{"rendered":"

by Norman F. Jacobs, Jr.<\/strong><\/p>\n

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Ensuring consistency among construction contracts is essential to the success of a project.<\/span>
Photos \u00a9\u00a0BigStockPhoto<\/em><\/figcaption><\/figure>\n

Project management science has advanced considerably in the last 50 years. Many sophisticated tools and processes employed by the project management community are products of the last decade, and their development continues today at a brisk pace. For project control professionals (i.e.<\/em> project managers), this development has been both exciting and challenging. The migration of network-based scheduling programs from office computers to jobsite tablets has created abundant opportunities to support the project management team. With the power of these systems right at the project manager\u2019s doorstep, it seems job success should be guaranteed\u2014but is it?<\/p>\n

It is important for project managers to be aware of any software with \u2018bugs\u2019 or other difficulties in the program, not letting a software package void the logic of the CPM schedule. An effective planning, scheduling, and control system cannot be established simply by buying and implementing a software package\u2014the project manager should manually draw the CPM schedule network diagram, showing the logic and dependencies of all activities before he or she inputs work breakdown structure (WBS) activities.<\/p>\n

As well, professionals should not forget any project control system requires meticulous documentation, and coordinating contracts is key. This means ensuring clauses are consistent in all contracts into which construction parties enter. Contractors should ensure the complete scope of work for a particular trade is passed down to the subcontractor for the trade and specification division involved. This becomes more difficult when a trade is split between two subcontractors, or when the contract is for interrelated work, although most contractors are fairly meticulous in matching the scope of work between contracts with detailed coordination. However, coordinating contracts does not end here\u2014there are also insurance requirements, notice provisions for extra work, timing of documentation for payments, and dispute clauses to consider. Building information modeling (BIM) can also be used to coordinate construction contract documents, and to integrate mechanical\/electrical\/plumbing (MEP) drawings with architectural and structural drawings.<\/p>\n

It is easy to understand how a mismatch between contracts can happen. The standard practice of most general contractors is to use one type of subcontract form for all projects. This assures repeat subcontractors nothing has changed, makes it easier for project managers to know the subcontract, and saves negotiating new language every time.<\/p>\n

This article, the second in a four-part series<\/a>, delves into some of the documents crucial to the project management process and how they can be used to minimize risk.<\/p>\n

Specifications and subcontracts<\/strong><\/p>\n

All contract parties must examine MasterFormat<\/em> Divisions 02 to 16 of the specifications. These are the portion of the contract documents consisting of written requirements for materials, equipment, systems, standards, workmanship, and project performance. They are the part of contractor and subcontractor contracts outlining which part of the project is the responsibility of each different subcontractor.<\/p>\n

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Project managers should be aware of relevant standards and of each aspect of the specifications.<\/span><\/figcaption><\/figure>\n

Project managers must manage all subcontractors, as they comprise a major part of most construction jobs. Some general conditions even require a list of subcontractors be approved by the architect and owner before awards are granted. Given subcontracting now represents as much as 80 to 90 percent of some projects, it is extremely important for the project manager to effectively manage this diversified effort, not overlooking coordination of subcontractor submittals. Subcontractors should be involved in all critical path method (CPM)<\/a> activities, and when it is time to draft subcontracts, the project manager must ensure they have reviewed any notes on drawings, including them in the scope of work for the project.<\/p>\n

A project\u2019s specifications also usually list relevant standards; at times, the architect may also require the contractor to list onsite standards. It is critical project managers know what effect these standards may have on the specifications.<\/p>\n

Relevant standards may include those from ASTM, or \u2018material-specific\u2019 entities like American Concrete Institute (ACI), American Institute of Steel Construction (AISC), and American Society of Heating, Refrigerating, and Air-conditioning Engineers (ASHRAE).<\/p>\n

The project manager should check all standards to see they are compatible with other contract documents.<\/p>\n

Each project may also have different building codes to follow. Therefore, the project manager should be familiar with any such codes in the geographic location of his or her project. Generally, these codes are intended to be applied by architects and engineers, but they are also used for various purposes by safety inspectors, environmental scientists, real estate developers, contractors, insurance companies, and facility managers.<\/p>\n

Finally, it is important to remember the owner is responsible for all notes, plans, and specifications\u2014in AIA A201, General Conditions of the Contract for Construction<\/em>, the owner warrants the accuracy of all contract documents. It is also best to check whether any addendums have been issued that may change notes on the drawings. Such notes should be studied by the project manager to determine whether they conflict with specifications\u2014sometimes, these may even become specifications. After the project manager examines the notes, if there are questions, he or she should send an RFI to the architect requesting clarification.<\/p>\n

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Keeping track of documents like change orders, meeting minutes, and RFIs can help professionals avoid conflicts of interest.<\/span><\/figcaption><\/figure>\n

RFIs<\/strong><\/p>\n

Construction industry team members must stay abreast of the document management system, especially as it relates to specifications defining the methodology for RFIs. Few owners take the time and effort to define terms like \u2018RFI,\u2019 \u2018plan clarification,\u2019 \u2018substitutions,\u2019 or \u2018nonconformance notice\u2019 in the contract documents, but it is crucial they establish an RFI processing and response system in the contract documents and in the contractor\u2019s field trailer.<\/p>\n

Owners need to examine their own internal project process to ensure it is fair and prompt, and describe the process in the contract documents so contractors, architects, and engineers understand what systems are in place and how they operate. Responses to RFIs should be issued in a timely fashion, and should not change any requirements of the contract documents unless included in a signed change order.<\/p>\n

All contract parties should be educated on the daily RFI process. The architect and owner need to establish a formal, in-house RFI review processing system, and it is recommended they assign a single, knowledgeable individual to be in charge of it. This person must personally receive all documents labeled RFIs, and should review them the same day they are received to determine if they have been labeled correctly. If the document is actually an RFI, the appointed individual should enter the document into the RFI log and process it for a response. He or she should also track all RFIs in process to ensure timely and accurate responses are made.<\/p>\n

Change orders<\/strong><\/p>\n

When changes in the scope of work occur, most construction contracts require written change orders for time and money. The owner is responsible for signing these orders, but problems are often encountered when the owner\u2019s project manager relies on the architect to review or recommend the approval\/rejection of change orders based on an area not adequately covered in the plans and specifications. This may cause a conflict of interest for the architect, who\u2014by approving such change orders\u2014may be inappropriately admitting his or her own negligence in allowing faulty omissions from the contract documents. It is best for project managers to keep detailed logs of all change orders.<\/p>\n

Record-keeping<\/strong><\/p>\n

Architects and contractors should both hold meetings and record minutes, which the project manager must obtain copies of and file. For instance, when the architect makes site visits, he or she will prepare minutes of each meeting and distribute them to the owner and contractor. Each project manager must scrutinize the architect\u2019s minutes, and all contract parties should check whether its policy is to challenge erroneous items in these minutes. Project managers should also consider what the architect\u2019s intention was with the items being challenged, and monitor any items possibly self-serving to the author of the minutes, remembering minutes are project documentation.<\/p>\n

The project manager should also scrutinize all pre-construction tests and review all testing reports during construction, keeping detailed documentation of such reports in the appropriate file. Every project manager should further examine the project specifications for testing requirements, and may want to add testing activities to the CPM schedule. It is important to remember the owner hires the testing agent, and needs to be informed by the project manager when tests are required.<\/p>\n

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Cost management<\/strong><\/p>\n

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Accurate documentation can help construction professionals avoid liability, as discussed in the next part of this series.<\/span><\/figcaption><\/figure>\n

The project manager is expected to check the schedule of values against the original cost estimate to ensure all spending is categorized correctly. At each monthly billing, the contractor may bill for materials stored offsite. Project managers should ensure the contract allows for this payment, and that these offsite materials are stored in a bonded warehouse and covered by adequate insurance, with the owner named as additional security. The schedule of values documents project the cost to date.<\/p>\n

The project manager must also check each insurance policy for exclusions, and know where risk has been moved from one contract party to another. He or she should have a lawyer critique all insurance policies and provide knowledge of any sections in need of monitoring. It is important to take the time to study and examine A201-1997 11.2, \u201cOwner\u2019s Liability Insurance,\u201d and 11.3, \u201cProject Management Protective Liability Insurance,\u201d as well as 10.3, \u201cHazardous Materials,\u201d at 10.23, and to check builders risk insurance.<\/p>\n

Contracts and indemnification clauses<\/strong><\/p>\n

Under A201-1997, section 10.3.3, all contract parties must study indemnification and obligations to hold harmless. Specifically, the owner shall indemnify and hold harmless other contract parties.<\/p>\n

Indemnification can be viewed from the perspective of worker safety and avoidance of accidents, with an emphasis on its exculpatory aspects. However, escaping liability and the associated consequences can sometimes create problems if indemnification provisions are abused. This is particularly true with the broad form or intermediate form, which can exculpate the indemnities from wrongdoing or negligence.<\/p>\n

The astute project manager should be aware contract indemnification provisions are statutory. They require interpretation by an appropriate legal counsel with knowledge of indemnification statutes for either the client\u2019s specific geographical area or the area the proposed construction project will be built. Problem avoidance requires adequate documentation.<\/p>\n

Prudent project managers will study the responsibilities of the architect, owner, and contractor to the contract documents, carefully critiquing AIA A201 as well as all specifications and plans. Then, it is best to examine any supplementary conditions and general requirements to see if they conflict with other specifications.<\/p>\n

The Spearin Doctrine can be consulted for a sense of the owner\u2019s obligation to the plans and specifications. United States v. Spearin, 248 U.S. 132 (1918)<\/em> is the central case at the U.S. federal level regarding the effect quality of contract drawings has on a project. In this case, the court held the owner has the obligation to provide accurate drawings of sufficient quality to allow the contractor to build the project effectively. The contract drawings and specifications must aid rather than hinder the contractor in the performance of the work.<\/p>\n

In the next installment<\/a>, this author delves into\u00a0strategies for offsetting construction claims.<\/p>\n\n\n\n\n
\u00a0REDUCING PROJECT COST<\/span><\/td>\n<\/tr>\n
Value engineering\u2014a systematic approach to obtaining optimum value for every dollar spent\u2014may help project managers reduce project cost. Through a system of investigation, unnecessary expenditures can be avoided, resulting in improved project value and economy. The value engineering approach is a creative analysis effort concerned with the elimination or modification of anything that adds cost to an item without adding to its function. During this process, all expenditures related to construction, maintenance, operation, replacement, or similar tasks should be considered. By employing creative techniques and technical information on new materials and methods, project managers can develop alternative solutions for specific functions.<\/p>\n

Unlike cost-cutting by simply making smaller quantities of something or using fewer or cheaper materials, value engineering analyzes function or method by asking such questions as:<\/p>\n