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Construction Estimators Should Have a Vested Interest in the Right Contract Documents 
By Robert H. Pratt, FCPE and Carrie L. Ciliberto, Esq.

Question: Why should professional estimators care about the provisions in the contract documents that apply to the current project that they are bidding?

Answer: Because the provisions contained in the contract documents can play an even more significant role in the profitability of a project than the accuracy of the scope of the work.

It’s all about RISK allocation and management. Contractors, subcontractors and design professionals may successfully complete work on tens or even hundreds of projects without confronting a problem that has the potential to wipe out all or some portion of their working capital.

However, all it takes is one project failure to drastically impact your company’s profitability and perhaps even viability. Many times such catastrophic circumstances are precipitated by a situation that is completely beyond the control of the affected design professional, contractor or subcontractor.

Most industry-standard form contracts (sometimes known as boilerplate contracts) provide prescribed means for a design professional, contractor or subcontractor to seek equitable adjustment for situations that arise that are beyond the control of that party. But not all standard form contracts are equal. If you are a professional estimator, have you taken the time to read and understand the legal and practical significance of every provision in the various standard form contracts that are available for the types of projects that you bid? The answer is: probably not (and this is the wrong answer for professional estimators).

Forensic schedule and damages experts typically see more projects with problems than projects without problems. Even project owners will acknowledge that the manner in which the language of standard contract forms are drafted can have a dramatic effect on the process and outcome, particularly when it comes to resolving problems that typically arise on a construction project.

For example, the American Institute of Architect’s AIA-A201 General Conditions document is a standard form that has been in use since its first edition was published in 1911. While its provisions have become generally known and implemented in the course of the performance of many projects, some of the more recent revisions have shifted more risk to contractors and subcontractors, while at the same time incrementally reducing the exposure of project owners and their design professional agents to certain types of claims.

Many of these changes are subtle and may not make any difference on a majority of the projects being bid and constructed. However, if a problem arises, proper risk allocation and equitable dispute procedures can be key to smooth and efficient resolution. Additionally, improper risk allocation forces other parties to raise their bids to account for potentially unknown consequences, which are sometimes uninsurable. While some owners applaud AIA’s risk-skirting provisions, there are others who would prefer to embrace an approach that allocates risk more fairly, and puts the project’s best interests above any one party’s.

One such owner is the State of Iowa’s Department of Administrative Services. T. Ryan Lamb, Esq. was Legal Counsel to DAS when their switch from AIA to ConsensusDocs standard contracts was vetted and implemented. He explained how proper risk allocation helps facilitate better project results:

“The Iowa Department of Administrative Services (“DAS”) is responsible for providing a wide variety of services to its State agency customers, including contracting for and administering construction projects. Prior to the Fall of 2011, DAS used modified AIA contracts for its construction projects and a traditional project delivery method (with a designer and a single prime construction contractor). In late Fall 2011, DAS switched to the ConsensusDocs 800 Program Management Series of construction contracts and to a construction-manager-as agent centered project delivery method. The new contracts and the new project delivery method have been well received by the industry and very successful.

While there is no doubt that a successful project depends more upon good people than good contracts, DAS has found that a straight forward and risk-balanced contract gets the project off to a great start and puts project executive in a better position to make decisions. Note: The above statements are solely based upon my personal opinion as a construction attorney and the comments I have received from other individuals who were instrumental in the changes made in our construction group.”

Given today’s emphasis on collaboration and creating an environment of inclusiveness in projects, it is significant to note that these contract documents are the result of drafting sessions open to all ConsensusDocs organizations and other industry experts. These robust exchanges of positions evolved into the equitable risk and responsibility allocations contained in the contract language... All members of the capital project team can be confident that ConsensusDocs provides a thoughtfully considered, balanced and fair framework for a successful project.”

Five years ago, at the American Society of Professional Estimators Convention held in Dallas, Texas, the ASPE delegates voted to become one of the now 40+ ConsensusDocs endorsing organizations. Since that time, ASPE has been represented on the ConsensusDocs Contract Content Advisory Council (CCAC) by Robert H. (Bob) Pratt, Past National President of ASPE, and a Fellow Certified Professional Estimator (FCPE).

At a recent meeting in Washington, D.C., Mr. Pratt was elected to serve as Vice Chairman of the Council for the coming year. As a Forensic expert, Bob Pratt provides his Top Ten List of Risks Faced by Construction Project Participants below:

  1. Key project personnel don’t know or understand what their contract really says, and what rights each party has under the contract.
  2. Pre-contract site investigations are faulty and can create flaws in the design of underground work and foundation systems.
  3. Poor coordination and management of the design phase where external time pressures frequently lead to critical mistakes in the development of a project’s design.
  4. Poor budgeting or conceptual cost estimating, and failure to use lump sum, unit price or force account/cost-plus pricing alternatives properly.
  5. Improper development of a baseline project schedule, and improper updating and adjustment of the project schedule.
  6. Poor coordination and management of multiple prime contractors, domestic and international suppliers, vendors, fabricators, erectors and trade contractors.
  7. Poor coordination, management, access to, and dissemination of up-to-date plans, fabrication drawings, erection drawings, catalog cut sheets and specifications.
  8. Improper tracking of baseline project costs versus extra or impact costs associated with problems that arise, and the need for forensic cost estimating and cost segregation.
  9. Failure by various parties to give timely notice of problems, delays, and disruptive circumstances.
  10. Failure to mitigate damages and recover lost time, and to accept responsibility for problems that were self-created.

Unfortunately, no contract can eliminate all risks. The best contract is usually the one created by your own company attorneys – but they can be expensive, one-sided, and take too long to complete. If you need a construction contract in a hurry, boilerplate contracts, such as those available from ConsensusDocs, provide a contractual relationship and atmosphere of cooperation and collaboration that is conducive to proactively mitigating and resolving risk related issues as quickly and efficiently as possible.

It’s only logical to conclude that construction estimators should have a vested interest in the provisions and the form of the contract that will provide the rules that their next project will be bid and performed on.


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