Construction Estimators Should Have a Vested Interest in the Right Contract
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
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
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
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
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
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
provides a thoughtfully considered, balanced and fair framework for a
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
Key project personnel don’t know or understand what their contract
really says, and what rights each party has under the contract.
Pre-contract site investigations are faulty and can create flaws in the
design of underground work and foundation systems.
Poor coordination and management of the design phase where external time
pressures frequently lead to critical mistakes in the development of a
Poor budgeting or conceptual cost estimating, and failure to use lump
sum, unit price or force account/cost-plus pricing alternatives
Improper development of a baseline project schedule, and improper
updating and adjustment of the project schedule.
Poor coordination and management of multiple prime contractors, domestic
and international suppliers, vendors, fabricators, erectors and trade
Poor coordination, management, access to, and dissemination of
up-to-date plans, fabrication drawings, erection drawings, catalog cut
sheets and specifications.
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.
Failure by various parties to give timely notice of problems, delays,
and disruptive circumstances.
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
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.