Disputes are bad for business–obviously. Nonetheless, sometimes avoiding them is easier said than done in the contracting business. Insiders share tips on preventing shifting plans from spiraling into costly and disruptive disputes.
Stop The Handshaking…
At Construction Dive, Spencer Krebs points out that although construction agreements typically lay out formal processes for change orders impacting the contract, schedule or scope of work, pressure to keep things moving in real time often overrides protocol: “Under field conditions, where issues arise unexpectedly, approval is often verbal, and there is pressure to remain on schedule. Contractors and subs often proceed without first securing written authorization from the owner. As a result, construction change orders are often the subject of litigation.” To reduce the risks of delayed payments, termination and litigation that disputes can cause, Krebs urges contractors and subcontractors to avoid reliance on “handshake agreements” and suggests:
Defining the construction project scope clearly and in detail in the design documents…. All entities should agree on a realistic and equitable change order process before signing the contract. Often times, many large general contractors, owners and developers push for one-sided contracts that limit their liability regarding payment for changes, which is why subcontractors should negotiate contract provisions that are equitable and clear….Subcontractors should also include a provision that provides an alternative procedure that permits secondary authorization should the need for a time-sensitive change order arise….
Instead of relying on good faith, before implementing any change, review the contract and familiarize yourself with all requirements for change orders, including time constraints, format, content and approval process. This may result in pausing the construction project for an hour or two, but a slight delay in the short term can dramatically decrease an expensive change order dispute at the end of the project.
In addition to taking care with agreements and approval processes so as to avoid disputes, industry pros at Colonial Surety point out that another way for contractors to prevent disputes and claims is to invest in a strong project manager. When issues arise with scheduling changes, poor subcontractor performance, or other delays, a good project manager will problem solve and keep the project running smoothly. In addition, strong project management will keep open lines of communication between the obligee, contractor and subs and suppliers and even utility companies. Efficient, effective project managers are invaluable to successful day to day supervision, coordination and scheduling—which lead to successful project completion.The reverse can cause project delays, liquidated damages or even lead to owners considering termination.
Gaining control of the financials—on a day to day basis—also helps contractors avoid problems because they are armed with the insights needed to make sound decisions and operate their businesses with agility despite challenges. For financial intel—and a competitive edge—contractors across the country access The Partnership Account® for Contractors from Colonial Surety, and you can too. Qualify here for your own private digital dashboard, providing you with a day to day snapshot of single and aggregate limits and current and available bond capacity. As your work in progress decreases, update work on hand—increasing your aggregate. Afterall, you’re in control. Get started today: Pre-Qualify and Get Free Scores Here.
Good To Do: Communicate and Document
In the day to day rush to the finish line, two core components of business success–communicating and documenting—tend to get pushed to the sidelines.
Krebs advises that focusing on better communication and documentation will pay off in the long run and observes:
Collaboration is key in any successful construction project. Stakeholder meetings should be scheduled and organized at the beginning, throughout the duration of the project and at the end to ensure all team members are working on the same page….
Proper documentation is a key part to compliance and ensuring project quality. It’s important to maintain a manageable system of record keeping that provides easy access and up-to-date versions of construction documents. Implementing cloud-based construction project management software allows contractors to automate and document the change order process.
Don’t forget, Colonial Surety is here to help contractors succeed too! Once qualified for The Partnership Account® for Contractors, builders position their companies for ever more success with:
- a surety line of credit—in writing;
- a private digital dashboard;
- a daily snapshot of single and aggregate limits
- the ability to update work on hand—and increase your aggregate.
In addition to all this, Colonial gives you power of attorney to issue your own bid bonds, instantly. Speedy performance bonds? Sure! With The Partnership Account® on your side, you’ll win and complete more work than ever.
Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed.