Tuesday, October 7, 2014
When was the last time you had a pleasant surprise on a construction project – something that cost less than estimated or was easier than expected? It’s probably been a while. Most surprises are bad news – extra work and higher cost.
If you know a way to eliminate surprises, congratulations. You’ve got a rare gift. The rest of us have to deal with the unexpected. And that’s what I’m going to explain.
First, understand that construction companies are not insurance companies. Nothing in the law requires contractors to absorb the loss when there’s a surprise on the job. An example will make this clear.
Yesterday I took a question from a solar contractor. He bid a roof-top PV solar system for a church and got the job. So far, so good. Then came the surprise. On closer inspection, the existing roof was fragile mission tile -- pans and caps, not sturdy s-shaped Spanish tile. The salesman didn’t notice that when selling the job. After closer inspection, the contractor called the owner and explained the problem. Installing solar panels was going to break a lot of those fragile tile. The roof would probably leak. Better to re-roof the affected area with sturdy Spanish tile before installing the collector panels. The extra cost for re-roofing would be something north of $10,000.
Oops! The owner wouldn’t budge. He insisted that the contract was valid and enforceable as written. He was going to sue if work wasn’t done at the contract price.
What would you do? Re-roof and eat the $10,000? Install over mission tile and hope for the best? Walk away and let the lawyers slug it out?
I’m going to leave the answer to your best judgment. But I’m going to explain how to avoid losses and acrimony like this when there’s a surprise.
Differing Site Conditions
Just about every contract for public works construction includes a “differing site conditions” clause. If site conditions (such as the roof surface or substrate) aren’t as expected, the contractor gets a change order and an equitable adjustment in the contract price. A differing site conditions clause is considered a benefit to both the owner and the contractor. Contractors can bid based on what’s most likely, not the worst case. Government agencies get more competitive bids.
What’s good for public works projects is perfect for renovation, repair and improvement jobs. Expect surprises. Explain in your bid exactly what you expect on the job – in this case, installation over Spanish tile supported by a suitable substrate. Then be sure your contract has a differing site conditions clause. That settles it. No dispute. No lawyers needed. A satisfied customer.
A contract for renovation, repair or improvement work that doesn’t include a differing site conditions clause is an accident waiting to happen. Don’t get caught when there's a surprise. Construction Contract Writer has a good selection of differing site conditions clauses. Select the contract language that offers the best protection on your jobs. The trial version is free.