Bad weather, labor strife, difficult site conditions, environmental contamination, naturally occurring toxic substances, permit problems, design errors — the parade of calamities that can beset any construction project is daunting.
For school construction projects, the consequences of those calamities can be serious: a school year opening without enough classroom space for students.
Schools can't avoid glitches in construction projects, but they can take steps to minimize them. From selecting the proper project-delivery method to finishing the project on time, the key is to plan ahead always — and plan for the worst.
Managing risk in school construction begins with selecting the proper method of project delivery — traditional (a school contracts separately with the design professional and the contractor) vs. design/build (a school contracts with a single entity for both design and construction). Each method has significant advantages and disadvantages.
The traditional method is well-suited for those projects in which the overall plan allows for completion (or near completion) of the design before the school solicits bids. A more complete design reduces uncertainty and costly contingencies in the bids, as does a project that is not complex or where the design is similar to previous projects. The designer receives direct input from school officials on design issues, and has a business incentive to meet the school's budgetary and operational needs.
Finally, the method conforms to public procurement statutes in most jurisdictions. Schools typically are subject to public procurement statutes in acquiring construction and design services. Such statutes require construction contracts be awarded to the “lowest, responsible” bidder. The traditional method of project delivery conforms to these statutes, while design/build may not without special legislation.
However, there are disadvantages in the traditional method that may cause delays and additional costs for the project. For example, under the traditional method, a school assumes a legally implied warranty of the adequacy of the design. Because the design and construction responsibilities are separated, the likelihood is greater that the design may not be “constructible.” This can lead to time-consuming and costly changes, and an adversarial atmosphere.
The design/build method, where available under procurement statutes, can provide cost and quality advantages to schools in certain situations. The method is appropriate for complex projects in which the owner must rely on the design/builder's expertise.
The method also is suitable on projects that have no previous design documents that can be used as a “hard spec” for competitive bidding. Design/build may be more cost-effective because the contractor can provide constructibility input during the design. This is particularly advantageous when the time window for design and construction is short.
The design/build method also has disadvantages. The design/builder must either perform or coordinate complex design and construction services. Thus, the method should be used only if available firms have the necessary experience and expertise. Under design/build, problems that arise during construction may not be made known to the owner. Therefore, the design/build method should not be viewed as a substitute for sound project management.
Selecting the proper type of contract (i.e., lump sum or cost reimbursable) is important in managing risk on a school construction project. The procurement statutes in most jurisdictions permit only lump-sum-type contracts for school construction projects. A lump sum contract is appropriate when the design is complete or nearly complete at the time bids go out or when the project is relatively uncomplicated.
Some jurisdictions permit cost-reimbursable-type contracts, (usually with a guaranteed maximum price). Such contracts can minimize risk if the project is on a “fast track,” the project is complex, or the conditions of construction are not well-known at the time of bid.
Contract “boilerplate” is important in allocating risk and should be reviewed frequently. Make sure it conforms to current law and whether additional provisions are needed.
If local laws allow, the following provisions should be included in any school construction project:
Representations regarding site conditions and pre-award inspections.
Disclaimer of differing site conditions.
Acknowledgment that contractor has reviewed plans and specifications.
An inclusive “changes” clause.
A time-extension provision.
No damages for delay.
Termination for “cause.”
Termination for convenience.
Prosecution of the work.
Protection of materials and the work.
The right to offset.
Notice provisions with mandatory time limits.
Full audit rights.
Sound project management and controls, consistently applied, are invaluable tools in avoiding a troubled project. Many schools engage outside project-management firms.
Administrators should take care in selecting the right manager for the project. Is the firm the right size? Does it have the experience in constructing similar projects and, if so, will it commit its experienced personnel? Draw on as many references as possible to answer these and other questions.
Schools should make sure that effective project controls are in place and used. These include a project schedule, agreed upon at the outset and updated monthly; a detailed schedule of values; procurement and materials controls; tracking of quality control and inspection; daily and weekly reports summarizing work performed and problems encountered; recovery plans; and minutes of all project meetings, circulated and approved.
Unfortunately, disputes and claims often don't arise until the closeout of a project, when financial impacts become clear. However, with proper planning, the appropriate method of project delivery and contract type, enforcement of protective contract provisions and strict application of project controls, schools can greatly reduce such disputes.
In addition, schools should develop, in advance, a thorough closeout plan that ensures receipt of the project for which it contracted, free of liens and encumbrances. These measures greatly increase the likelihood that the school construction project will be completed on time and within budget.
Rochefort and Gosch are partners in the law firm of Weston Benshoof Rochefort Rubalcava and MacCuish LLP, Los Angeles.