In the ever-evolving world of construction, effective communication is paramount. As outlined in our latest article, clearly identifying expectations and maintaining open lines of communication can make all the difference.
1. Set Clear Expectations: Contract obligations are non-negotiable without written agreement. Reinforce these obligations to prevent misunderstandings.
2. Open Communication: Address concerns upfront and work together to find solutions. Regular face-to-face interactions can strengthen your working relationship.
3. Collaborative Strategies: Use a mix of formal and informal communication to ensure both parties meet their contractual obligations.
The right approach to managing communication can prevent conflicts, foster trust, and enhance project outcomes.
Maintaining relationships in a challenging environment.
Awarding a construction project often hinges on a contractor’s previous performance, demonstrated behaviors, and their ability to collaborate effectively throughout the project lifecycle. These qualities are essential for fostering strong relationships; however, they are not always consistently exhibited by either contractors or owners. Parties tend to be on their best behaviors at the pre-contract stage, and the gloves come off as soon as the contract is signed.
In a competitive, lump-sum bidding environment, it is common for contractors to submit bids with low margins, incorporating strategic pricing and the insertion of deliberate language regarding inappropriate risk allocation, thereby setting the stage to pursue substantial changes and claims later. Owners can be notorious for allocating the majority of risks to contractors, which can become a breeding ground for disputes.
Construction projects are often challenging and frequently result in disagreements and even formal disputes; however, it remains essential for both parties to make every effort to prioritize and preserve the working relationship.
Common themes that can negatively impact relationships.
Contractors frequently assert that insufficient or ambiguous contract documentation, unexpected site conditions, or an endless list of other issues hindered their progress. Such tactics are often employed to enhance financial outcomes, recover unforeseen losses, hide poor performance, or compensate for inefficiencies that were not factored into the initial bid.
Owners accuse contractors of underperforming, capitalizing on ambiguous contract terms, and behaving in a commercially aggressive manner. Meanwhile, contractors accuse owners of impacting their means and methods, failing to process changes in a timely manner, and compromising their cash flow.
Construction contracts often outline numerous obligations related to the contractor’s submission of project submittals or data. When these requirements are not submitted on time, in the expected sequence, or to an expected standard, it can significantly disrupt project progress and may serve as a defense or counterargument to claims initiated by a contractor.
Owner-authored contracts typically obligate contractors to produce daily, weekly, and monthly reports, as well as regular schedule updates, progress measurements and forecasts. Contractors dedicate staff to producing detailed reports and often place great emphasis on ‘heads-up’ claim language. An astute contractor takes great care to inform the owner of the status of the project, including a focus on issues, risks which may impact the progress of the work, any ‘owner caused’ delays or disruptions which may negatively impact the project.
When this occurs, owner personnel should carefully review and analyze the contractor’s submissions. This doesn’t always occur due to a lack of commercial awareness, resource constraints, complacency, low morale, or where the volume of reports results in insufficient time to review the documents in detail.
Commercially astute contractors also dedicate staff to creating opportunities, writing letters to illustrate changing conditions, highlighting inefficiencies, deficient or late information, or otherwise laying the groundwork for future claims. While this can lead to frustration and a strained relationship, it is paramount that owner personnel review the submitted records, refute any false, misleading or inaccurate assertions and do so consistently. It is also critical to address legitimate changes expediently, although typically, the more spurious changes/claims that are submitted, the more scrutiny they receive.
Although the scenario described above may appear pessimistic, owners and contractors must constantly work to sustain a professional relationship. Equally, it is incumbent upon both parties to uphold and invest in that relationship. When trust erodes or conflict persists between parties, the result can be prolonged delays, inflated costs, entrenched positions, decline in overall project quality, and likely formal disputes. Any indication of misconduct or recurring poor behavior is likely to undergo rigorous legal examination in anticipation of arbitration or litigation.
“Coming together is a beginning, staying together is progress, and working together is success.” – Henry Ford
Communication
Effective communication begins with clearly identifying expectations ahead of time. The obligations contained in any contract are set out for a reason and cannot be relaxed or contracted out of without written agreement.
If an owner doesn’t reinforce contract obligations, the contractor may seek to demonstrate that the contract was varied by conduct. That being said, if clarity is required to understand the requirements, a forum should be provided to aid in compliance with the contract, and that information sent/received by both parties is timely, accurate and fit for purpose.
Keeping lines of communication open (both verbally and in writing) is important, despite the challenges illustrated above. Concerns should be addressed upfront. If it appears that information, access, or other owner-provided items are going to be delayed, communicate the issue promptly and jointly work on a solution.
Although personnel working for commercially astute contractors are mandated to consistently produce vast documentation as a precursor to a claim or to protect against Subcontractor claims, there can be common ground reached in collaboratively managing a project.
Effective communication begins with each individual and the relationship with your counterpart. A healthy mix of formal correspondence and informal discussion is crucial to maintain a working relationship.
The list below contains both collaborative actions and strategies for ensuring parties meet the obligations set out in the contract. This can be a challenging and often arduous task; however, it will ultimately benefit both parties to the contract.
Some practical tips are:
- Schedule regular face-to-face time.
- Listen to each other’s concerns and understand the position each party may be in.
- Help each other understand the project and contract requirements through explanation and reminders.
- If a contractor is prioritizing future claims instead of fulfilling the contract obligations, course correct through discussion and written reminders (in consultation with the Contract Administrator). Refocus their efforts by reminding them of their obligations under the Contract.
- Evidence is key. As illustrated in our article titled CEES – The Four Pillars of a Construction Claim which can be accessed here
- Usable lessons learned are key, as is providing readily available access to this data.
- Place care and attention into the management of change, don’t prolong issues as this will lead to erosion of trust.
- If conflicts escalate, consider hiring a neutral third-party mediator to help facilitate discussions and find a resolution.
- Get your legal counsel involved early if you are unable to resolve the situation.
Conclusion
Knowledge of the contract is essential, particularly for key personnel and personnel managing the day-to-day contract. Interaction between contracts, construction and project controls is essential, as is consistently holding each party accountable within the four corners of the contract. Frequent discussion and understanding of the issues are critical, as is escalation of key issues to ensure issues don’t fester, often to the detriment of the project.
Give and take is a careful balance, but one that can be used effectively for the betterment of any project. We will explore this concept in future articles where we address key elements of the contractor and owner playbooks.
- There may be other legitimate reasons and/or ‘excuses’ as to why this doesn’t occur or is not consistently carried out…
