Tara Rose | Hahn Loeser & Parks
Would it surprise you to learn that one of the most important sections in your construction contract is the one your lawyer will probably spend the least amount of time on? In your lawyer’s defense, lawyers aren’t always privy to the nitty gritty details of a project’s scope of work – details which are often added to a construction contract at the end of negotiations once the substantive legal terms have been blessed.
However, tellingly, the first question from a construction lawyer negotiating a contract will usually be: what’s the scope of work for this project? As a surprise to no one: different scopes of work have different risk profiles and may require different contractual approaches and strategies. But, beyond that, having a well-defined scope of work that clearly identifies, at the outset of the project, the work to be completed, the materials to be used, what’s included in the cost, and, importantly, what’s excluded from the cost, can save all parties involved from headache and heartache down the line. Disagreements stemming from ill-defined scopes of work can come in many forms ranging from disputes on project cost, timing to completion, and coordination of different scopes of work between contractors.
When renovating or restoring a property, it’s even more important to have a clearly defined scope of work with as much detail as possible. This is especially true for older buildings that may have existing underlying systems that cannot handle a specific upgrade or are no longer code compliant. These issues often do not appear until after contract execution, and sometimes even later in the progress of the work.
For example, assume that renovating an existing commercial space into a medical office requires tying new plumbing connections into the existing sewer main to accommodate sinks in the new exam rooms, as well as adding a new employee restroom. Now, imagine that, after completion of the work, the sewer main continually backs up in the employee restroom because the original sewer main pipe never had the correct slope and now cannot handle the new capacity. In this scenario, is replacing the original sewer pipe to correct the sewage flow problem the contractor’s responsibility? More importantly, is the cost for that work already included in the cost of the original contract price? As the project owner, if you pay for plumbing to be installed in your renovation project, you may assume it’s ultimately the contractor’s responsibility to ensure it operates correctly. However, most contractors will not agree to be responsible for underlying or unknown conditions at the project. So, they typically will include an express disclaimer of issues with existing systems in the statement of work, leaving the project owner holding the proverbial bag. This creates an obvious rift in expectations and reality for the project owner, especially if the scope was not well reviewed or defined.
Thus, what’s expressly excluded from the scope of work is just as important as what’s expressly included in the scope of work. Any list of exclusions from the work should be prepared and/or reviewed carefully, as any expressly excluded work will not be priced or contemplated in the contract. Project owners should take careful consideration of these lists in evaluating bids or quotes for renovation work. Typically, the true cost differential can be found by an apples-to-apples comparison of the differences, exclusions and assumptions in each scope of work for the quoted price.
Other important matters to confirm, particularly while renovating existing spaces, is the delivery conditions and assumptions listed in (or relative to) the scope of work. While not exclusions per se, assumptions and delivery conditions can increase project costs for owners if these assumptions ultimately prove to be incorrect, or the conditions are not met. It can sometimes be a shock to project owners when they find out that they are ultimately responsible for providing or ensuring certain substrates or tolerances are in place before their general contractor even starts the work. Failure to meet these requirements and conditions usually results in cost increases and project delays.
While your lawyer surely will work hard to protect you from bad legal terms, only you can conduct the in-depth review of the scope of work, coupled with to your expectations of the project, that is necessary to protect your project from unforeseen costs, delays and disputes that may arise from an ill-defined scope of work in your construction contract.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.