The commercial terms of the contract can consume page after page of small print.  These pages should be reviewed carefully prior to submitting the bid on the project.  If there are objectionable terms the contractor needs to ask questions to see if they can be changed prior to the bid being submitted.

If exceptions are not allowed, as is the case with many governmental and some private companies, the contractor has to judge the risk. If the risk is acceptable the contractor should adjust their pricing to cover the risk.  If it is not acceptable, they should pass on bidding the project.

But it is not just the commercial terms of the contract; the technical specifications can create problems too.  Remember, the specifications identify the least acceptable quality level the owner is looking for in the project.  The contractor looks at them as the maximum level they have to meet.  When these two don’t meet – here come the problems.

Oh, By the Way… There are more than these obstacles to success.  Yet, contractors keep on bidding.  They have to be the most optimistic companies in the world.

Times have changed drastically, now an employee can “walk off” with much more without anyone noticing.  Thumb drives can be great to transfer needed information, but can also be tools for employees copying their contacts plus several gigabytes worth of confidential information.  Right now, I have an 8 gigabyte flash drive sitting in my desk which anymore is considered small.

Hopefully, a person has enough honesty and integrity not to steal the confidential information, but it will still occasionally happen.  Unfortunately, the targeted data such as historical cost is information estimators need to perform their normal job responsibilities.

Even though technology is supposed to make everyone’s jobs easier, it can also create additional headaches.

Guest Blogger – Todd Weidemann

10. Contractual relationships in construction are unique under law.

9. Different delivery methods drive different motives and can lead to differing outcomes.

8. Communication channels are a challenge.

7. The distance from the original funding source is directly proportional to the risk of not getting paid for materials, labor, equipment or services.

6. A written contract is preferred, but the handshake can be better.

5. When an estimate turns into a guess or vice versa.

4. Rome could have been built in a day – just ask any owner representative.

3. All design is deemed to have flaws, but all construction is guaranteed as perfect.

2. When working for the government you can pick your nose, but you can’t pick your contract terms.

1. Shrinking margins are like shrinking underwear – both cause puckering.

Todd W. Weidemann is an attorney with Woods & Aitken. He practices Construction Law and Commercial Litigation, as well as Real Estate.

Then there are the experts for each side.  They are fair game for the other side.  By this I mean they can be subject to the full treatment of getting beat up in depositions and during their testimony regarding their opinions.  Some of it can be deserved when the expert is clearly less than an expert in the area of testimony.  Some experts charge higher rates for depositions and their testimony.

It is interesting to see how some experts should not really be considered as experts when it comes down to it.  I have seen an “estimating expert” on the witness stand testify about construction estimating practices.  This expert was from an accounting and consulting firm.  His experience in estimating consisted of estimating fees on their assignments.  None of the estimating involved construction or time and motion knowledge.

Industry experts are truly beneficial to the dispute resolution process.  They can assist their client in many ways. It may involve telling them to settle the dispute.  It may be to participate in an oversight role with their client doing the bulk of the work in preparing for the trial or hearing.  It can even be assisting the attorneys with questions for the other side.

Oh, By The Way… Will an expert help make your case?  Maybe. Maybe not.  The facts are your best offense or defense.  If you rely upon an expert, make sure you have a knowledgeable industry expert who will present the facts and conclusions in the clearest manner possible to help achieve the best possible outcome.

The competitive advantage comes in the means and methods used to achieve the results the owner and architect or engineer have set out in the plans and specifications.  This is not to slight the other members of the project, but generally speaking the contractors (their estimators and project management personnel) are the most knowledgeable people regarding the means and methods on any given project.  Productivity gains and losses are where they make or lose money.

At bid time, when a competitive advantage develops, the smart contractor will price out the customary or conventional process and evaluate it against the “unconventional” process.  If there is a savings the pricing structure can reflect this.  They may take half the cost difference as a “risk/reward” amount to add back to their profit margin.

In my bidding, I have been “beat’ by others using this type of competitive advantage.  One that comes to mind is where the successful bidder used a work week with fewer overtime hours than the one we, and the other bidder, anticipated.  They saved on direct labor cost for each hour and gained in overall productivity.  The owner received the same project specified at a lesser cost than the other bidders would have provided.

Oh, By the Way… Innovation comes from experience and ideas developed from this experience.  With the “old timers” leaving the industry, and a dearth of training and mentoring, the construction industry may be in for some hard times in the upcoming years.

Lying does nothing but demoralizes the employees and will not encourage them to increase their productivity.  In general, people want to do a good job and take pride in the work they do.  Telling them how the job is progressing is another way of saying they are doing a good job which can actually make them work harder.  A person will be more productive with a positive attitude compared to being frustrated and negative.

If trust is an issue with the craft, then there are much bigger problems to deal with especially on remodel projects.  The client’s image of the contractor is based on the crews they see all day and every day, not the project manager or anyone else that may visit the site every few days or weeks.  So how can a contractor trust the craft to represent the company but not trust the craft enough to be honest to them?

Unfortunately, not every project is a winner, but after the trust is established between the craft and management, telling the craft the project is behind will carry much more weight.  It’s really no different than the old story of the boy crying wolf.

If a person is going to milk the job, they will milk the job no matter what.  If a contractor can’t trust an employee, then maybe they need to reconsider that employee’s employment.

Bidders that short circuit the specifications are taking something of value from the owner of the project.   In the development of the specifications the owner has set forth their expected level of quality with regards to the materials and workmanship.  If they want Product X meeting Specification Y that is their decision.

If contractors desire to have a substitute product considered, there is a mechanism to get it done.  However too short bid periods, pride of authorship and other factors tend defeat this mechanism.  If this happens the contractors still need to bid to meet the specifications.

After the bid, the contractor can then re-approach the designer and owner about the substitution.  This process could involve a savings to the owner in time and/or money.  The owner and architect or engineer need to possess an open mind and have the knowledge to properly evaluate this option in any case.

Oh, By the Way… The successful, long term contractors that make money on construction are the innovative contractors.  They innovate on production and other areas to succeed.

It doesn’t matter if you have an earthwork program that is used for takeoff and then field elevation control.  If you do not set it up in the field correctly you will not get the right elevations.   If you set it up right once, it does not mean it will get set up right the next time.

Estimating software is another big time saver.  The resulting on screen displays and/or prints are impressive.  Because they look good, they must be right.   However if the user does know how to prepare an estimate, the results will be impressive looking garbage.

The same holds true for scheduling software.  If the user doesn’t know the logical relationships between the activities, the schedule is worthless.  Impressive, but not worth the time it took to prepare.

I imagine the same holds true for most software.  I know it certainly does for spreadsheets, word processing and accounting software.

Oh, By the Way… My moment of enlightenment in the car was finding out I needed to turn the heater on after two days of wondering why the temperature was not coming up to the one set on the screen!

A major firm needed estimating services.  They wanted the service on an hourly rate basis with established per diem rates for travel and such.  So far this is a doable deal.

The contract agreement documents contained 51 pages of single spaced text.  Considering the contract scope could be for well under $250,000 up to $2 million in value, I suppose this could be considered as tolerable.

The “I gotcha’s” were many. What became the problem was they were requiring locally available personnel for staffing at the various sites located around the country.  The assignments were for undefined time frames and they retained approval rights on the personnel being provided.  If qualified personnel were not available locally they were to be assigned on a per diem basis with the same conditions attached.  Besides these terms, there were numerous other considerations being imposed.

In review of the total package it became apparent what they really wanted was a “job shop” or temporary labor agency, not a consulting company to provide professional estimating services.

Oh, By the Way… In spite of the lousy construction economy, we declined to submit on this RFP since it did not match our methods of operations and untenable contract conditions.  It would have degraded our typically outstanding results.