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As every construction professional is aware, unexpected events and problems are guaranteed on every large project. Defects, delays and change orders are sure to arise, and depending on how they are dealt with and addressed at the time, they can either have minimal effects on the overall project or they can have drastic, long-term and often costly effects, including but not limited to thousands of dollars in legal fees, increases in insurance premiums and/or years of litigation down the road. 

There are many reasons why so many large construction projects end up in some type of litigation. Delay claims, construction contract disputes and construction defect lawsuits are so prevalent in certain parts of the country that certain judges designate specific time blocks in their courtrooms for construction cases only—just to deal with the large portions of their case dockets dealing with construction issues at the same time. 

Defects

If a defect is identified during a project, it is important to have a clear record of what actions were taken to address the specific, defective condition. If a defect is identified, but it is not remedied during construction, the contractor should not be surprised if it is sued for a construction defect down the road. It does not help anyone to simply identify the issue and fail to make sure that it gets fixed. 

All parties should endeavor to have a clear record of what the condition is, who is responsible for the condition, who is responsible for fixing it, whether and how the condition was fixed and whether an inspector or design professional signed off, inspected and approved the specific repair. This can be done via a request for information, inspection reports or any other manner of written documentation. Without such specificity and a clear documentary record, everyone who touched the issue (whether it’s the contractor, subcontractor, engineer, consultant, inspector, etc.) could potentially be the subject of a construction defect claim by the owner or a by a future owner. The procedure for identifying and addressing construction defects can be memorialized in a construction contract, with clear procedures as to who is responsible for identifying same and how they are to be dealt with. 

Delays

If it is not clear in a construction contract how delays are dealt with, how delay damages are calculated and who is responsible for certain types of delays, it will almost surely lead to a delay claim and, very often, the resulting withholding of payment by the owner or client. One way to avoid this is to ensure that the construction contract has clear and unambiguous delay provision language, including clear “force majeure” language, setting forth precisely what types of delays are outside of the contractor’s control so there can be no dispute in the event same arises. 

Similarly, there should be clear language setting forth the owner’s and design professional’s responsibilities, including for example, how much time it should take for an owner or design professional to respond to a change order request, request for information or product submittal. If everyone on the project has clear deadlines for specific tasks, it will minimize the risk of a dispute down the road. 

Without these types of safeguards built into a project, the parties risk having to argue and litigate a delay claim, which often necessitates the retention of expensive expert witnesses. These expert witnesses have to evaluate the project’s critical path and review all of the project documents and communications in order to make a determination as who they believe is responsible for each specific delay event, and how each delay event affected the critical path. 

Change Orders

Whether it is a defect (that could be the cause of a delay) or some other unforeseen issue, change orders will likely be required for any large construction project to alter deadlines or amounts owed to the contractor. The details in every change order are extremely important, and without a clear record of what was included in the specific change order, a dispute (and more specifically, a payment dispute) is more likely to arise. 

For example, if an additional scope of work is being added to an already existing contract, the change order should specifically identify the materials, the cost of the materials, the labor and the cost of labor, as well as any overhead, permitting, insurance or other costs. Without that clear record, a client or owner could potentially argue down the line that it was not clear what they were signing for. The more detail and information built into the change order, the better it is for all parties involved so it is extremely clear what scope of work is being performed, what charges from the contract are being added or deducted (in the case of a credit or deduction), and why the change order was necessary in the first place.

Defects, delays and change orders are inevitable in the construction industry. Depending on how they are anticipated and handled, the ripple effects could be long-term and extremely expensive.

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