Author: Lisset Garcia

Your company selects a GC for a 10-story office building project. Contract includes generic terms and does not differentiate between a GC and its subcontractors or specific items of work. Bids are send out for the concrete package and 3 sub-contractors have tight bids within 3% off each other. The scope of work includes framework, rebar, pour and finish. The lowest bidder was selected and interviews conducted with the sub-contractor to make sure the scope of work and schedule are covered. The written bid did not reference any drawings. At the interview you ask if they have all concrete shown on both arch dwgs and structural dwgs. You ask because there were a couple of concrete housekeeping pads and one set of steel stair infills shown on the arch dwgs that you want to make sure are picked up. The sub-contractor acknowledges and notes that this was documented in the pre-award meeting notes.

You hire the interviewed subcontractor and a week later mail a subcontract agreement and at the same time work is begun. Sub calls inquiring reference made to the arch dwgs. You remind the sub of the housekeeping pads and stair infills. Work continues. Two weeks later sub sends signed agreement but the reference to arch dwgs is crossed out. It turns out that several walls shown on arch dwgs are not shown on structural dwgs. Walls are not detailed as they would have been on the structural dwgs which would typically include steel embeds and rebar. A request for information (RFI) is written and the structural engineer responds with the necessary sketches but the architect does not attach a directional document such as a construction change directive (CCD) to the RFI. As a result the sub refuses to accept the contract as originally written and will not install the walls unless a change order is issued. The walls are worth $50K and your company nor the sub have the money in your budget to take care of the issue.

In this case there were also a lot of miscommunication errors. There were no specific terms. No one knows exactly what they are supposed to do. There is no coherence between the structural and arch dwgs. The written bid should have referenced arch dwgs. Drawings should have been very carefully specified and also have had to be dated with page numbers on dwgs. All dwgs must be up to date.

In this case the client hires a GC to build a $3 million executive home but he also hires separately an architect for the design. Once the permit was obtained the architect’s contract was closed out. The agreed contract does not tie the GC to a fixed price and the $3 million estimate is referred only as a “budget” in the contract. The owner assumes that because of verbal communication with the GC that the $3 million agreement was a lump sum. Discussions and estimates were not tied to or referenced in the contract. The owners’ mistake was not having any representative like a project manager or someone with prior experience as the owner had never been involved in a construction project.

During construction changes were made by the city and owner but none were formalized in the contract. Many changes were due to building code changes. The GC understood this to be a time and materials (T&M) project they did not find it necessary to submit change orders against the “budgeted” amount. When the project was 90% completed the GC invoices owner for 100% payment at that point the GC indicates that the project will run over $500K from the $3 million “budgeted” amount. The owner refuses to pay the GC, the GC pulls off the job and states he will not complete the job until the owner pays off the remaining $1 million and the additional $500K. At this point GC is dismissed and both parties sue each other.

In this case I believe the owner is at fault for not having a third party involved. He should have had someone with prior construction experience like a project manager. He would have been better informed and any changes made would have been changed in the contract. Every change should have been referenced back to the contract. The contract was vague as it did not tie the GC to a fixed price.