Good Quality Guidelines

Mission Statement

The Associated General Contractors of America, the American Subcontractors Association, and the Associated SpecialtyContractors have agreed to work together to develop, maintain and promote Guidelines for a Successful ConstructionProject. The guidelines represent the joint efforts and approval of these organizations who will continue to addressindustry concerns as the need arises.

A. Introduction & Overview

1. General Contractor-Subcontractor Relations.................................................................................................................1

2. Owner’s Ability to Pay ..................................................................................................................................................5

3. Contractor’s Payment Rights, Obligation, and Responsibilities ...................................................................................7

4. Design Responsibility....................................................................................................................................................9

5. Liaison Committees.....................................................................................................................................................10

B. Bidding Processes

1. Bidding Procedures......................................................................................................................................................11

2. Project Scheduling, Delays, and Liquidated Damages ...............................................................................................13

3. "Scope" Bidding for Private Work...............................................................................................................................15

4. Bid Shopping & Bid Peddling.....................................................................................................................................17

C. Pre-Construction Planning

1. Pre-construction Conferences......................................................................................................................................18

2. Partnering.....................................................................................................................................................................21

3. Reserved

4. Site Logistics ...............................................................................................................................................................24

D. Project Execution

1. Environmental Health & Safety

a. Project Safety and Health........................................................................................................................................28

b. Unforeseen Environmental Problems in Construction...........................................................................................29

Guidelines For A Successful Construction ProjectTable of Contents

Guidelines for a Successful Construction Project. Copyright © 2003, The Associated General Contractors of America/AmericanSubcontractors Association, Inc./Associated Specialty Contractors. i

How to use this pdf:Clicking on an entry in the Table of Contents will take you directly to that Guideline. In a Guideline, clicking on areference to another Guideline will take you to the referenced document.

mpoles

Typewritten Text

D. Successful Project Execution (cont.)

2. Coordination

a. Communication.......................................................................................................................................................31

b. Project Meetings.....................................................................................................................................................33

3. Contract Administration

a. Avoidance and Resolution of Construction Disputes .............................................................................................32

b. Benefits to the Owner of Effective Allocation, Delegation, and Performance of General ConditionsResponsibilities ......................................................................................................................................................36

c. Consequential Damages..........................................................................................................................................37

d. Procedures for Change Orders................................................................................................................................39

e. Charges for Non-contracted Construction Services................................................................................................42

f. Prompt Payment ......................................................................................................................................................43

g. Guideline for Payment for Stored Materials and Equipment.................................................................................44

h. Purchase of Materials or Equipment by Owners....................................................................................................45

i. Overtime, Construction Costs and Productivity......................................................................................................46

j. Reserved

k. Retainage.................................................................................................................................................................49

4. Quality Assurance/Quality Control

a. Total Quality Management......................................................................................................................................50

b. Project Inspections..................................................................................................................................................53

c. Reserved

5. Project Closeout

a. Project Closeout......................................................................................................................................................55

b. Punch List Procedures ............................................................................................................................................57

E. Appendix - Forms

1. Sub bid Proposal..........................................................................................................................................................58

2. Subcontractor ’s Application for Payment....................................................................................................................60

3. Work Authorization Form............................................................................................................................................61

4. Change Proposal/Order Form......................................................................................................................................62

Table of Contents

Guidelines for a Successful Construction Project. Copyright © 2003, The Associated General Contractors of America/AmericanSubcontractors Association, Inc./Associated Specialty Contractors. ii

mpoles

Highlight

Preamble

The primary objectives of every general contractor andsubcontractor are to successfully deliver to the owner thespecified project safely, on time, at the contract price andachieve a reasonable profit in return for performance ofits work. Regardless of personal pride, business philoso-phy, contractual authority or years of experience, no gen-eral contractor can deliver a project successfully withoutthe cooperation of competent subcontractors.

Similarly, no subcontractor, regardless of skill and experi-ence in its specialty, can perform its work successfullywithout the corresponding measure of cooperation andleadership of a competent general contractor.

Both seek a business relationship on which they candepend. Usually, each wants to continue to do businesswith the other on future projects as well as those at hand.Skill, integrity, fairness, trust, respect, and responsibilitywill make the contractual relationship—now and in thefuture—possible, profitable and pleasant.

Contract Documents

A written contract document usually establishes theframework for the relationship between the general con-tractor and the subcontractor. To foster cooperation, thesubcontract should be fair to both parties and non-adver-sarial. Experienced participants in the construction indus-try know that no architect/engineer can prepare a perfectset of documents, and that no general contractor or sub-contractor can perform perfectly. Likewise, contract doc-uments cannot detail every industry practice or anticipateevery crisis or situation that will arise at the site.Mistakes will occur and miscommunications will arise.Most general contractors and subcontractors solve theirproblems without resorting to litigation. Errors and omis-sions, when discovered and made known in a timely fash-ion, can generally be overcome with minimal damage toall concerned. Mistakes that are admitted and correctedimmediately are the least costly mistakes.

Project Culture, Trust, and Teamwork

Key to successful construction relationships is mutualtrust which must be nurtured to develop a positive project

culture. Keeping everyone on a project working togetherin a harmonious fashion, without unduly delaying ordamaging others, is a highly complex task requiring theutmost coordination, cooperation, communication, and—sometimes—compromise. As difficult as it may be, thisis what makes a project profitable and the constructionindustry rewarding (see D.2.a.Communication andD.2.b.Project Meetings).

Each general contractor and subcontractor on a projectshould be regarded with equal respect. Each is an expertin its own field. Ethical conduct, regardless of contractu-al "rights" or ability to make another firm suffer, is essen-tial for harmony. The golden rule, "Do unto others as youwould have others do unto you," is still the best guidelinein dealing with other individuals and businesses.

Contractors should also assist architects, engineers andowners by advising them, when requested, on relativecosts of alternates while plans are being prepared so as toreduce the number of alternates.

The following guidelines, developed by the AssociatedGeneral Contractors of America, the AmericanSubcontractors Association, and the Associated SpecialtyContractors, provide suggestions for mutually profitableand ethical general contractor-subcontractor relations.These are arranged in the chronological order of the con-struction process.

Pre-bid phase

1. The general contractor should issue bid invitations tosubcontractors, in sufficient time for subcontractorsto review the project documents and prepare respon-sible and responsive bids (see B.1. BiddingProcedures).

2. The general contractor should make the projectfinancing information available to subcontractorsbefore the deadline for subbids (see A.2. Owner’sAbility to Pay).

3. The general contractor should furnish any specialbid proposal forms required and make necessarybidding documents reasonably available to subcon-tractor bidders. General contractors receiving sub-contractor bids, as well as subcontractors receiving

A.1Guideline on General Contractor-Subcontractor Relations

Guidelines for a Successful Construction Project. Copyright © 2003, The Associated General Contractors of America/AmericanSubcontractors Association, Inc./Associated Specialty Contractors. 1

sub-subs’ bids, should provide a convenient planroom or make documents available via the internetfor subcontractors’use in preparing estimates.

4. The general contractor should promptly make bul-letin and addenda information available to biddingsubcontractors.

5. Each subcontractor should deliver to the generalcontractor, at least 24 hours before the bid hour, awritten bid without dollar amount, setting forth itsproposed scope, alternates, unit prices, addendaand/or bulletins to be included. The scope shouldreference specification divisions or sections andspecifically identify any omissions or additions.

6. Proposals should not be invited, accepted, or consid-ered from any subcontractor or supplier known to beunqualified to perform the proposed work or renderthe specified service, or from one who, for somereason, has no genuine possibility of being awardeda contract.

Bid period

1. The subcontractor should submit its finalized biddollar amount and any necessary clarifications to thegeneral contractor at least four hours before the gen-eral contractor bid hour. The general contractorshould establish for all bidders a cutoff time forreceiving subcontractor bids, make it known, andadhere to it.

2. Subcontractors should not quote on unapprovedsubstitutions, except as an alternate.

3. The bid amount of one competitor should not bedivulged to another before the award of the subcon-tract or order, nor should it be used by the generalcontractor to secure a lower proposal from anotherbidder on that project (see B.4 Bid Shopping andBid Peddling). If a bid is so low in comparison withother bids as to suggest clearly an error, the generalcontractor should notify the subcontractor immedi-ately that its bid appears to be out of line. The sub-contractor should either withdraw or stand on itsbid, but not modify it.

4. Fair and bona fide competition is a fundamentalservice the industry brings to its customers. Any actor scheme to restrict or suppress free and fair com-

petition by any method is a breach of faith and abetrayal of principles. Any false or malicious wordor act that would harm, or is intended to harm, thereputation of a competitor is unethical.

5. The amount of a bid should not be altered after theopening, nor should alterations be requested, exceptwhen a substantial change is made in the work (seeB.1 Bidding Procedures).

Award of contract

1. Upon execution of the general contract, the generalcontractor should promptly award subcontracts atthe bid amounts to responsible subcontractors whosebids were used in the preparation of the general con-tractor’s bid. Subcontract terms should be the sameas those in the owner-contractor agreement as relat-ed to the subcontractor’s work. The interests of allparties in the construction process are well servedby each being fully aware of its responsibilities andrights. All parties should pursue a full understand-ing of their contract obligations; those included byreference as well as express terms. Likewise, a fullunderstanding of surety bond obligations, if any, andrights of claims against such bonds should be pur-sued.

2. The general contractor should establish a progresspayment procedure and schedule which is approvedby the owner and issue copies to the subcontractorsupon request. The general contractor shouldpromptly coordinate with the owner’s paymentapproval authority to assure that the procedure andschedule will be followed (see D.3.f. PromptPayment).

3. The general contractor should issue each subcontrac-tor a timely written "notice to proceed" for the sub-contractor’s work and promptly notify the subcon-tractor of any changes in such date.

Pre-construction conference

The general contractor should arrange for and conduct apreconstruction conference as soon as the schedule hasbeen prepared (see C.1. Pre-construction Conferences formore detail beyond the summary outlined below). Aresponsible representative(s) of each subcontractor, majorsupplier, the architect/engineer and owner ’s representative

A.1 Guideline on General Contractor-Subcontractor Relations


should attend. Detailed minutes should be recorded anddistributed to all such parties on the project. The purpos-es of the meeting are:

1. To introduce members of the team to one anotherand establish the project communication procedure(see D.2.a. Communication);

2. To review the job schedule prepared by the generalcontractor and ascertain that a reasonable time hasbeen allowed for performing the work of each trade(see B.2. Project Scheduling, Delays and LiquidatedDamages);

3. To coordinate the submission of shop drawings andsamples;

4. To set up change order procedures (see D.3.d.Procedures for Change Orders);

5. To list all initial questions that will require ananswer from the architect/engineer or owner’s agent;

6. To ascertain whether there are likely to be any laboror material problems which could seriously impedeprogress of the project;

7. To establish how non-contracted services forcleanup, temporary facilities, etc., will be authorizedand charged (see D.3.e. Charges for Non-ContractedConstruction Services);

8. To describe temporary facilities for the project andestablish parameters for their use (see D.3.e.Charges for Non-Contracted Construction Servicesand C.4. Site Logistics);

9. To explain punch list procedures (see D.5.b. PunchList Procedures).

Scheduling

A workable project schedule is absolutely essential for asuccessful project (see B.2 Project Scheduling, Delays,and Liquidated Damages). It should be prepared by thegeneral contractor with input from major subcontractorsand suppliers. Failures to meet schedule requirementshurt all members of the team. Effective scheduling incor-porates the following concepts:

1. The general contractor should only require a subcon-tractor on site when the project is ready for that sub-contractor’s work. The general contractor should

strive to coordinate the project in such a manner asto permit subcontractors’ work to proceed in a rea-sonable and logical sequence and manner.

2. A network diagram showing the critical path andclearly showing when each subcontractor is to startand complete the various portions of its work is avaluable tool. The general contractor and each sub-contractor should be sure to understand the particu-lar schedule used.

3. Conflicts in the project schedule should be discussedwhen they arise. Resolution frequently necessitatescompromise.

4. The schedule should be continuously monitored,updated and issued to all project participants on aperiodic basis (weekly or monthly depending onproject size and complexity)

5. When a schedule change is made, each subcontractoraffected should be notified immediately.

6. Dates for delivery and installation of heavy equip-ment should appear on the project schedule. Accessfor such equipment installation should be main-tained accordingly.

Shop drawings and samples

The subcontractor should plan and schedule shop draw-ings and sample submissions in a logical sequence withinput from suppliers involved and coordinated with thegeneral contractor. The sequence must:

1. Allow for the project’s established approval processturnaround time.

2. Prioritize subcontractor submittals to obtain approvalfor the longest lead time deliveries first.

3. Comply with the project schedule.

Building codes

Strict compliance with all local and national buildingcodes should be observed and maintained.

Safety

Precautionary measures should be introduced andobserved to ensure safety and protection of the public and



those engaged in the industry. Subcontractors must abideby the safety requirements established by the general con-tractor as well as those of their own safety programs andapplicable jurisdictions.

Payments

Prime contractors should make payment promptly and injust proportion to work done by subcontractors and sup-pliers, and any changes in retained percentages shouldlikewise be passed along in proper proportion (see D.3.f.Prompt Payment).

In like manner, it is expected that the subcontractor willpay promptly for all its labor and material as far as exe-cuted, and should submit evidence of this fact to the gen-eral contractor if requested (see D.3.f. Prompt Payment).

Retainage

Percentage retentions by the owner with respect to thegeneral contractor and by the general contractor with

respect to subcontractors are for the purpose of assuringcompletion of the work. Any manipulation of retentionsfor any other purpose, such as a credit device, is animproper use of others’ money. Any adjustment of theretained percentage in the general contract made duringthe course of construction should be equally, proportion-ately, and promptly applied to the subcontract interest. Asubcontractor that has completed its work properly shouldnot be penalized by having final payment withheldbecause some other contractor has not completed its con-tract.

Project Closeout

All parties must work throughout the project with an eyetowards the final completion and acceptance by theowner. As a result, Project Closeout procedures must beintegrated into all phases of the work beginning at con-tract award (see D.5.a Project Closeout).



Delays or defaults by owners in meeting contractual pay-ment obligations to contractors are a continuing cause oflitigation, liens, long delays in completion of construc-tion, abandonment of contracts, and bankruptcy of con-tractors and subcontractors. Qualified contractors oftenare unwilling to bid on projects for owners whose finan-cial capacity and credit rating are not widely known.This results in reduced competition and the possibility ofhigher bids to the detriment of the owners.

The problem has been partially addressed in standardcontract documents. For example, The American Instituteof Architects’ Document A201, "General Conditions ofthe Contract for Construction" (1997 edition), states insections 2.2.1 and 14.1.1:

The Owner shall, at the written request of theC o n t r a c t o r, prior to commencement of the Work andt h e re a f t e r, furnish to the Contractor reasonable evi -dence that financial arrangements have been madeto fulfill the Owner’s obligations under the Contract.Furnishing of such evidence shall be a conditionp recedent to commencement of continuation of theWork. After such evidence has been furnished, theOwner shall not materially vary such financiala rrangements without prior notice to the Contractor.

The Contractor may terminate the Contract if theWork is stopped for a period of 30 consecutive daysthrough no act or fault of the Contractor or aSubcontractor, Sub-subcontractor or their agents oremployees or any other persons or entities perform -ing portions of the Work under direct or indirectcontract with the Contractor, for any of the follow -ing reasons: . . . .4 the Owner has failed to furnishto the Contractor promptly, upon the Contractor’srequest, reasonable evidence as required bySubparagraph 2.2.1.

Even though these clauses alert owners to the need toprovide such "reasonable evidence" before constructioncan commence and during the course of the project, theymay not completely reassure contractors who are consid-ering bidding the work and investing many thousands ofdollars in the process of preparing their bids.Furthermore, the requirement of "reasonable evidence"may be vague and cause misunderstandings.

The owner may have made financial arrangements to ful-fill its obligation, but that does not necessarily mean thatprocedures have been established to assure that contrac-tors will, in fact, receive timely payments and will not beforced to borrow working capital with interest to pay theirongoing expenses on the project. A trouble-free arrange-ment from the beginning to the completion of the con-struction requires that the owner have a sufficient com-mitment from a lending institution or other source of con-struction capital. This includes funding to make allprogress payments and final payment promptly as provid-ed for in the contract documents, as well as to pay forchanges and any damages for which the contractors areentitled to reimbursement.

It is not advisable for construction contracts to be execut-ed unless all necessary funds to pay for the constructionhave been placed on deposit, or unless all of those whobid on the project have full knowledge of deficiencies infunding before preparing bids or signing contracts. It isimproper for any payment delay of even one day to occurbecause of administrative lapses or because release offunds is deliberately delayed while waiting for certificatesof deposit or investments to mature. Such actions pass onto contractors the responsibility of financing the project,which should normally not be a contractor obligation. Ameans of avoiding these difficulties might be for pay-ments to be issued to prime contractors by the lendinginstitution or a title company from loan commitments. Inaddition, when a project is constructed with borrowedfunds then the loan should be tied to the contractretainage provisions, so that there is an obligation by thelender, as well as by the owner to pay retainage. (SeeD.3.f. Prompt Payment)

In order to obtain the most competitive bids, ownersshould furnish current written information needed by gen-eral contractors and subcontractors to enforce lien andbond rights. The following procedure is suggested to own-ers and to architects and engineers for recommendation toowners at the time bidding documents are being prepared:

• Invitations for bids should contain clear statementsthat the owner has made sufficient financial arrange-ments for the completion of the project and adminis-trative arrangements for timely disbursement ofevery payment, including change orders and claims.

A.2Guideline on Owner’s Ability to Pay


• Bidders should be invited to make inquiry aboutthese arrangements so that they may satisfy them-selves about financial details.

• Inquiries from contractors who have been invited tobid the project should be answered quickly and can-didly by the owner and/or the construction lender.

In the case of governmental bodies, statements that neces-sary funds have been appropriated for the financing of theproject by legislative bodies having appropriation authori-ty or that necessary bonds have been sold and funds are

on deposit will serve the same important purpose.Bidders who once felt confident in bidding to governmen-tal bodies may have lost such confidence due to a numberof governments which have defaulted or approacheddefault on obligations. Because of the reputation of manygovernmental bodies of delaying payments due to proce-dural red tape, it is especially important that bidders onpublic works have clear assurances that such delays willnot occur.

A.2 Guideline on Owner’s Ability to Pay


1. One of the most important aspects of the constructionprocess is timely and complete payment for workaccomplished.

2. At times, contractors fail to do adequate due diligencein determining the terms and conditions for payment.In addition, many contractors do not understand theirrights to determine whether or not an owner, undercontract with a general or prime contractor, has theability to fund the construction project.

3. The responsibility of the contractors and subcontractorsis to:

• Understand the payment terms and conditions oftheir contracts.

• Confirm the owner’s ability to pay for services pro-vided.

4. The following is a checklist to assist you in under-standing your payment entitlements and obligations.

It is imperative that all parties review the contractor subcontract before entering into such agreements.

It is your responsibility to review the specific pay-ment terms and obligations spelled out in the con-tract with the owner and/or your subcontract with aprime contractor.

It is your responsibility, if a general contractor, toresearch the owner’s ability to pay for the projectand to convey such information promptly uponrequest to all members of your construction team atthe outset and during the course of the project,including:

• Total Financing Amount

• Current Contract Amount

• Pending Amount of Change Orders and Extras

• Contingency Funds Available

It is your responsibility, if a subcontractor, toresearch the owner’s ability to pay for the projectand the general contractor’s ability to pay those withwhom it has contracts for goods or services.

It is your responsibility to understand the adequacyand source of the money for each project. You havea right to this information upon request. In mostcases, there will be a financial arrangement in place:i.e. loan, line of credit or owner supplied funds. It isappropriate for you to assure yourself that enoughmoney and/or credit is in place and that you under-stand the terms under which the money/credit canbe accessed. (See A.2. Owner’s Ability to Pay)

It is your responsibility to understand the billingprocess of the owner, contractor, and lender. Each oftheir specific requirements could lead to significantdelays in actual payment. Ensure that your paymentforms are submitted in a timely manner, as pre-scribed by contract, and that each requisition iscomplete. Changes, revisions, or incorrect billingforms may delay payment in some cases until thenext billing cycle. (See D.3.f. Prompt Payment)

You must understand your obligations as requiredby the contract. If you are not in complete compli-ance with your contract, it may affect your ability tocollect on the work that you have completed.

It is your right to obtain any information deemedappropriate to your work on the project. Thisincludes any financial conditions, terms, and theability to change or modify those terms and condi-tions. It is important that your contract spell out ifany of the financial conditions change for the proj-ect, you are to be notified in advance.

Understand your bond rights, if any, and appli-cable lien laws. Avoid the premature waiver of anybond or lien rights and file all required bond andintent to lien notices promptly.

Understand the conditions of your contract as towhen you are entitled to stop work, if necessary,for lack of payment. It is important that you retainthe contractual right on each project to stop work, orto terminate, in the event of nonpayment for proper-ly performed work

Understand, however, that you must have com-plied with all terms and conditions of your con-

A.3Guideline on Contractors Payment

Rights, Obligations and Responsibilities


tract before actions allowed by the contract provi-sions can be exercised.

5. The person most responsible for prompt and com-plete payment is you. Protect yourself and yourcompany. Understand and research the payment

requirements of each individual project and theowner’s ability to pay. It is not only your right but alsoa prerequisite for your success in the constructionindustry.

A.3 Guideline on Cont ractors Payment Rights, Obligations and Responsibilities

Guidelines for a Successful Construction Project. Copyright © 2003, The Associated General Contractors of America/American 8Subcontractors Association, Inc./Associated Specialty Contractors. 8

All owners, architects and other design professionals areurged to uniformly accept responsibility for design relatedplans and specifications applying to construction projects.This design responsibility includes drafting completespecifications for inclusion in project bidding documents,initiating or approving all design-related additions, dele-tions and changes to project specifications and acceptingultimate responsibility for the safety and utility of allproject design elements. For design-build projects, theresponsibility for the plans and specifications must beextended to the design-build entity in order to ensureproject success.

Delegation of professional services which constitute thepractice of architecture or engineering, should ordinarilybe limited to manufactured products such as curtain wallsand elevators, and then only subject to constraints includ-ing the following:

1. The owner and architect must specify all perform-ance and design criteria that these professional serv-ices must satisfy.

2. All such services must be specifically required in thecontract documents and not be in violation of anyapplicable law.

3. The architect, or other owner designated design pro-fessional, must approve all design related work per-formed by others and coordinate the overall designintegration, safety of the public, compliance withcodes and other legal or owner requirements as con-tracted. With respect to other than the manufacturedproducts themselves, the architect or other ownerdesignated design professional shall accept andretain sole responsibility for overall design.

4. Contractors and subcontractors must not be heldresponsible for the adequacy of the performance ordesign criteria indicated by the contract documents.

5. The use of inappropriate or unclear specificationsordinarily increases costs to the owner. Higher bid

prices, frequent change orders, and lost time usuallyresult when design documents lack clarity or fail toadequately integrate the work of individual trades.Attempts to shift design responsibility to the con-tractor impose an unquantifiable risk on the contrac-tor that may increase the owner's cost withoutshielding the owner against liability to others.

6. Specification divisions for each trade must be clearand complete. Phrases such as "intended results,""including but not limited to" and "reasonably infer-able" create bidding uncertainties, result frequentlyin claims and lessen the owner's chances that theproject will meet its expectations. (See also B.3."Scope" Bidding for Private Work)

7. Review of design drawings and documents by thecontractor should be for the purpose of facilitatingconstruction and not impose on the contractor a dutyto discover errors, omissions or inconsistencies. Itshould be recognized by all concerned that the con-tractor's review is made in its capacity as a contrac-tor and not as a design professional.

8. Review and approval of contractor submittals by thedesigner is another area that can create distress forthe project team. Some designers will "approve" asubmittal with an approval stamp that contains lan-guage absolving the designer of responsibility forany mistakes in the review process. During contractnegotiations and initial meetings between the owner,designer, and construction team, this issue should befrankly discussed.

Long experience demonstrates that a clear division ofresponsibility between the architect, as designer, and thecontractor, as builder, offers an effective way to achievefast, safe, and economical construction results.

A.4Guideline on Design Responsibility


The AGC-ASA-ASC Guidelines for a SuccessfulConstruction Project are intended primarily for distribu-tion through the associations’chapter offices. The guide-lines and forms may be used as a framework for localindustry discussions. They may be distributed by individ-ual contractors to their customers as a vehicle for bring-ing about a better understanding of the complexity of theindustry. Architects, consulting engineers and membersof construction users’groups should receive personallydelivered copies.

S ta rting a construction industry liaison committ e e

In those areas of the country where some form of anindustry liaison committee now exists, much has beendone to jointly develop solutions to many of the vexing—but unnecessary—problems that may occur in the work-ing relationship between general contractors and subcon-tractors.

Use and implementation of the Guidelines, adapting themwhere required to fit local needs, will strengthen andimprove the efforts of existing committees. Where suchan effort has not yet begun, the Guidelines can be invalu-able in initiating a productive and ongoing program. Alllocal leaders of AGC, ASA and ASC have access to theGuidelines and related documents.

How to get going

I. To gain maximum support and strength from yourchapter members, establish an industry liaison com-mittee within your chapter, including the chaptermanager or executive director. Members of thiscommittee may then serve as members of an indus-try liaison committee. Take the initiative to organ-ize an informal industry liaison committee.

II. At the first industry liaison committee meeting, plana meeting of the members of all of the local con-struction association chapters and members of spon-soring organizations not having chapters. Organizea thorough and frank discussion of the Guideline on

Better General Contractor-Subcontractor Relations(see A.1. Contractor-Subcontractor Relations) andother contents of the Guidelines.

a. Go over carefully the materials contained in theGuidelines for a Successful Construction Projectso that all committee members are familiar withthe material. Discuss each item thoroughly.

b. Go over the list of the prearranged meeting items.Get the information your group needs and keepthe discussion on a high plane—don’t be argu-mentative.

c. Based on the meeting comments, and where prac-tical, plan to initiate those actions that represen-tatives feel are necessary or helpful.

d. If a controversy exists, find out the reasons andseek a mutually acceptable solution. A starttowards a reasonable approach to common prob-lems is a significant accomplishment.

III. Take action with respect to holding future meetingsof the entire industry liaison committee and of thesubcommittees or task forces which can carry outmany of the committee’s programs between fullcommittee meetings.

a. It would be advisable, for subsequent meetings ofthe full committee, for the chairperson to bealternated among the members, so that all groupshave an equal role. Make a full written report ofcommittee discussions and agreements and dis-tribute them promptly to all committee represen-tatives.

b. In the interest of continuity, it is quite helpful tohave permanent members from all organiza-tions—rather than rotating membership.

c. Make distribution of copies of the Guidelines tolocal architects, consulting engineers and ownersa priority objective of the industry liaison com-mittee.

A.5Guideline on Liaison Committees:

Starting or Expanding an Existing Program


Most construction projects in the United States are com-petitively bid. However, bidding procedures from onegeographic region to another frequently vary widely.This variety has become an increasing industry problemas owners, design professionals, contractors and subcon-tractors more frequently move from construction marketto construction market.

As a result, there is a need to establish more uniformguidelines for bidding competitively-priced projects inorder to reduce confusion, increase fair competition andlower construction costs. Some key concepts for biddingare summarized below:

Advertisement for Bids

Owners should advertise the availability and distributionof bidding documents as far in advance as possible, butno later than 30 days prior to bid document issue. Anadvertisement should contain a short description of theproject, including bid date, time, approximate contractamount, approximate size, project location, licensingrequirements, plus bid and performance and paymentbond requirements. It also should state the date of docu-ment availability, location of documents, and deposit andrefund information. The advertisement should be circu-lated to both individual prime and major subcontractorand material supplier prospect bidders, placed in con-struction publications and posted in plan rooms.

Bid Documents

Bid documents should be complete before they are issued.For small or simple projects, at least two weeks should beallowed for bid preparation. If a project is large and/orcomplex, four to six weeks or even more may be necessary.

Bid documents should be made available to a suff i c i e n tnumber of bidders to foster competition. Thus, the ownershould furnish each local plan room with at least four com-plete sets of bidding documents. In addition, the ownershould provide each prime bidder with at least four sets ofbidding documents for its use and the use of its subcontrac-tors and suppliers. Major subcontractors also should beprovided, by the prime bidders, with a copy of the bid doc-uments. Any prospective bidder should be afforded theopportunity to obtain complete sets of documents through a

plan deposit system and/or to purchase partial or completesets directly from a printer or the architect.

Recent developments in the use of "electronic plan rooms"have increased the availability of project information tomultiple users. Owners and General Contractors areencouraged to investigate and implement web-based planaccess to maximize plan availability while minimizing cost.

Plan Deposits

In order for an owner to receive the best possible price on aconstruction project, it is important that all bidders on theproject (prime contractors a n d subcontractors) have accessto the most accurate and complete plans and specifications.It is in the interest of owners to provide sufficient sets ofdrawings and specifications to permit all interested con-tractors, subcontractors and material suppliers to prepareaccurate bids. Afee for the use of such plans, when addedto the contractors’ other estimating costs, can be a factorlimiting both quantity and quality of the bids on the projectsince only successful bidders can recover these costs.

Deposits, not exceeding reproduction costs for the plans,are reasonable. There should be a provision, however, forprompt refunds in full to anyone who pays the deposits andwho submits a bid or sub-bid on the project and returns theplans within 30 days after bid opening (if its bid wasunsuccessful) or who returns plans promptly after examin-ing them and making a decision not to prepare a bid.

Further, it is reasonable to charge reproduction costs forplans to those material suppliers or bidders on smallersubcontracts who wish a set of plans for their own exclu-sive personal use, yet for whom plan room or borrowedsets of plans would normally be adequate for careful bidpreparation.

With these facts in mind, and in order to promote the best,most careful and complete bidding on all projects, an ade-quate number of plans to permit careful preparation of bidsshould be provided to interested parties at no cost to bid-ders who return such plans within 30 days after bidding.

Scope Letters

Each sub bidder should submit a written scope letter tothe prime bidder at least 24 hours before the bid time.

B.1Guideline on Bidding Procedures


The scope letter should contain any information the primebidder needs to evaluate the sub bidder’s bid, includingits proposed scope, alternates, unit prices, addenda,and/or bulletins to be included. The scope letter shouldreference specific divisions or sections and specificallyidentify any omissions or additions. Each sub biddershould submit its final bid dollar amount and any neces-sary clarifications to the prime bidder at least four hoursbefore the prime bidder ’s bid hour. The prime biddershould establish a cutoff time for receiving sub bids,make it known, and adhere to it.

Ethics In Bidding

The bid amount of one competitor should not be divulgedto another prior to bid time, nor should it be used by theprime bidder to secure a lower bid proposal from anotherbidder on that project. A subcontract bidder or supplieralso should not request information from the prime bidderregarding any sub bid prior to the award of the subcontract(see B.4 Bid Shopping and Bid Peddling for more details).

Owners should publicly open and read aloud the bids.Construction contracts should be awarded to thoseresponsible and responsive bidders, at all levels of theproject, which submit the low bids for their portions ofthe work prior to bid time. Bids should not be heldlonger than 60 days without an award being made.

Bid Errors and Adjustments

If, after bids are opened, a low bidder claims it has madea material error in the preparation of its bid and can sup-port such a claim with satisfactory evidence, it should bepermitted to withdraw its bid, without forfeiting its bidsecurity. Under no circumstances should a bidder beallowed to adjust its bid price as a result of an error in itsbid. If the owner opts to re-solicit bids for the project,the erring contractor should not be allowed to bid for thecontract, unless precluded by local, state, or federal law.

Some construction owners allow a low bidder who candemonstrate an error in its bid to upwardly adjust its bidprice to the extent of the error. The low bidder will beawarded the contract at the adjusted price so long as thatprice, as adjusted, is still below that of the second lowbidder.

Allowing a low bidder to adjust its price under any condi-tions, other than change orders issued after the contract is

underway, undermines the entire system of competitivebidding and is an open invitation to abuse.

Use of the following procedures is recommended when abid error is discovered:

When an apparent low bidder discovers an error inits bid price, it shall have the following options:

1. The low bidder may, at its option, confirm itsoriginal bid price; or

2. The low bidder may withdraw the bid, withoutpenalty or forfeiture of bid security if it estab-lishes that a valid computational or transcribingerror resulted in an unintentionally low bid, butshall not be allowed to re-bid the job under anycircumstances.

The owner shall then have the option of awardingthe contract to the second low bidder or of re-solic-iting bids for the project. In the event the project isre-bid, the former low bidder shall not be allowed tobid for the contract. Unless required by statute, noadjustment in bid price should be allowed a bidderas a result of an error in its bid.

If a subcontractor bid is so low in comparison with otherbids as to suggest clearly an error, the general contractorshould notify the subcontractor immediately that its bidappears to be out of line. The subcontractor should eitherwithdraw or confirm its bid, but not modify it. TheAmerican Society of Professional Estimators has pre-pared even more detailed Bidding Procedures forCompetitively Bid Construction Projects. Copies of thedocument can be obtained from ASPE, 11141 GeorgiaAvenue, Suite 412, Wheaton, MD 20902, telephone: 1-301-929-8848 or online at http://www.aspenational.com/.

Other references include:

Recommended Guide for Competitive BiddingProcedures and Contract Awards for BuildingConstruction published by AGC and the AmericanInstitute of Architects:http://www.agc.org/contractdocuments/ http://www.aia.org/documents/

Recommended Competitive Bidding ProceduresConstruction Projects published by the EngineersJoint Contract Documents Committee:http://www.pubs.asce.org/contract.html

B.1 Guideline on Bidding Procedures


Proper project scheduling and avoidance of delays arecritically important. When the owner has decided toinclude liquidated damages in the contract, or reserves theright to pursue un-liquidated, consequential damages,then the owner’s design team must become involved withthe pre-bid scheduling process, including the following:

• Review critical lead-time items: i.e., steel, mechani-cal equipment, electrical distribution equipment, etc.

• Determine in advance (within the time constraintsavailable) that the major equipment and supplies canbe purchased and delivered (within the time con-straints available).

• Determine in advance that responsible marketplaceparticipants can deliver this type of project withinspecified time constraints.

• Consult with knowledgeable and experienced con-struction contractors about all aspects of the pro-posed construction project and schedule.

Only after all of the above elements have been undertak-en should the request for proposal (RFP) or invitation forbid (IFB) process go forward. To expect the constructionindustry to meet the owner’s requirements without ownerimplementation of the above action items allocates unrea-sonable risks to the construction contractor and adverselyimpacts project costs.

Contractor Review

The contractor review of the construction documents andschedule must be a realistic assessment of the project toprovide critique and direction for the owner and designteam before the contractor completes the pricing process.This review is essentially a marketing opportunity for thecontractor that is honest and up-front with the owner, andcomes prepared with the documentation necessary to backup its assessment.

When the construction contractor bypasses this step, thecontractor assumes the risk of accepting a project that hasno chance of meeting the project schedule.

In addition, the major subcontractors and suppliers mustaccept their responsibility to review their areas of expert-

ise for inclusion in the information stream in electing to"go" or "not go" with the project. If a major subcontrac-tor bypasses this step, it assumes the risk involved in notcompleting the project on schedule.

Schedule Documentation and Communication

Documentation of schedule and a communication planmust be comprehensive. Every tier of contractor, subcon-tractor and supplier must have access to complete plans,specifications, and the project schedule to be fullyinformed of risks involved in non-performance.

Any subsequent variation to the projected schedule mustbe communicated up and down the project ladder.Without this communication, significant risk in projectexpansion or contraction is assumed by those who do notcommunicate (see D.2.a.Communication).

Team Responsibilities

The design team accepts an enormous responsibility fordrawing review, submittal review, change order approval,and the impacts of tardy review and return. Contractorsmust assume the responsibility for timely submission andits impact on the project schedule, but the design teammust provide its review in time to meet schedule guide-lines.

The entire construction team must understand that eachmember is responsible for its performance in the projectschedule. Any hitch or stumble affects the entire processand creates risk for claims by downstream contractors.Project expansion and contraction are two of the risksinvolved.

Project Closeout

Project closeout and delaying the processing of changeorders until the end of the project, create risk in complet-ing and finalizing a construction project. It is unreason-able to assume lower-tier contractors must wait for theirpayment while the paperwork for changes they weredirected to complete is delayed. While the owner may beusing the building, the construction contractor incurs anincreased financial burden, possible claims for non-pay-

B.2Guideline on Project Scheduling, Delays

and Liquidated Damages


ment on change orders and potential litigation. (see D.5.aCloseout, D.3.c. Consequential Damages, and D.3.kRetainage)

Team Relationships

Utilizing project relationships to the detriment of a teammember of one project in the hope of winning a futureproject is irresponsible. This practice should be discour-aged by any team member, including the design profes-sionals and prime or lower-tier contractors.

While utilizing the Partnering process is a good start, aquality project is the goal, and success for the entire proj-ect team must be the vision to strive for, including the on-time, on-budget successful completion of the owner’sproject. (see C.2. Partnering)

B.2 Guideline on Project Scheduling, Delays and Liquidated Damages


So-called "scope" bidding has proliferated in recent yearsin relation traditional competitive bidding. On the onehand, the concept has introduced flexibility in contractadministration that is useful and desirable. However, theconcept has also introduced an uncertainty and anextreme risk to contractors and subcontractors by imply-ing responsibility and liability for added work under the"scope" concept which the contractor and subcontractorcould not have deduced was required from the informa-tion given on the scope documents. Note that the con-cerns in this guideline may not be applicable to Design-Build delivery methods.

Concept Overview

The "scope" document may appear in the form of a stampon the plans or specifications that has many variations,with infinite interpretations. One example is:

Scope Document

“This document indicates the general scope of theproject in terms of architectural design, the dimen-sions of the building, the major architectural partsand the type of structural, mechanical, and electri-cal systems. This document does not necessarilyindicate or describe all work required for full per-formance and completion of the ContractDocuments. On the basis of the general scopeindicated or described, the contractor shall furnishall items required for the proper execution andcompletion of work. Decisions of the architect, asto the work included within the scope of this docu-ment, shall be final and binding on the contractorand the owner.”

Note that the above example is not a recommendation,but is presented for information to those not familiar with"scope" projects.

Because of the inherent risk presented by such a contractdocument, owner-users, architects, engineers, contractorsand subcontractors should be aware of the problems asso-ciated with "Scope Bidding." The obligations and limita-tions of the various groups within the construction indus-try are outlined below.

Background

This guideline applies to projects where the architect andengineer are responsible for design but plans and specifi-cations do not cover every item necessary for a completeproject. It is recognized that, in practically all areas ofplans and specifications, every single item of constructionmaterial and technique cannot be delineated. It is reason-able to require the providing contractor, as part of itswork, to include those items which are part of its tradeand which are installed as part of the work without spe-cific instructions being required to demand that activity(see B.1. Bidding Procedures "Scope Letters").

On the other hand, demands upon the contractor to covera multitude of changes and additions on the basis thatthey come within the definition of the "scope," areunwarranted and should be rejected. Design and designchanges for a project should be the sole responsibility ofthe architect and/or engineer unless, as a part of the con-tract obligations, the contractor assumes that responsibili-ty. In that case, the full responsibility for design, installa-tion and performance should be specific (see A.4. DesignResponsibility).

Guideline Details

1. Performance specifications or scope criteria should notbe used in the award of competitively bid contracts forpublic buildings. Scope and performance criteria donot generate the best competitive bidding among con-tractors nor do they provide the awarding authoritywith sufficient means for accurate and fair comparisonof proposals received.

2. Where "scope" plans and specifications are a part ofthe project documents, each contractor should providethe following:

a. All material and equipment of standard quality,whether specified or not, and within the limitationsof the architectural, structural, mechanical and elec-trical drawings and specifications, to cause theinstallation to function in accordance with the inten-tion and objective of the finished project. The origi-nal intention should be specifically set forth in thedocuments.

B.3Guideline on “Scope” Bidding for Private Work


b. All material necessary for equipment to function in anormal and acceptable peculiar or particular typemanner, unless that equipment is of a manufacturewhich requires singular, unique or special installa-tion devices or techniques. In that case, it should bethe obligation of the architect/engineer to specifythose requirements.

c. All work required to cause its operations to fit andcoordinate with others, causing the other trades noadded cost, subject to the limitations of the structureas shown on plans.

d. All work required to comply with governing codeswith respect to its activity, except for design criteriainvolving capacities and basic design.

e. When not indicated in the plans and specifications,the sizing of interconnecting facilities, such as pip-ing, ducts and wiring, between pieces of equipmentin order to utilize the specified capacities of theequipment.

3. The contractor should not be required to provide thefollowing:

a. Material or equipment not specified to be furnished,unless required for normal functioning of the systemor to comply with the original stated intent.

b. Changes in location of equipment, materials andfacilities due to alterations in architectural conceptand design.

c. Changes in sizes, capacities and locations of compo-nents of the installation due to modifications of thebuilding or its components.

d. Determination of capacities and sizes, unless made apart of bidding and contract requirements, and thefurnishing of equipment to satisfy those capacities.

e. Basic design changes to meet applicable codes andordinances, including but not limited to, addedstairs, exits, added sprinklers, fire protection orchanges from specified or indicated items.

By following this guideline in preparing project docu-ments, and in making architectural and engineering deci-sions and interpretations, many disputes arising from theword "scope" may be avoided.

B.3 Guideline on “Scope” Bidding for Private Work


Bid shopping and bid peddling are abhorrent businesspractices that threaten the integrity of the competitive bid-ding system that serves the construction industry and theeconomy so well.

The bid amount of one competitor should not be divulgedto another before the award of the subcontract or order,nor should it be used by the contractor to secure a lowerproposal from another bidder on that project (bid shop-ping). Neither should the subcontractor or supplierrequest information from the contractor regarding anysubbid in order to submit a lower proposal on that project(bid peddling).

An important, but often unrecognized, business asset ofthe construction contractor is its proprietary information.

Proprietary information includes the price, the design ornovel technique, or an innovative approach used inpreparing a proposal.

The preparation of bids, proposals, submissions ordesign-build documents is the result of professional con-sideration which is the intellectual property of the prepar-er, and so any such information should be considered pro-prietary.

It is unethical to disclose to others, any information thatis provided with an expectation that such information willbe kept confidential.

B.4Guideline on Bid Shopping and Bid Peddling


Conference time and participation

The best time for the preconstruction conference is afterall subcontracts have been awarded but before the begin-ning of actual construction. This timing will permit theimportant details discussed at the conference to become abackground for understanding the intended operationalplan among members of the project team.

It is essential that all members of the project team attendthe conference. The presence of the owner will enable itto better appreciate the potential operational problemsencountered by the team on the project. This procedurewill aid the total building team by:

• Providing greater insight on specific owner needs.

• Helping the architect to secure and translate teamcooperation into a quality job consistent with thescheduled time and costs.

Preconstruction conference

The preconstruction conference is a practical forum inwhich problems of economic waste and disruptive con-struction problems can be discussed and prevented. Theconference is designed to benefit all concerned parties byrecognizing the responsibilities for various tasks beforethe project is begun. The benefits are as follows:

1. Recognition and elimination of delays and disagree-ments.

2. Establishment of agreements that curb increases inconstruction costs.

3. Predisposition of the gray-area responsibilities which,if left unassigned, can cause disputes.

4. Unification of management requirements and establish-ment of clear understanding of these requirements.

5. Establishment of lines of communication.

Participants

The preconstruction conference is a meeting of the princi-pal parties involved in the planning and execution of aconstruction project.

It should include:

• The Owner • The General Contractor• Local Jurisdiction Officials • The Architect• The Subcontractors • The Engineers• The Major Suppliers

Full attendance and participation can be assured by mak-ing an agreement for the general contractor and all sub-contractors to attend the preconstruction conference oneof the conditions of the contract documents. This actionwill emphasize the importance of the conference.

Purpose

The primary purpose of the conference is to establishacceptable ground rules for all parties concerned, and toassure that each party understands the complete job require-ments and coordinates its work to produce a completed jobin a minimum amount of time, with maximum economicgains, and in proper coordination with the owner, architect,e n g i n e e r, prime contractor, and all subcontractors. The pre-construction conference is primarily concerned with man-agement and operational considerations. It is in these areasof contract interpretation and clarification that the greatestvalue of the preconstruction conference can be achieved.

Topics for discussion

The preconstruction conference should be scheduled topermit sufficient time to cover the total agenda. Topicsfor discussion typically depend upon the nature, size andcomplexity of the project. It is, however, necessary toassign priorities. Although each job is different, certainfactors are common to all types of construction.

Agenda for a typical preconstruction conference

1. Progress payments. When, how, and to whom, in exactterms, stated clearly so that no question exists aboutbilling and payment requirements and responsibilities.This should also apply to the areas of retention andfinal payment (see D.3.f. Prompt Payment).

2. The form for payment requests. For a suggested form,see E.2 Appendix – "Subcontractor’s Application forPayment." Are the suppliers’ waivers required? Is itpossible that waivers can be one payment behind; that

C.1Guideline on Preconstruction Conferences


is, can a waiver for a particular request be submitted atthe time the next request is presented?

3. Payroll reports. The requirements, if any, for payrollreports and accidents.

4. Shop drawing and sample submittal data including pro-cedures for submittal, review, and approval . The formin which data is to be submitted. The number of copiesrequired and the number to be returned; the type ofapproval, i.e., "approved," "approved as noted,""approved as noted-resubmit," "rejected," etc.

5. Requirements, if any, for interference and/or compositedrawings. Who initiates them and what will be theorder of progression of these drawings; what is theimpact on time for performing the work if compositedrawings are required?

6. Insurance requirements.

7. Job progress scheduling. A preconstruction conferenceprovides an opportunity for the essential involvementof subcontractors in the development and correlation ofthe individual schedules that make up the constructionschedule. Many large projects are conducted with anoverall schedule, using the CMP (Critical Path Method)or the PERT (Project Evaluation Review Technique)systems. Such scheduling is most effective when it isthoroughly understood by all parties.

8. Site Logistics. Many utility and other services areessential to the construction process but do not form apart of the finished product. Under the uniform system,the specifications related to this scope are spelled outunder "General Requirements"; under other systems therequirements are less well defined. This is a gray area,requiring clear definitions of responsibility. (See C.4.Site Logistics for a complete listing of categories thatshould be covered.)

9. Change orders. Since change orders are responsiblefor more disputes than any other single aspect of a con-struction project, they should be discussed in completedetail (see D.3.d. Procedures for Change Orders).Typical items for discussion include:

a. Percentage mark-ups for overhead and profit to beapplied to change orders; what costs will or will notbe included in the change order price.

b. Length of time that a change order proposal price isto be considered firm.

c. Determination of the individual(s) authorized toapprove change orders.

d. Procedures to be followed when submitting changeorder proposals.

e. Change order forms to be used. American Instituteof Architects’, general contractor’s, subcontractor’s,others.

f. Time extension—requests made by the subcontrac-tors due to changes in drawings or specifications.

g. The detail required of subcontractors when submit-ting change order proposals. Will a complete break-down of all costs be required? Brief description?Descriptive drawings?

h. Overtime—due to change orders. Consideration ofdecreased productivity (See D.3.i. Overtime,Construction Costs and Productivity).

i. When materials or equipment are to be removed dueto a change, who owns it, and who removes it fromthe site of the job?

j. Responsibility for as-built drawings brought aboutdue to change orders.

k. Acceptance and payment. Consideration of methodsfor achieving expeditious acceptance and promptpayment.

10. Warranty requirements. Since damage or defectscaused by abuse, modifications by others, improperor insufficient maintenance, improper operation ornormal wear and tear are responsible for many dis-putes, this should be discussed.

11. Employment practices.

12. Listing and identification of all tiers of subcontrac-tors.

13. Inspections Protocol (see D.4.b. Project Inspections).

14. Punch lists. The procedure for establishing timelypunch list items and the avoidance of a multiple num-ber of punchlists (see D.5.b Punch List Procedures).

15. Lines of communication. The procedure for transfer-ring information to and from the owner, architect,engineers, contractor, subcontractors, and major sup-pliers (see D.2.a Communication).

C.1 Guideline on Preconstruction Conferences


16. Commissioning protocol to develop consensus as tothe extent, timing and procedures for commissioningof the project.

Conclusion

Effective communication among owners, architects, engi-neers, general contractors, subcontractors, and major sup-

pliers is essential for the successful completion of a con-struction project. Only with such a basis of understand-ing can the necessary planning and work proceed withoutconflict or costly dispute. The preconstruction confer-ence is a practical means toward this end.

C.1 Guideline on Preconstruction Conferences


Construction contracting is a very high-risk business.Intense competition, coupled with occasional, unfortunatemisperceptions of conflicting objectives among owners,contractors, architect/engineers, subcontractors and sup-pliers, can set the stage for adversarial and unrewardingrelationships. Litigation, with all of its negative impact,is counterproductive to the mission of every constructionteam member to profit while producing quality projectson time and within budget.

In order for a construction project to be deemed success-ful, all the members of a construction team must worktogether to:

• Emphasize cooperation and clearly define commonobjectives

• Recognize the respective roles and inherent risks ofother team members

• Develop synergistic systems for rapid issue resolu-tion and to jointly evaluate partnership effectiveness.

One way to achieve this goal is through a strategy andprocess called Partnering. Partnering is a strategy forbuilding relationships based on trust, honesty, andrespect. Partnering is a proactive process aimed at pre-vention prior to dispute. For Partnering to have its mosteffective results, all construction team members shouldparticipate in the development of the Partnering strategyfor the project. A Partnering workshop should be con-ducted during the early stages of the contract process.

The key elements of Partnering are embodied in the 3C’s:Commitment, Communication, and Conflict Resolution.To ensure Partnering success, the following conceptsshould be considered and incorporated into the process:

Commitment – Commitment to Partnering must comefrom the top management of all construction team mem-bers who have a stake in the project and are called stake-holders.

Early Involvement of Stakeholders – Owner representa-tives, design professionals, general contractors, subcon-tractors and local officials need to be part of the evolutionof the framework of the partnership charter.

Equity – Every stake holder ’s interests must be consid-ered in creating mutual goals. There must be a commit-

ment to satisfying each stockholder’s requirements for asuccessful project by utilizing win/win thinking.

Development of Mutual Goals/Objectives – At aPartnering workshop, the stakeholders should identify allprospective goals for the project in which their interestsoverlap. These jointly developed and mutually agreed togoals may include achieving zero injuries during construc-tion, value engineering savings, meeting the financialgoals of each party, limiting cost growth, limiting reviewperiods for contract submittals, early completion, minimiz-ing paperwork for the purpose of case building or postur-ing, no litigation, and other goals specific to the project.

Implementation – Stakeholders together should developstrategies for implementing their mutual goals and themechanisms for solving problems.

Continuous Evaluation – In order to ensure implementa-tion, the stakeholders should agree to plan for periodicjoint evaluation based on the mutually agreed to goals.This will ensure the plan is proceeding as intended andthat all stakeholders are carrying their share of the load.

Timely Responsiveness – Timely communication anddecision making will not only save money but can alsokeep a problem from growing into a dispute.

Benefits to the project contractors, subcontractors,suppliers and workers

• Better control over safety and health issues.

• Reduced exposure to litigation through communica-tion and issue resolution strategies.

• Increased productivity because of elimination ofdefensive case building.

• Lower risk of cost overruns and delays because ofbetter time and cost control over the project.

• Increased opportunity for innovation and implemen-tation of value engineering in the work.

• Potential to improve cash flow due to fewer disputesand withheld payments.

• Improved decision making that helps avoid costlyclaims and saves time and money.

C.2Guideline on Partnering


• Enhanced role in decision making process as anactive team member.

• Increased opportunity for a financially successfulproject because of a non-adversarial win/win atti-tude.

• Improved long-term relationships between teammembers for future projects.

The Partnering Process

Because every project is unique and the particular stake-holders for each project will vary, the process should betailored by and for the stakeholders for each project. Apartnering process can be developed for any type projectand any size project.

The following is a model to guide the Partnering process.

1. Educate Your Organization. Whether you are anowner, contractor, subcontractor or supplier, youshould educate your own organization about Partneringbefore attempting a project using the concept.Understanding and commitment are essential.

2. Make Partnering Intentions Clear. The owner’sintention to encourage Partnering may be mentioned inthe project solicitation advertisement and specifica-tions. The provision should emphasize the voluntarynature of Partnering and that the costs associated withimplementing it would be shared. The pre-bid confer-ence may include a presentation of Partnering. In thecontext of a negotiated contract for private work, thecontractor may propose the use of Partnering. In pub-lic works contracts, the contractor can propose and ini-tiate a Partnering agreement after the award becausethe Partnering process does not change the contract.

3. Commitment from Top Management at the Start.Following the award, the owner or the contractor canrequest a meeting at the chief executive officer level todiscuss the Partnering approach to managing the proj-ect and the CEO role. Commitment at this level isessential for Partnering to achieve its potential. Uponagreement, each entity will designate a Partneringleader. These leaders will meet at a neutral site to getto know one another as individuals and to plan aPartnering workshop.

4. The Partnering Workshop. As soon as possible,before problems arise, all key construction team mem-

bers should participate in a Partnering workshop, againat a neutral site away from the job site and outside ofthe respective corporate cultures of the various stake-holders. Key team members from each stakeholdero rganization at the workshop are those who actuallywill be involved in contract performance and those withdecision making authority. They might include the con-t r a c t o r’s area manager, project manager, superintendentand project engineer; the architect/engineer’s chiefd e s i g n e r, construction administrator and consultants;s u b c o n t r a c t o r s ’ project managers or superintendents;the owner’s manager or representative; and, dependingon the project, special participants such as a representa-tive from a testing laboratory or a key public off i c i a l .L a rger projects might utilize a facilitator, as discussedb e l o w, but a facilitator is not essential to the concept.

While partnering workshops are most effective at thebeginning of a new project, project relations and prob-lem solving can be improved even midway on a proj-e c t .

a. Creation of a Partnering Charter. The mutuallydeveloped objectives form the basis for thePartnering charter. In this process the team mem-bers get to know one another and develop team atti-tudes rather than we/they or "us/them" attitudes.The charter not only is a symbol of the stakehold-ers’ commitment to Partnering, but also can be usedas a scale against which the implementation of theprocess can be evaluated. The ceremonial signingof the charter after the personal interaction neces-sary for the development of mutual goals is animportant formalization of the bonds among allstakeholders. This charter should be communicatedthroughout the project and to all participants includ-ing other organizations not directly involved withthe charter development. The charter should also becommunicated within each organization, especiallyto key managers who may join the project teamafter the charter has been finalized.

b. Development of an Issue Resolution Process. Inthe workshop, the partners design systems forresolving issues on the project. They decide howissues that are not resolved at their level will beescalated to the next level of management in atimely manner so that the decision-making processbecomes more efficient and costly delays areavoided.

C.2 Guideline on Partnering


c. Development of a Joint Evaluation Process. InPartnering the effectiveness of the process participa-tion is reviewed and evaluated by all participants.Evaluation can be written, through periodic meet-ings of the key team members, and/or periodic exec-utive meetings.

d. Discussion of Individual Roles/Concerns. A work-shop goal should be a high-trust culture in whicheveryone feels they can express their ideas and con-tribute to the solution. Risks and potentially diffi-cult areas of the contract should be discussed open-ly. Team members should be made aware of thepotential for value engineering. Understandingother stakeholders’ risks and concerns and seeingwhere one’s portion of the contract fits in relation toothers’help to build the essential team attitude.

e. The Facilitated Workshop. Although not essentialto the process, a neutral facilitator can be very help-ful in organizing the workshop agenda and provid-ing training in conflict management, listening andcommunication skills, as well as insights into indi-

vidual problem solving styles. Whether to use afacilitator is a business decision to be made jointlyby all stakeholders. A qualified facilitator is particu-larly valuable in initial Partnering experiences tohelp develop comfort and confidence with regard tothe effective implementation of the Partnering pro-gram.

Summary

Partnering is a challenging endeavor with lofty goals. Itis not a panacea. The participants must be committed tochange and to working in a team environment whichstimulates win/win relationships.

Successful construction projects do not simply happen;they are made to happen. The essence and spirit ofPartnering is a winning strategy to make constructionprojects successful.

Partnering has the potential to change our industry, oneproject at a time!

C.2 Guideline on Partnering


Overview

Providing the necessary facilities and services to supportsuccessful project delivery is sometimes overlooked orput low on the priority list when bidding or setting up aproject.

This section provides a simple checklist for analyzing,developing, implementing, and maintaining a comprehen-sive Site Logistics plan. It is also suggested that the fol-lowing "service obligations" serve as a guide for use bycontractors and subcontractors in discussing job site con-ditions relative to safety, temporary job utilities and tem-porary services. Such discussions may help eliminatemisunderstandings and promote cooperation among themembers of the construction team. When adequate iden-tification of temporary services is provided and logicalassignments of responsibilities are made, the costs ofsuch services may be adequately covered in contractarrangements. This guideline is a comprehensive out-line of key issues to be considered and should be adapt-ed to local conditions, preferably by local industry liai-son committees of contractors and subcontractors.

Achievement of these desirable relationships can be initi-ated by segregating requirements for each type of tempo-rary service in a manner which is consistent with theorganization of the contract documents, the scope of thework of contracting parties who would ordinarily estab-lish and maintain the services, and any jurisdictional divi-sions of work that may exist. The following generalguidelines are suggested:

1. Each employer whether it be general contractor, primecontractor or subcontractor shall be separately respon-sible for all specific safety requirements promulgatedby any governmental authority, including without limi-tation, the requirements of the Occupational Safety andHealth Act of 1970, as amended ("OSHA"), and allstandards and regulations which have been or shall bepromulgated by parties or agencies which administerthe Act. With respect to the requirements of OSHA,each contractor and subcontractor is responsible for theacts of its employees and for appropriate recordkeepingand reporting.

2. Specific timing for the availability of each temporaryfacility should be established during the preconstruc-

tion conference (see C.1. Pre c o n s t ruction Confere n c e s ) .Before the established times, each contractor or sub-contractor should satisfy its own requirements for suchservices.

3. The contract documents prepared by the architect andengineer should clearly indicate the location of existingon-site and off-site utilities, and, where applicable, thequantity and conditions of use with respect to the specif-ic type of temporary services and temporary facilities.

Analysis/Scope/Plan Development

Understand requirements applying to your work byreviewing:

• Your contractual responsibilities

• Responsibilities of the owner, CM/GC, GC or otherparticipants

When determining the responsible party, the appropriatespecification section can be utilized and modified to fitproject specific requirements. After determining yourcontractual responsibilities, a plan can be developed byusing the guideline below supplemented by project spe-cific requirements, including who is to pay the temporaryservices costs.

1. Access

The general contractor should provide an adequate accessand/or roads to the site of the structure if required. Thegeneral contractor should maintain onsite road conditionsto allow for easy access around the project and for a min-imization of debris being tracked into the buildings orcarried offsite by traffic. The general contractor shouldalso provide and maintain at least one temporary or per-manent access to each working elevation which is to bepermanently occupied.

a. Familiarize yourself with the area surrounding theproject (including visiting the project site if possi-ble).

b. From what direction will most construction trafficcome?

c. How will nearby businesses, schools, or other facili-ties be impacted?

C.4Guideline on Site Logistics


d. Are there any overhead utilities that will impededeliveries or cranes?

e. What type of onsite traffic flow is optimal to supportyour plans for the project?

f. How many access points are needed and develop thetraffic flow on and off the site?

g. Is a truck wheel wash or other method required toclean vehicles tires prior to leaving the project site?

h. How will access be provided to each level of anystructures?

i. Review your plan with the appropriate project organ-izations and with local officials as required.

2. Hoisting Facilities

The general contractor and individual subcontractorsshould be responsible for providing hoisting of their ownmaterials on construction of (fill-in based on grade stateor local practice) floors or less above. A tower hoist orother hoisting facility of suitable capacity to carry all nor-mal items of material should be provided on a pre-agreed basis to subcontractors by the general contractoron construction more of than (fill-in) floors.Subcontractors should conform to a mutually agreeableschedule during normal working hours. Hoisting facili-ties should be maintained until the bulk of all materialsare stored in the building. When materials exceed thecapacity of normal hoisting facilities in either size orweight, or demand excessive time, the individual subcon-tractor should be required to make its own arrangements.When the magnitude of the work force and the height ofthe work requires, a suitable personnel elevator or manlift should also be provided by the general contractor.

OSHA compliance for all hoists, conveyors, and elevatorson the job site is the responsibility of the installing con-tractor. Maintenance of the facilities in compliance withthe law is the responsibility of the contractor or subcon-tractors operating the equipment.

3. Guardrails, floor and wall openings and stairways

The general contractor should provide guardrails,handrails and covers for floor, roof and wall openings andperimeters, and stairways installed and/or constructed byits own forces. If movement of these protective facilitiesis required for the subcontractor to perform its work, itshould be the responsibility of that subcontractor to give

prior notification to the general contractor and to replacesame in satisfactory manner.

4. Security

a. Does the project require security fencing?

b. Will you be interfacing with or subject to existingclient security plans? If so, familiarize yourselfwith the requirements and determine any impact toyour personnel and plan.

c. Does the project require off-hours security patrolsand/or staffed gates?

d. Locate adequate gates to support traffic flow.

e. Determine who will be responsible to open and closegates to support work hours.

f. Will the security plan require modification throughoutthe project to support different phase requirements?

5. Parking

a. Where will onsite management, workers, visitors,inspectors, client representatives, and others park?

b. If space is limited, investigate options for offsiteparking and logistics for getting workers to andfrom the site. Review local labor requirements forterms related to offsite parking and travel time foradditional cost impacts.

6. Safety Orientation/Training

a. Determine what type of safety training will berequired (See D.1.a. Guideline on Project Healthand Safety).

b. Determine who will provide the training:

i. CM/GC or GC.

ii. Your company or outside resources.

iii. Client (for interfacing with their facilities/opera-tions).

7. Trailers/Shantys

a. What are the space needs for your staff and subcon-tractors?

b. Determine a location for your trailers/shantys (Canyou use existing ones or other existing structuresinstead?)

C.4 Guideline on Site Logistics


c. Locate utility connection points. (See Section 9below)

8. Break/Lunch Facilities

a. What are the local requirements for break/lunchfacilities?

b. Determine peak headcount for your employees.

c. Determine your space requirements (25sf/personaverage)

d. Where can you locate or can you use existing facili-ties or the work area?

9. Toilets/Wash Facilities

The general contractor should be responsible for furnish-ing adequate temporary toilet and wash-up facilities onthe job site.

a. What are the local requirements for facilities?

b. If flush toilets and running water are required, locatefacilities to minimize utility runs.

c. Provide separate facilities for men and women asneeded.

10. Storage Facilities

The general contractor should coordinate the allocation ofstorage areas to the various subcontractors.

a. Determine lay-down, storage, staging requirements

b. Will there be any onsite storage available other thaninside the work area?

c. Establish maximum loading restrictions, if appropriate.

11. Temporary Utilities

a. Drinking water: Potable drinking water on the jobsite should be provided free of charge to subcontrac-tors, in convenient and accessible locations, by thegeneral contractor, so long as the general contractorhas personnel on the job requiring drinking water.

b. Sewer: The General Contactor should extend andconnect sewer service to support construction toiletsas required.

c. Water service: The General Contractor (through theplumbing contractor) should furnish a temporarywater supply at each floor of a building, and at other

access points if indicated by the architect/engineerin the specifications, which should also indicate thesize, quantity and pressure at the water outlets. Inany case, the plumbing contractor should provide atminimum a ____-inch hose bibb supply (state/localpractice). During the course of construction thewater bill should be paid by the general contractor.Any contractor or subcontractor whose waterrequirements are in excess of those specified shouldbe responsible for their facility.

d. Electrical service: The general contractor (throughthe electrical contractor) should furnish and main-tain temporary electrical service for both power andlighting, if indicated by the architect/engineer in thespecifications, which should also indicate the type,quantity, wattage, amperage and voltage characteris-tics of temporary lighting, power circuits and out-lets. But in any case the electrical contractor shouldprovide at a minimum, _____ amperage (state/localpractice), _____ voltage (state/local practice), _____phase electrical receptacles (state/local practice) ateach floor of each building so that any point on eachfloor can be reached by a _____-foot extension cord(state/local practice). Energy charges should bepaid by the general contractor. Any contractor hav-ing requirements for power, lighting or service otherthan those discussed in this guideline should makethe necessary arrangements at its own expense.

e. Telecommunication Service: The general contrac-tor should provide for sufficient voice and dataphone lines to support the anticipated needs of thegeneral contractor and onsite subcontractor offices.A convenient connection terminal should be provid-ed by the general contractor to minimize installationcosts. Each subcontractor should be responsible forplacing orders and paying for their phone charges.

12. Temporary Lighting

During construction, the general contractor should providetemporary lighting (via the electrical contractor) as follows:

a. Exterior: Provides security lighting and generallighting in trailer, parking, lay down, traffic, andother exterior areas to support project work hours.

b. Interior: Meets the OSHA minimum requirementsfor general access lighting. Subcontractors shouldbe responsible for task specific lighting needs.



13. We a t h e r P rotection and temporary heat/ventilation

During construction, weather protection and heating/ven-tilation may be required for protection of workers andprotection of construction:

a. Before permanent enclosure of the building;

b. After enclosure but before finishing operations; and

c. During finishing operations.

Local agreements prior to bidding for use in the contractdocuments should establish the type, duration and level ofrequirements for heating/ventilating and weather protection.

Generally, the general contractor should be responsiblefor providing general weather protection. Theheating/ventilating contractor should be responsible forproviding heating/ventilating of workers and constructionafter permanent enclosures have been installed and thepermanent heating system is sufficiently completed toallow safe operation, as determined by the architect/engi-neer and/or owner. Subcontractors having specific orunusual HVAC requirements should be responsible fortheir own requirements.

Because of the many variable climatic conditions whichoccur throughout the United States, no guidelines are sug-gested regarding the specifics of weather protection andheating/ventilation requirements. However, such specifi-cations for local use may be prepared in such a mannerthat the heating and/or ventilation contractor should berequired to furnish temporary connection to the perma-nent heating or ventilation system and the removal of thesame. (This also should include placing the system backin first class condition before turning the system over tothe owner.) Also, in order that an allowance can be estab-lished in the contract price, the architect/engineer shouldincorporate in the specifications a lump sum dollaramount or a total number of hours that the HVAC con-tractor should include in its bid for the cost of temporary

heat and/or temporary ventilating labor. The HVAC con-tractor also should state the hourly rates for furnishinglabor for temporary heat, in order that a cost adjustmentmay be made against the stated allowance. The cost ofall fuel, water, electricity and other consumable productsshould be paid by the owner.

14. Trash/Recycling:

The general contractor should be responsible for provid-ing trash receptacles on each floor of the building. Eachcontractor or subcontractor should be responsible for col-lecting and depositing its debris in such collection facili-ties. The general contractor should be responsible for theremoval of all debris from the jobsite. Trash and debrisshould not be allowed to accumulate.

a. What are the contract requirements for trash andrecycling?

b. Depending on local availability, incorporate recy-cling into your trash plan including separate recepta-cles for:

• Wood

• Cardboard

• Metal

• Drywall

• Others

15. Fire Protection

The general contractor should provide the general tempo-rary fire protection requirements. Subcontractors shouldbe responsible for their own specialty requirements.Permanent fire protection equipment used for fire protec-tion during construction should be the responsibility ofthe installing contractor.



Safety must be the number one concern in theconstruction industry!

The construction industry, by its inherent nature, is sus-ceptible to potentially dangerous conditions that affect thesafety of all personnel working on construction projects.As a result, it is imperative in all planning, design, bid-ding, and implementation that safety be the one constantbuilt into each project.

The Associated General Contractors of America (AGC),the American Subcontractors Association (ASA), and theAssociated Specialty Contractors (ASC) are committed tomaintaining a safe, healthful industry and to protectingthe public against any potential hazards caused by con-struction operations. Every member of the constructionteam is responsible for safety and should be held account-able for ensuring a safe and healthful worksite.

Developing a Project Culture that supportsworker safety

The foundation to executing a safe project is the earlyestablishment and nurturing of a project culture that isbased on the values of good working relationships andcandid communication. Without these values, the proba-bility of a safe project is likely to decrease.

The development of the project team’s approach to safetyis intertwined with the overall approach developed by thegeneral contractor in partnership with the owner andarchitect and in consultation with major subcontractors.Safety should be an integral part of any Partnering (seeC.2. Partnering) or Pre-construction Meetings (see C.1.Pre-construction Conferences).

The General Contractor holds the key role in developingcoordination and communication methods that will allowfor the planning and execution of the work safely (seeD.2.a. Communication). These communication channelsshould allow for:

• Early analysis of the project scope to identify keyrisk areas;

• Clear communication of the project safety approach,programs, roles and responsibilities;

• Early involvement of key subcontractors;

• Candid dialogue between the General Contractor,Subcontractors, and Craft workers without fear ofretribution.

All parties involved must be totally committedto safety

Each contractor and subcontractor must make a commit-ment to support the development of the project safety cul-ture. This commitment includes:

• Training their employees to work in a safe andrespectful manner.

• Developing a written safety policy that spells out itscommitment to run each project in a safe manner.That policy should emphasize the firm’s pledge tocomply with all federal and state safety laws andregulations.

• Informing employees of employment requirementsfor safety, and advising them that they will be heldaccountable for their own actions on the job site.

• Making available to all jobsite personnel a list of allavailable safety equipment, jobsite safety require-ments and prohibited unsafe work habits.

• Enforcement by subcontractors of safety theirresponsibilities and penalties.

Every member of the construction team, including theproject owner, design team, general contractor, and sub-contractors, must appreciate the value of a good safetyprogram.

AGC, ASA and ASC each have produced comprehensivesafety materials for the use of employers and employeesin the construction industry, as have many other trade andprofessional organizations associated with the construc-tion industry. For more information on safety, contactyour sponsoring association.

D.1.aGuideline on Project Safety and Health


Impact of Unforeseen Environmental Problems

1. Few changed conditions can adversely affect a con-struction project more than the discovery of environ-mental hazards. Whether the problem is hazardouswaste that was not discovered or anticipated by theOwner, or some other environmental contamination,invariably it will require highly specialized responsesthat are expensive, time consuming, and sometimesrisky. A contractor who did not anticipate the perform-ance of environmental work because it was not speci-fied cannot reasonably be expected to assume the costor the liability related to handling the unforeseen envi-ronmental complication.

2. The discovery of an unforeseen environmental problemalso damages the owner or client. Because the cost ofthe problem will not have been built into the originalproject budget, dealing with it will mean that the proj-ect will likely exceed its anticipated cost. As the prob-lem has been uncovered midway through a project, thepressure to take care of it quickly and remain as closeto the schedule as possible will mean less opportunityto get the most competitive price for the environmentalwork. Environmental problems may also jeopardizeproject funding by triggering concerns about a lender’sliability or affect the availability and cost of insurance.

Industry Practice and Relevant Authorities

3. Best practices in the industry recognize that the fairestand most cost-effective allocation of this risk andresponsibility is for the project owner who did not dis-close the conditions to undertake full responsibility forthe proper remediation of the condition. Environmentallaws and regulations, such as the ResourceConservation and Recovery Act, have made ownersresponsible for all environmental wastes and byprod-ucts of construction projects as the "generator." Thismeans that owners will always retain the authority andcontrol over how environmental issues are handled.

4. Owner responsibility for remediation is embodied inthe recognized industry standard form documents suchas the AIAA201 form General Condition of theContract for Construction (contract between the owner

and the general contractor) and the Federal AcquisitionRegulation Changed Conditions clause. The relevantpassages of these documents are indicated below.

4.1. AIAA201 (1997 edition)

4.1.1. Article 10.3.1

"If reasonable precautions will be inadequate to pre-vent foreseeable bodily injury or death to personresulting from a material or substance, including butnot limited to, asbestos or polychlorinated biphenyl(PCB) encountered on the site by the Contractor, theContractor shall, upon recognizing the condition,immediately stop Work in the area affected andreport the condition to the Owner and Architect inwriting."

4.1.2. Article 10.3.2

"… When the material or substance has been ren-dered harmless, Work in the affected area shallresume upon written agreement of the Owner andContractor. The Contract Time shall be extendedappropriately and the Contract Sum shall beincreased in the amount of the Contractor’s reason-able additional costs of shut-down, delay, and start-up…"

4.1.3. Article 10.3.3

"To the fullest extent permitted by law, the Ownershall indemnify and hold harmless the Contractor,Subcontractors, Architect, Architect’s consultantsand agents, and employees of any of them from andagainst claims, damages, losses, and expenses,including but not limited to attorneys’ fees, arisingout of or resulting from performance of the Work inthe affected area if, in fact, the material or substancepresents the risk of bodily injury or death asdescribed in Subparagraph 10.3.1 and has not beenrendered harmless … and provided that such dam-age, loss or expense is not due to the sole negli-gence of a party seeking indemnity."

4.1.4. Article 10.5

"If, without negligence on the part of the Contractor,the Contractor is held liable for the cost of remedia-

D.1.bGuideline on Unforseen Environmental Problems

in Construction

Guidelines for a Successful Construction Project. Copyright © 2003, The Associated General Contractors of America/AmericanSubcontractors Association, Inc./Associated Specialty Contractors. 29 2929

tion of a hazardous material or substance solely byreason of performing Work as required by theContract Documents, the Owner shall indemnify theContractor for all cost and expense therebyincurred."

4.2. FAR Changed Conditions Clause, 48 CFR §52.243-5

"(b) The Contractor shall promptly notify theContracting officer, in writing, of subsurface orlatent physical conditions differing materially fromthose indicated in this contract or unknown unusualphysical conditions at the site before proceedingwith the work.

"(c) If changes under...paragraph (b) increase ordecrease the cost of, or time required for performingthe work, the Contracting officer shall make anequitable adjustment...."

Conclusion

5. The relevant authorities, industry practice and history,and common sense all support owners bearing respon-sibility for unforeseen environmental conditions dis-covered on a construction project. A properly draftedcontract should reflect the owner’s responsibility forsuch work.

6. Before relying on any language cited above, the con-tractor should consult an attorney and the full docu-ments from which these passages have been taken.

7. Further information on the subject can be found inAGC #1184, Construction Contractor’s EnvironmentalRisk Management Procedures Manual, published bythe Associated General Contractors of America:http://www.agc.org/contractdocuments/

D.1.b Guideline on Unforseen Environmental Problems in Construction


A key ingredient in all successful construction projects isclear, efficient and effective communication between allparticipants. Good communication does not automatical-ly occur on construction projects, but must be nurturedfrom project inception through close-out.

The owner, general contractor, and designer must set thestage for effective project communication during initialcontract negotiations and teamwork discussions. Use ofthe Partnering process can facilitate the beginnings ofgood communication (see C.2 Partnering). Effective Pre-Construction Conferences can also be a vehicle to devel-op communication channels including subcontractors andinspectors (see C.1. Pre-construction Conferences). Theuse of clear and concise meeting minutes can minimizemiscommunication between parties (See D.2.b. ProjectMeetings).

Basic concepts of coordination and cooperation, as sum-marized below, can foster continuing effective communi-cation throughout the project.

Coordination

1. The general contractor should have a competent full-time superintendent on the project backed up by a gen-eral superintendent and/or project manager. Eachmajor subcontractor should have a competent foremanon the job backed up by an outside superintendentand/or project manager who is readily available to rep-resent the subcontractor. Each subcontractor employ-ing only one or two workers on the job should have atleast a competent crew leader in charge of the workbacked up by an outside superintendent and/or projectmanager who is readily available to represent the sub-contractor.

2. Coordination should be assured through regular on-the-job meetings of the general contractor’s authorizedproject representative and the on-site subcontractors’authorized project representatives. Additional meetingsmay be required for subcontractors whose work mightinterfere with another at a given time. Minutes of suchmeetings should be prepared promptly and distributedto all attendees and their home offices.

3. The general contractor and each subcontractor should

organize their own work in such a way as not to devi-ate from the schedule, interfere, or otherwise adverselyaffect the work of others. The general contractorshould monitor and coordinate the work of all partiesto ensure compliance with the project schedule.

4. The general contractor should establish a comprehen-sive Site Logistics plan to support all phases of theproject (see C.4. Site Logistics). This plan shouldinclude, for example:

• Storage areas for all subcontractors at the appropri-ate time. Such areas should not obstruct the work.Relocating materials is costly and should be avoid-ed. Subcontractors should store material in desig-nated areas only.

• Adequate personnel lifts, when required, and cranesand hoists at times and places that will minimizewaiting time as much as possible, regardless of whois contractually responsible.

• Adequate lighting, heating, weatherproofing, venti-lating, fire protection, and cleanup is provided in atimely manner regardless of who is contractuallyresponsible

5. The general contractor should monitor and expedite theprocessing of shop drawings, samples and other sub-mittals for approval. This procedure is especiallyimportant when change orders are involved.

6. The general contractor and all subcontractors shouldrespect one another’s work. When damage or loss doesoccur, it should be reported immediately to the injuredparty, appropriate insurance carriers, and the generalcontractor, and corrected promptly.

Cooperation

1. The general contractor should make a good faith effortto effectively and equally represent each subcontractorin disputes with the owner or architect and invite theaffected subcontractor to attend and participate in anyconferences related to the subcontractor’s work.

2. The general contractor and subcontractors should nego-tiate disputes in good faith with the intent of achievinga fair and expeditious agreement. The general contrac-

D.2.aGuideline on Communication


tor also should make a good faith effort toward resolv-ing disputes between subcontractors on the project.Monetary issues in connection with disputes should besettled as promptly as possible; however, every effortshould be made to avoid departing from the scheduleor delaying the project (see D.3.a. Avoidance andResolution of Construction Disputes).

3. A work authorization form should be completed andsigned prior to performing any work for another con-tractor or subcontractor. "Back charges" work shouldnot be performed unless authorized by such a form or aspecifically agreed alternative (see D.3.e. Charges forNon-contracted Construction Services, and E.3. WorkAuthorization Form).

4. Each subcontractor should submit progress and finalpayment applications in accordance with the contract’sestablished procedure (see E.2. Subcontractor’sApplication for Payment).

5. It is improper to demand releases or waivers of futureclaims or claims that, although properly made, remainunpaid.

6. Communications between the subcontractor and thearchitect/engineer or its consultants for the projectshould go through the general contractor, in theabsence of a specific agreement to the contrary. Forexample, one such agreement may be for the subcon-tractor to make reasonable requests directly to thearchitect/engineer, upon the architect engineer/s con-sent, about action taken on that subcontractor’s pay-ment application.

7. On-the-job relationships should be conducted betweenthe general contractor’s and subcontractors’ authorizedproject representatives. Conflicts or problems notpromptly settled on site should be handled by homeoffice personnel without disruption to the job.

Communication can either bolster the development of apositive project culture, or can lead to its downfall. Allproject parties must invest time in developing an effectivesystem for communication and then effectively imple-ment the process.

D.2.a Guideline on Communication


Regularly scheduled project meetings, when correctlyplanned and conducted by the controlling/coordinatingcontractor/owner agent (responsible contractor), willfacilitate the orderly and cost-effective construction andcompletion of a project.

Meeting Schedule and Participants

Typically, meetings should be held weekly at the sametime each week with bi-weekly meetings appropriate onsome projects. Each contractor’s authorized representa-tives should attend meetings starting two weeks prior tomobilization and continuing until their work is complet-ed. Attendance should be required and with authorizedrepresentatives knowledgeable of the project scope andrequirements. In the event a specific contractors’work isintermittent, it may not be necessary to attend meetingswhen not on site. One meeting per month should includehome office management from each contractor andowner’s representative.

Meeting Content and Structure

The responsible contractor should have previously com-pleted project schedule and sequencing (see C.1. Pre-con-

struction Conferences and B.2. Project Scheduling,Delays, and Liquidated Damages). In addition, theresponsible contractor should assign a person who has acomprehensive knowledge of overall project require-ments. That individual will have the responsibility to:

1. Prepare and distribute a written agenda.

2. Notify all parties expected to attend. Pre-determineorder of each contractor ’s participation and when prac-tical, excuse contractors from the meeting after receiv-ing their input and determining if subsequent agendaitems are irrelevant to their operations.

3. Promptly prepare and distribute minutes of each meet-ing to all contractors (whether in attendance or not),including a specific list of follow up tasks withassigned responsibilities. The task list automaticallybecomes an item on the agenda for the next projectmeeting.

4. Prepare, distribute in advance, review and revise a twoweek "look ahead" schedule and update at each meet-ing.

5. Keep and distribute in advance of each meeting a "run-ning" log of outstanding items.

6. Start meetings promptly and keep discussion short and"to the point" with an agreed upon time for adjourn-ment.

7. Have current information on changes requested,changes approved, approved drawings and related proj-ect updates at each meeting.

Web Site Projects

On projects where communications and informationexchange is in an electronic format, integrate projectmeeting minutes with follow up lists of assigned respon-sibilities, sequencing, changes, and other pertinent projectinformation into the web site.

Summary

Properly planned and conducted "Project Meetings" willresult in positive attitudes, committed participants, less"lost motion", better production, on time completion andhigher profits.

D.2.bGuideline on Project Meetings


The construction industry is, by nature, a complex one.In the process, inevitable differences arise concerningscope definition, delays, accelerations, obstructions, andchanged conditions. All the while, the process of build-ing must go forward with a minimum of disruption.

Resorting to lawsuits can be costly and time consuming,and judges and juries generally lack an understanding ofthe construction process. The net result is all too oftenthat only lawyers, consultants and expert witnesses bene-fit from lengthy court actions.

Disputes avoidance

The Associated General Contractors of America, theAmerican Subcontractors Association, and the AssociatedSpecialty Contractors support programs to minimize dis-putes through equitable allocation of risks in contractsand fostering cooperation among members of the con-struction team throughout the building process. Disputeavoidance and resolution may be accomplished throughteamwork programs such as the partnering concept thatinvolves post-award, several-day meetings of owner,design professional, construction manager, and majorcontractor representatives working together to identifypotential problems and to develop practical solutions (seeC.2 Partnering). The concept also may involve groupbonuses payable only if all trades achieve establishedproject goals.

In principle, a vast majority of construction disputes aresusceptible to settlement through a give-and-take processby decision-makers of construction team members with-out resort to formal third party intervention. All parties inconstruction projects are urged to minimize the role oflawyers, inasmuch as construction problems usually relateto fact and customary industry practice rather thanemphasis on legal issues.

Because of the desirability of settling disputes quicklyand inexpensively, language calling for the parties toendeavor to settle disputes through direct discussionsbefore considering mediation or arbitration should beincluded in all contracts.

Non-binding alternative disputes resolution(ADR) methods

The most frequently used method of non-binding alterna-tive disputes resolution (ADR) is mediation. Mediationconsists of one or more impartial parties advising andconsulting with those involved in a dispute. The media-tor can not impose a settlement, but rather guides the par-ties toward their own settlement. Mediation is availableto the parties by mutual agreement even though a contractmay specify arbitration. Language recommending con-sideration of mediation prior to arbitration, if the partiesso agree, is strongly encouraged for inclusion in all con-tacts.

Another non-binding ADR method available for use is themini-trial. This process is not a trial in the usual sense ofan adversarial judicial proceeding. Instead, it is a rela-tively structured process whereby management represen-tatives of the parties to a dispute operate within mutually-agreed upon time limits to conduct informal conferencesand hold non-binding, confidential discussions.Typically, attorneys prepare positions for the parties. Thebasic idea is to have the principals of firms see the rela-tive strengths and weaknesses of their cases and to serveas a basis for negotiations between them to resolve thedispute. Disputes resolution and counseling panels areother non-binding ADR services. These panels use mem-bers who are ordinarily technical experts, chosen inadvance, to address disputes at the times they arise on aproject. The aim is to act quickly on moderate size dis-putes before confrontational attitudes harden. Panel deci-sions entered as evidence in arbitration or litigation or, byagreement of the parties can be accepted as final andbinding.

Still otherADR techniques are:

1. Step negotiations involving the passing of disputes tosuccessively higher levels of management untilresolved,

2. Referral of technical questions to project architects forinitial decisions,

3. Advisory rulings by neutral experts and,

D.3.aGuideline on Avoidance and Resolution

of Construction Disputes


4. Fact-based mediation whereby a mediator suggests asettlement amount and then assists in negotiation.

Arbitration

Unlike most other ADR methods, arbitration is final andbinding. Decisions are subject to challenge only on nar-row grounds such as prejudice or bad faith. Arbitration isused widely in the construction industry, and the practiceis encouraged by provisions in standard documents call-ing for arbitration in accordance with the ConstructionIndustry Arbitration Rules of the American ArbitrationAssociation. (see http://www.adr.org)

Arbitration may involve one or three arbitrators jointlychosen by the parties. The process normally is faster andless costly than litigation and has the major advantage ofcases being heard by persons experienced in the construc-tion industry. The desirability of using the flexibility of

arbitration by tailoring rules to fit specific cases is anadvantage to this approach. However, excessive use oflegalistic approaches that unnecessarily slow the settle-ment process and increase costs to the parties isdeplorable.

Conclusion

AGC, ASA and ASC support initial efforts to settle dis-putes through direct negotiations. If it becomes necessaryto use neutral third parties to assist in the resolutionprocess, we encourage consideration first of the use ofmediation or other non-binding ADR methods because ofspeed and cost considerations. Finally, where parties to adispute want final and binding resolution, the associationssupport arbitration using qualified, properly trained per-sons as arbitrators and utilizing expedited procedures tothe extent practical.

MediationFor Technical Assistance or Mediation Services, contactMichael S. Poles GC, CM, RCI, DABFET, ACFE

1800.684.9100 | 1323.874.8973WEB: MichaelPolesMediation.Com E-Mail: [email protected]

D.3.a Guideline on Avoidance and Resolution of Construction Disputes


mpoles

Typewritten Text

http://www.michaelpolesmediation.com

mailto:[email protected]

mpoles

Rectangle

1. As construction processes change to meet the needs ofeffective construction project delivery, owners musttake care to ensure that all necessary functions of thebuilding process, often called general conditions, areperformed on a coordinated, interactive basis.

2. In the traditional project delivery system, there is aclear relationship between the general contractor andits subcontractor. Contract documents, prepared by theowner and/or the owner’s representative, spell out theobligations for which each is responsible. The generalcontractor maintains continuous supervision, adminis-tration, and control of a project. Communication of themany details and coordination of the various phases ishandled by the general contractor as the job progresses.These responsibilities are part of the general conditionsof the project, and the general contractor has a contractwith the owner to deliver these services. These generalconditions include the temporary infrastructure andservices which are needed to support successful com-pletion of the project, but are not a part of the complet-ed project.

3. Alternate project delivery systems have evolved in aneffort to shorten project delivery times and to gainother efficiencies and savings. Responsibilities areoften divided among unrelated parties and manage-ment, and control of the overall project, including gen-eral conditions, may not be clearly established. A proj-ect may have a general contractor and/or constructionmanager, but they may not be contractually required toperform all of the traditional duties contained in thetypical general conditions. The use of such alternatedelivery systems can create confusion among the stake-holders on the jobsite and problems for the owner inthe form of delays and additional costs.

4. Regardless of the project delivery system used, ownersmust ensure that a general contractor or appropriateentity responsible to the owner performs and is liablefor the completion of general conditions items. Theperson or entity responsible for delivery or perform-ance of general conditions items should maintain a job-site presence. These include, but are not limited to:

• Safety (see D.1.a. Project Health & Safety)

• Scheduling/Coordination (see B.2 ProjectScheduling, Delays and Liquidated Damages)

• Site Logistics (site access, temporary utilities, stor-age, etc.) (see C.4 Site Logistics)

• Communication (see D.2.a. Communication)

• Inspection (see D.4.b. Project Inspections)

• Project closeout (see D.5.a. Project Closeout)

5. While each construction project must be defined incontract terms that express the unique characteristicsand requirements of the project, maximum efficiencyand successful project delivery are achieved when theowner ensures that a responsible party performs thegeneral conditions work. The value to the ownerincludes timely project completion, reduced costs,delivery of a quality project, and reduced likelihood ofclaims.

D.3.bGuideline on Benefits to the Owner ofEffective Allocation, Delegation, and

Performance of General Conditions Responsibilities


Overview

1. Growing windfalls and disproportionately large courtand arbitrator awards on lost profit and similarly specu-lative claims have led to major losses by owners andcontractors and increased litigation. These claimsinvolve highly subjective, ripple-effect cost impactestimates growing out of project delays and disrup-tions.

2. Individual consequential damage awards may farexceed the total value of a contract or subcontract.They are neither insurable nor subject to beingrecouped through pricing in today’s highly competitiveconstruction marketplace. Besides legal and awardcosts, valuable time is often required of key employeesto defend claims. Finally, delays and their resultingcosts generally involve complex circumstances wherefault is shared by numerous parties. The end result hasbeen uncertainty and a misallocation of risk to thoselacking adequate control.

Contract Language

3. All parties in the construction process are best servedthrough clear contractual understandings that achievecertainty and restrict recovery of claimed damages toamounts, if any, specifically agreed upon by the par-ties. Accordingly, relevant text should be included onmutual consequential damage waiver language in con-struction agreements. Both AGC 200 and AIAA201contain language that accomplishes this goal. Section4.3.10 of The American Institute of Architects docu-ment A201, General Conditions of the Contract forConstruction (1997 Edition) reads as follows:

The Contractor and Owner waive Claims againsteach other for consequential damages arising out ofor relating to this Contract. This mutual waiverincludes:

.1 damages incurred by the Owner for rentalexpenses, for losses of use, income, profit,financing, business and reputation, and for lossof management or employee productivity or ofthe services of such persons, and

.2 damages incurred by the Contractor for principaloffice expenses including the compensation ofpersonnel stationed there, for losses of financingbusiness and reputation, and for loss of profitexcept anticipated profit arising directly from theWork.

4. Owners benefit from the mutual waiver of consequen-tial damages by avoiding potential claims for contrac-tors’and subcontractors’ extended home office over-head. These costs are extremely complex and ownersand contractors have had to devote significantresources to deal with these claims.1

5. Specific waiver language is necessary on each job toavoid liability for consequential damages. Contractsand subcontracts that are silent on the subject offer noprotection against all sorts of indirect cost claims foralleged damages or performance deficiencies.

6. Construction projects are frequently based on aggres-sive target completion dates that make no allowancefor delays due to weather, late infrastructure work,labor shortages, changes to plans, and coordinationproblems. Owners who place reliance on these aggres-sive target dates in obtaining financial commitmentsand leasing the premises should be prepared to acceptthe associated risks.

7. Consequential damages may arise from performance aswell as delays. For example, an owner may contend thato ffice-building leasing was slower than anticipated andrental rates were below plan because of intermittentH VAC problems. Speculative claims of this sort are notpermitted under the current A I A General Conditions.

8. Liquidated damages, unlike consequential damages,allow contractors and subcontractors to make businessdecisions about whether or not to bid the work and toinclude contingencies in their pricing. On projectswhere it is foreseeable that delay beyond a given datewill result in known, specific costs, the parties mayagree in advance on a reasonable dollar amount of liq-uidated damages for each day of unexcused delay.Owners should be aware that inclusion of liquidateddamages generally may result in higher prices and per-haps fewer bidders.

D.3.cGuideline on Consequential Damages


Conclusion

9. Certainty and predictability are principles on whichconstruction contracts should be based. AGC, ASA,and ASC support the concept that risks should be limit-ed to those foreseen and agreed upon in contracts, witheach party specifically disclaiming any right to assert aclaim for consequential damages.

______________________

1 General Contractors and subcontractors may wish,instead, to routinely charge project specific costs (such assalaried supervision) to each job to avoid the consequen -tial damages waiver impact on these well-established costitems.

D.3.c Guideline on Consequential Damages


Reasons for a change order

There are many reasons for issuing a change order on a con-struction project. The most common reason is to accommo-date a change in the owner’s requirements. Other commonreasons for change orders include: changing requirements ofpublic authorities; deletion of project features; resolution ofproject coordination problems; correction of errors or con-flicts in the plans or specifications; changes in materials orequipment; unavailability or delayed delivery of specifieditems; or changes in technology.

As the number of change orders on a project increases, sodoes the possibility of misunderstanding among the con-tracting parties. Such a misunderstanding may occurbecause one or more of the parties lacks full knowledgeof the change order process itself, the costs involved inimplementing changes, or the delays, conflicts, and inter-ruption of the construction sequence and schedule whichcan adversely impact project coordination.

The following procedures are recommended to owners,architects, contractors, and subcontractors to minimizethe possibility of misunderstanding and project disruptionstemming from change orders.

Owner-initiated change order

When a change order is initiated by the owner or owner’sagent, the process should begin with a request for propos-al (RFP). The RFP should contain all the informationneeded by the contractor or subcontractors to make a rea-sonable and realistic estimate of the costs and the timeneeded to implement the change. This informationshould include, but may not be limited to:

1. Revised plans and specifications that permit accuratequantification of work to be added, deleted, or substi-tuted and its relation to unchanged work.

2. The time span for making the change and specificauthorization for overtime, if required.

3. The amount of supplemental work to be performed ifthe change is in a completed area.

4. The degree of detail expected in the cost breakdown ofthe contractor’s change order proposal.

5. The period of time during which the change proposedwill be open for review, acceptance, or rejection.

Contractor or subcontractor-initiated changeorder

When a change order is initiated by the contractor or a sub-c o n t r a c t o r, the approved project procedure should be fol-lowed. The Change Order should include, at a minimum:

1. The reason for the proposed change, a reference to theplans and specifications, the benefit to the owner andthe project, and the effect of the change on the projectsequence.

2. The effect of the proposed change on the contract timeand price in sufficient detail to permit proper evaluationby the contractor, the owner, and the owner’s agent.

3. A reasonable but definite time period for the owner toaccept or reject the change proposal without interrup-tion or delay in the project schedule.

The timely issuance of change orders can prevent exces-sive costs, delays, and friction between the parties. Allparties must understand the time constraints in the con-tract and subcontracts for and abide by these constraints.Accumulating change order requests until the end of theproject is not acceptable and will most likely lead to adispute. Late changes in the contract documents can bereduced by the owner through continual review of thedocuments and inspection of the work as it progresses.

The owner’s agent, the contractor, and subcontractors alsocan reduce conflicts and last-minute revisions by review-ing plans and specifications before construction and mak-ing timely requests for necessary clarifications. Theowner’s agent should be diligent in the issuance of clarifi-cation responses and submittal approvals, thus avoidinginterruption in the work and substantial delays in the proj-ect schedule.

Types of change orders

The lump sum change order

The lump sum change order is the most common type ofchange order. It is preferred because it defines precisely

D.3.dGuideline on Procedures for Change Orders

Guidelines for a Successful Construction Project. Copyright © 2003, The Associated General Contractors of America/AmericanSubcontractors Association, Inc./Associated Specialty Contractors. 39 39

the total cost or credit and time variation to the contract.It is negotiated by the parties and agreed upon before thework is executed, in most cases.

Unit price change order

The unit price change order is used when unit prices forspecific items or trades are prenegotiated and made partof the contract. Thus, only quantities of each item ofwork are estimated or measured before or after thechanges are performed. However, problems or inequitiescan arise when the performance of the work conflictswith other trades or delays the construction schedule, orwhen substantial variations are made to the total quantityof work on which the original prices were based.

Time and material change order

The time and material change order is most often usedwhen the scope of the change cannot be defined properlybefore work must begin, either because the parties cannot agree or because there is not enough time for standardchange order processing. When using a time and materialchange order, the parties should be sure to have a cleardefinition of reimbursable costs before the work is begun.Following are some examples of reimbursable items to beclearly defined:

• Labor rates to be charged, including specific per-centages for payroll taxes and other statutory andemployer-provided benefits.

• Rates for machinery and equipment supplied by thecontractor, whether owned or rented.

• Costs of small tools and miscellaneous material,regardless of whether consumed in the work (thismay be stated as either a percentage of labor andmaterials incorporated into the work, or as individ-ual line items).

• Expenses for estimating, engineering coordinationand field supervision.

• Overhead expenses on the job and in the homeoffice and a reasonable fee for the additional work.Overhead and fee or profit is not normally deductedon deductive change orders.

Change directive

Construction change directives formally alter the scope ofthe work in the same manner as a change order, but with-out formal agreement as to the proper adjustments for

time and price. A contractor or subcontractor does notwaive its rights to time and price adjustments when itproceeds pursuant to a signed change directive.

Recorded minor change order

The recorded minor change order in most cases is initiat-ed by the owner’s agent and is used when the change isso minor that there is no significant effect on project costor time, but the variations to the plans or specificationsnevertheless should be recorded for later incorporationinto the as-built drawings. This type of change order alsois useful to avoid problems later when memories ofunrecorded changes might fail or when authorization forthe change may be questioned. This procedure also per-mits the contractor or subcontractor to recover expenseswhen a large number of minor changes accumulate.

Authorization of change

Change order work should not begin until after the owneror owner’s agent issues a written authorization to pro-ceed. Adherence to this precedence will promote smoothand efficient adjustments by all parties. This writtenauthorization should reflect the variations in the work andthe contract cost or time schedule. The authorization alsoshould specify that variations are made in accordancewith the terms of the original contract, and, to the extentprovided in the contract documents, allow for payment ofundisputed amounts as part of monthly progress pay-ments.

When the contract is finalized, the owner should identifythose individuals who have authority to authorize changeson the owner’s behalf. The contractor and subcontractorsalso should identify which of their employees are author-ized to accept or negotiate changes (preferably job super-intendents, job engineers, or the project manager). It isimportant that the owner or the owner’s agent deal onlywith the contractor’s authorized representative.

Special care should be taken with subcontractors andmaterial suppliers to clarify the proper communicationpaths and to identify the persons in authority. Directcommunication between subcontractors and the Owner,Owner’s agent, designer, or designer sub-consultants canresult in ambiguous contractual issues. Appropriate com-munication processes should be clearly outlined duringthe Pre-Construction Conference attended by all parties(See C.1. Pre-construction Conferences).

D.3.d Guideline on Procedures for Change Orders


The major problem affecting the proper execution ofchange orders is the time lag between the submittal of thecost and time estimates for the changes and later accept-ance or rejection by the owner (see B.2. ProjectScheduling, Delays and Liquidated Damages and D.5.a.Project Closeout). The longer the time lag between sub-mittal and acceptance or rejection, the greater the possi-bility of an increase in cost to the owner or a delay in thecompletion of the work. The contractor and subcontrac-tors must state prominently, on the face of each proposal,a reasonable time period during which the quoted pricemay be considered firm and after which the project willbe delayed.

Emergency changes require expedited procedures whichshould be developed and communicated as part of thePre-Construction Conference. Regardless, emergencychanges should be documented by written authorizationimmediately following.

Conclusion

Although each change order must be evaluated separately,certain procedures are applicable to most change ordersand should be followed.

1. Establish change order handling procedures at the pre-construction conference.

2. Identify those individuals who have authority to nego-tiate and approve change orders. Also, notify others of

any limits on the authority of those individuals. Thisinformation should be made known to all parties duringthe preconstruction conference.

3. No work beyond the scope of the base contract shouldbe performed without prior written authorization fromthe owner, except in emergencies.

4. The scope of the change order should be clear and therequest for the change should contain enough informa-tion to enable the contractor or subcontractors to makea realistic estimate of the costs and time involved.

5. Proposals should be submitted as soon as possible afterthe receipt of a request and, once submitted, should beacted upon immediately.

6. The proposal should acknowledge the contractor’s orsubcontractor’s right to include overhead and profitpercentages in additive changes, and to exclude thesefrom deductive changes.

7. All parties should acknowledge and honor the contrac-tor’s or subcontractor’s right to compensation for thecost of time delays, the cost of processing additive aswell as deductive changes, the cost of legally disposingof materials, and all other costs incurred in the execu-tion of the change.

D.3.d Guideline on Procedures for Change Orders


The following guidelines are recommended to ensureproper notice and compensation for additional services:

(1) Services should be rendered or material or equipmentfurnished by the contractor to or on behalf of the sub-contractor only on the basis of prior notice by thecontractor and concurrence by the subcontractor(Appendix E.3 Work Authorization Form is suggest-ed).

(2) Services should be rendered or material or equipmentfurnished by the subcontractor to or on behalf of thecontractor on the basis of prior notice by the subcon-tractor and concurrence by the contractor (AppendixE.3 Work Authorization Form is suggested).

(3) Where prior notice cannot be given due to the needfor immediate action, such action as is necessary may

be taken by the contractor or subcontractor on behalfof the other.

(4) No charges for services rendered or materials fur-nished by the contractor to the subcontractor or by thesubcontractor to the contractor should be valid unlessa written claim is given by the contractor to the sub-contractor, or by the subcontractor to the contractor,during the first ten days of the calendar month follow-ing that in which the claim originated.

This guideline applies to construction services only, asdistinct from changes in the work as required by the con-tract documents (see D.3.d. Procedures for ChangeOrders).

D.3.eGuideline on Charges for

Non-contracted Construction Services


Undue delays by owners, architects/engineers, generalcontractors, subcontractors and sub-subcontractors in pro-cessing payments or in making timely payments imposehardships and improper financial burdens on the contrac-tors and suppliers who await payment, and amount toextensions of credit by the contractor and suppliers totheir respective higher tiers.

In order to avoid such problems, all payments should bemade on all contracts promptly. This should include pay-ment for all labor, services and materials stored on the jobsite or other approved storage sites as of the closing dateof requisitions. This applies to both progress paymentsand final payments.

Contractor and subcontractor requisitions should notinclude amounts that the requisitioner does not intend topay its subcontractors or suppliers because of a dispute orother reason.

The following schedule of billings, certificates and pay-ments by various participants in the construction process

is suggested. The schedule assumes normal trade contractterms allowing monthly progress payments for work per-formed and materials suitably stored through the end ofthe month. This schedule does not refer to payments tosuppliers who are not subcontractors.

It is important to note that along the sequence of events,any recipient of a payment request who takes exception toan item of billing should immediately contact the initiat-ing party by telephone and attempt to resolve the matter.Failing resolution, the party taking exception should noti-fy the other party in writing of the reasons for the action.

The schedule should be adjusted by making appropriatebillings and payments on the last working day prior toany listed Saturday, Sunday or holiday. It is also suggest-ed that collection efforts be commenced immediately fol-lowing the day any payment due was not paid.

D.3.fGuideline on Prompt Payment

Guidelines for a Successful C onstruction Project. Copyright © 2003, The Associated General Contractors of America/AmericanSubcontractors Association, Inc./Associated Specialty Contractors. 44

Advance procurement of construction materials andequipment is a prudent practice that saves money andpromotes the timely completion of construction projects.Construction project owners garner the full benefit ofadvance procurement by allowing progress payments toinclude payment for materials and equipment stored at theconstruction site or some other agreed location.

As a matter of careful construction practice, contractorsand subcontractors often purchase and request delivery ofconstruction materials and equipment soon after a con-tract is executed and well before the equipment or materi-al is needed. The purpose of advance purchases is toassure that specified materials and equipment are avail-able for installation or use in accordance with the con-struction schedule. Early procurement of materials andequipment also guards against escalating costs, particular-ly in long-term contracts, and enables the contractor andits subcontractors to make timely purchases when short-ages may be a problem.

The contractor’s and subcontractor’s progress paymentsfor suitably stored material or equipment should not be

withheld until the material or equipment is actuallyinstalled in the work. Owners that fail to provide for pay-ment of stored materials and equipment discourage pru-dent business practices and prompt schedule compliance.Safeguards can be taken to assure that the owner’s inter-ests are protected from diversion, destruction, theft, ordamage to stored materials or equipment that the contrac-tor or subcontractor is holding for future installation.These safeguards may include, but are not limited to:

• Provision of delivery tickets, packing lists, and/orphotographs to substantiate delivery.

• Inspection of stored material by the owner orowner’s representative.

• Provision of proof of insurance coverage for off-sitestorage material.

• Inclusion of all of the above with the progress pay-ment request.

D . 3 . gGuideline on Payment for Stored Materials and Equipment


When an owner decides to purchase materials or equip-ment directly, it is imperative that adequate details forproper installation be included in all bid documents. Inaddition, owner purchased materials or equipment mayincrease the project price because a contractor will haveto cover contingencies over which it has little or no con-trol. Before deciding to exercise the direct purchase ofequipment or materials option, owners are encouraged toconsider the following:

• When an owner purchases equipment and whenequipment is installed by the owner’s or equipmentsupplier’s employees, there will always be the addi-tional burden of coordinating delivery and installa-tion. There is also a possibility of craft jurisdictionproblems.

• Contract performance can be adversely affected onprojects experiencing untimely, unscheduled orfailed delivery of equipment and materials.

• A contractor is most familiar with local buildingcode requirements, which often address both materi-als and equipment installation requirements.

• The issue of shipping charges is also importantbecause most manufacturers ship materials so thattitle passes to the purchaser at the manufacturing orshipping point.

• Under an owner direct purchase option, unless otherarrangements are made, the owner may have toassume responsibility for warehousing, transfer andsecurity of materials or equipment.

• When an owner buys materials or equipment, theowner also assumes the responsibility of resolvingany warranty issues with the manufacturer.

• A contractor’s overhead cost remains the same. Inaddition, in states in which a contractor is requiredto pay the sales tax on any equipment it installswhether it purchases it or not, the contractor maybuild taxes on the retail price of the equipment intoits bid.

Owners should consider potential consequences of direct-ly purchased equipment or materials. Complete and fulldisclosure of all aspects of owner purchases should becommunicated and coordinated with the contractor.

D.3.hGuideline on Purchase of

Materials or Equipment by Owner


The practice of scheduling overtime in machine-pacedfabricating and other types of manufacturing operations iswidespread. Perhaps some scheduled overtime to main-tain production schedules is less costly than bringing newemployees into the work force in some repetitive,machine-paced factory operations. However, any advan-tages of scheduled overtime which might be found inmanufacturing do not apply to construction. Non-repeti-tive work, fatiguing physical labor and other featuresmake construction work far different from machine-pacedfactory employment.

Scheduled overtime is seldom found on competitivelybid, firm-price contracts. Most contractors are mindful ofsome of the negative effects of overtime on costs and pro-ductivity. However, scheduled overtime is sometimesordered by owners or construction managers, particularlyon large cost-reimbursable projects, in an effort to:

• Accelerate completion;

• Make up for previous delays;

• Complete as originally scheduled a project whichhas been increased in size and complexity bychange orders; or

• Compensate for shortages of skilled constructionworkers in the area.

One of the worst but most common reasons to use over-time premium pay is to induce needed workers to leaveother jobs and accept employment on the project onwhich the overtime is scheduled.

Productivity Impacts

Simple arithmetic shows that premium pay for doubletime or time and one-half makes overtime work muchmore expensive. However, people who insist on overtimeseldom realize that other costs associated with overtimemay be even more significant than premium pay.Premiums affect only overtime hours, but continuing,scheduled overtime drastically affects the costs of allhours.

All available research findings indicate a serious inverseratio between the amount and duration of scheduled con-struction overtime hours and productivity. In the first few

weeks of scheduled overtime, total productivity per work-er is normally greater than in a 40-hour week, but not asmuch more as the number of additional work hours.After seven to nine consecutive 50- or 60-hour weeks,productivity is likely to be no more than that attainable bythe same work force in a 40-hour week. Productivity willcontinue to diminish as the overtime schedule continues.After another eight weeks or so of scheduled overtime,the substandard productivity of later weeks can be expect-ed to cancel out the costly gains in total weekly produc-tion realized in early weeks of the overtime schedule, sothat total work accomplished during the entire period overwhich weekly overtime was worked will be no greater, orpossibly even less, than the work accomplished if the reg-ular schedule had been used.

When the loss of productivity is added to the higher wagecost with premiums, productive value per wage dollarpaid after several weeks of scheduled overtime drops to:

• Less than 75 percent for five 10-hour days

• Less than 62 percent for six 10-hour days

• Less than 40 percent for seven 12-hour days

Studies on this subject conducted by the Bureau of LaborStatistics of the U.S. Department of Labor, theConstruction Industry Institute, the Business Roundtable,the National Electrical Contractors Association, and theMechanical Contractors Association of America producedsimilar results. All of them showed that continuingscheduled overtime has a strong negative effect on pro-ductivity which increases in magnitude proportionate tothe amount and duration of overtime. Abandonment ofthe overtime schedule appears to be the only effectiveremedy. Only the BLS study evaluated what happenswhen scheduled overtime is discontinued. That studyshowed a dramatic jump in productivity per hour uponreturn to a 40-hour week.

Reasons for declining productivity under over-time schedules

Several logical reasons have been found to account fordeclining productivity under overtime schedules.

D.3.iGuideline on Ove rtime, Construction Costs and Productivity


Work pace inertia

Industrial engineers have found that workers expend ener-gy at an established pace determined by long periods ofadaptation. Hence, when the hours of work increase,there is a tendency to adjust the pace to accomplish aboutthe same amount of work in an extended workday orworkweek as was accomplished before the extension.The interdependency of construction workers with otherson the same crew and with workers of other trades on thesame project make it difficult or impossible for any indi-vidual worker who may attempt to overcome this tenden-cy to do so without the problem of "running out of work"while waiting for other work to be performed.

Absenteeism

Bureau of Labor Statistics Bulletin 917 states: "But,whatever the reason, one fact stands out clearly in thesurvey: the longer the hours, the more scheduled worktime lost through absenteeism." Absenteeism is promotedwhen the effects of cumulative fatigue, desires of workersto spend more time with their families, and need for timeaway from the job to take care of personal business com-bine with lack of economic necessity to work all availablehours because of the high pay received during overtimeweeks. Absenteeism of even a few employees seriouslydisrupts scheduled daily operations and reduces totalproject efficiency.

Accidents

When extended overtime is employed, the result isincreased accidents and injuries, along with the produc-tivity-killing effects on morale. The BLS Bulletin states:"Injuries also increased as hours increased, not only inabsolute numbers, but also in rate of incidence. In mostof the observed instances, the number of injuries per mil-lion hours worked was very much higher at the longerhours."

Fatigue

Physical and mental fatigue build up at an acceleratedrate from excessive hours on the job and lack of recupera-tive time off the job, even when overtime work is result-ing in little or no additional work being accomplished. Inwork such as construction, which is not machine-pacedand which requires sustained physical effort as well asmental alertness, fatigue obviously reduced productivityduring all hours worked. The BLS Bulletin stated: "Forhours above 8 per day and 48 per week, it usually took 3

hours of work to produce 2 additional hours of outputwhen work was light. When the work was heavy, it tookabout 2 hours of work to produce 1 hour of additionaloutput."

Morale and attitude

Anything which adversely affects morale and whichlessens cooperative and positive attitudes toward thework, the employer, and the customer will result in low-ered output. Fatigue causes deterioration in morale andpositive attitude along with an overall negative impact tothe project culture. In addition, continuing expensiveovertime can quickly result in an attitude that, "Costmeans nothing to the customer, so why should we work-ers worry about efficiency?" Deteriorating morale andattitude coupled with fatigue increase friction among theworkers, grievances against management, and jurisdic-tional disputes with other trades.

Turnover

Frequent turnover of workers is expensive and disruptive.Regardless of the skills of new workers, a considerableamount of time is needed to train them to the specificneeds of the project and orient them to what they will bedoing and how it meshes with the work done by others onthe job. Turnover can be expected at an accelerating rateas overtime schedules continue because of fatigue, poormorale and attitude, and lack of economic need to contin-ue working.

Job shopping

In an area where one or more large projects have sched-uled overtime, workers seem to spend more effort findingthe project having the highest premiums than in gettingthe work accomplished. If other construction employersfeel induced to schedule overtime to keep their share ofthe area work force, a daily "auction" for available man-power is likely to occur.

Supervision problems

Because of their greater responsibilities, supervisoryemployees are likely to feel the fatiguing and demoraliz-ing effects of prolonged overtime schedules even morethan production workers. Loss of key supervisors partway through a construction job can have highly detrimen-tal effects, but such loss can be expected on a job withprolonged overtime due to illness or resignations becauseof overwork. Pressures resulting from scheduled over-

D.3.i Guideline on Overtime, Construction Costs and Productivity


time also cause supervisors to become careless, to makeerrors in judgment and to become irritable, adverselyaffecting their relations with workers and others.Obviously, the alternative of not having experiencedsupervisors present during all overtime hours beingworked can have even more serious consequences.

Stacking of trades

Scheduled overtime almost always distorts the orderlysequence schedule originally adopted. This inevitablyresults in space conflicts and undesirable mixing ofemployees of different crews and different contractors.

Pressure for more overtime

It is common for jobs with scheduled overtime to haveworker pressure for more overtime and slowdown amongworkers receiving less overtime pay than others.Competition to get the largest paychecks seems tobecome a greater motivator than pride of participating ina successful project.

Avoiding the effects of scheduled overtime

The following steps are recommended to avoid the effectsof scheduled overtime:

(1) All parties concerned with planning and schedulingconstruction projects, including owners, constructionmanagers, architects, engineers and contractors,should be fully aware of the magnitude of the extracosts caused by scheduling overtime and that produc-tivity losses will affect work during normal hours aswell as during overtime hours. All must recognizethat the supposed benefits to be gained from schedul-ing overtime, such as accelerating completion or mak-ing up for previous delays, are unlikely to be realizedand very costly to attempt.

(2) Initial completion schedules should be realistic andtake into account such factors as availability of skilledmanpower and potential delays from weather, strikes,licensing delays, interference by environmental inter-ests, etc. Completion schedules should allow suffi-cient flexibility to absorb unexpected but unavoidabledelays. Design should be completed and construction

started early enough that the customer need for acompletion date will be taken care of without artificialacceleration.

(3) Change orders of a size or number which will delaycompletion should be avoided unless the completiontime can be extended to permit performance of boththe changed work and the original work withoutresorting to overtime. No change should be contem-plated or authorized without full consideration by allparties of its effect on completion time.

(4) If the costs of scheduled overtime are to be paid bythe customer under a cost-reimbursable contract orunder cost-reimbursement provisions for changes oracceleration orders, the contractor should not be per-mitted to proceed with scheduled overtime withoutthe previous written agreement of the customer.Before agreeing to the proposed overtime schedule,the customer should thoroughly study the inherentdisadvantages, consult with contractor associations inthe area for their opinions on what the effects ofscheduled overtime will be, and make sure that noother alternative is available.

(5) Contractors on firm-price contracts should be fullycompensated for loss of productivity as well as forovertime premiums and additional supervisory andadministrative costs resulting from working on over-time schedules when required by the customer to per-form changed or accelerated work which necessitatesscheduled overtime.

(6) An effort should be made to negotiate and utilizeworkable shift work clauses to perform much of thework which must be performed outside scheduledworking hours with employees who are not employedduring regular working hours. It should be recog-nized, however, that productivity during shift periodsis not likely to equal that during regularly scheduledworking hours.

(7) Overtime should never be used to induce neededworkers to leave other jobs and accept employmenton the project for which the overtime is scheduled.

D.3.i Guideline on Overtime, Construction Costs and Productivity


The holding of retainage is a traditional and commonbusiness practice in the construction industry and is usedto assure a timely and satisfactory completion of the con-struction project.

Whenever practical, however, retainage should be elimi-nated or reduced. If the need for retainage can not beeliminated, an acceptable alternative form of security inlieu of retainage may be used. If retainage is required, thepercentage retained should be as low as possible.

Where withholding a retained sum from progress pay-ments is deemed necessary to secure performance on aconstruction project from prime or subcontractors, thefollowing guidelines are recommended:

• The percentage level of any retainage should be thesame for subcontractors as for prime contractors onthe project. This approach is applicable provided thesubcontractor exhibits the ability to provide thesame level of security as the prime contractor andthe prime contractor underwrites the cost of anyexcess required security that is not included in thecontract documents.

• Early release of retainage for completed and accept-ed work should be encouraged. Upon substantialcompletion of a contractor’s or subcontractor’s

work, a line item basis should be used by ownersand contractors in determining the point of anyreduction in the rate of retainage, the time forrelease of retained funds, and the time for makingfinal payment. For unit price quantities, retainage isnot released until final quantities are approved andpaid by owner. (See D.5.a. Project Closeout andD.5.b Punch List Procedures.)

• Progress payments, reduction of retainage, releaseof retained funds, and payments for completed workshould not be delayed because work under changeorders has not been finalized. Final payments forchange order work should be made promptly afterits completion.

• Where retainage is used, retained amounts should bedeposited in an escrow account accruing interest tothe contractor and the subcontractor in their respec-tive shares.

• Consideration should also be given to not holdingretainage on subcontracts and material purchaseagreements of less than $10,000 in order to mini-mize contract administration efforts.

D.3.kGuideline on Retainage


Every member of the construction team can benefit fromthe implementation of Total Quality Management (TQM)within their companies. The purpose of this guideline isto provide a brief overview of TQM and to assist con-struction company executives in their understanding ofthe benefits of implementing TQM in their companies.

There is misunderstanding by many in the constructionindustry over differences between Total QualityManagement and Quality Control or Quality Assurance.TQM is a continuing process of improvement involvingall aspects of the business. The wider aim of TQM is toprevent mistakes before they happen. Quality Controland Assurance is just one aspect of the process.

In the construction industry, a total commitment to TQMincludes applying the principles of partnering to the indi-vidual construction project. All of the construction teammembers must be given the opportunity to participate inthe TQM process (see C.2. Partnering).

There is nothing magical about TQM. It is a process to fol-low in reducing errors in work. The keys to continuousimprovement are commitment and teamwork. This com-mitment must start with the chief executive officer and filterthroughout the entire organization. TQM will not workwithout a total commitment and involvement from top man-agement. Managers, in all areas of the company, must pro-vide employees with the proper training, tools, equipmentand work place environment to accomplish the assignedtask. The task or requirements must be clearly defined.

TQM Benefits

Significant improvement in profitability has beenachieved by companies embracing TQM. The TQM-focused company can expect:

• Improved project and company culture

• Increased customer satisfaction

• Greater efficiency

• Larger market share

• Reduced rework and warranty work

• Higher profits

• Improved reputation

• Safer work execution and resulting in lower insur-ance cost

• Lower absenteeism and turnover rate

The individual in a TQM company can expect:

• Fewer job-related injuries

• Greater self-satisfaction

• Higher morale

• Improved working environment

• Increased job security

Top management’s commitment and involvement

Total Quality Management cannot be achieved withoutthe active involvement and firm commitment of top man-agement. The chief executive officer must initiate thequality policy and commit the necessary corporateresources to carry out that policy.

Management must undergo quality training and lead theimprovement process in creating a quality attitude withinthe organization. This training should start at the top andfilter down through all levels of management and on tothe job site.

TQM is not a program. It is a management processthrough which quality products and services are providedon a continuing basis. A company can expect a behav-ioral change as well as a technical change in the corporateattitude. The commitment must be for the long term.

Develop and communicate mission statement

The company’s first step in the TQM process is to devel-op a mission statement that describes the organization, itsvalues, guiding principles, purposes and vision. It shouldidentify the organization to employees, customers andcommunity as one deserving of admiration.

When the mission is clearly transmitted throughout theorganization, employees will identify with it and will beguided by its principles.

D.4.aGuideline on Total Quality Management


Quality policy

A clearly defined statement of an org a n i z a t i o n ’s public com-mitment to quality and continuous improvement makes apowerful impression on the entire company about the impor-tance of quality. The quality policy is focused on quality asit relates to customers, whereas the corporate mission state-ment encompasses all aspects of a company’s existence.

Resources

Implementation of the TQM process requires an investmentof today’s resources in the company’s future. Tr a i n i n grequires time and money. Top management must be pre-pared to commit both its time and its employees’ t i m e ,including that of busy managers at all levels. This cost isthe first part of the cost of quality, the cost of prevention.The cost of quality is defined as the cost of prevention, plusthe cost of errors. The cost of errors includes rework,delays, unplanned work, accidents, excessive paperwork,lost jobs, idle time, excessive crew size, equipment failureand late starts. The cost of prevention includes supervision,training, inspection, planning and meetings.

Coordinate overall quality improvementprocess

Quality action teams are established to study neededimprovements for targeted processes. Once implemented,the results are monitored and measured against previousperformance standards and goals. Employees working ina given process are trained in monitoring and are empow-ered to affect continuous improvements.

Upward flow of communications

All participants need the freedom to make suggestions forimprovement without fear of reprisal. For some compa-nies or some individuals, this feedback will be foreign totheir corporate culture. Management should be commit-ted to recognizing individuals who offer good ideas whenpresented and again when implemented, regardless of thesource. A formal feedback, or "lessons learned" processshould be put in place to gather, evaluate, and implementcorrective actions.

Recognition program

Recognizing individual and team achievement is critical

to the success of the TQM process. Celebrate successstories by publishing them in the company newsletteralong with a photo of the individual or team and discussthem at meetings. Indicate a description of the problem,the solution, cost savings and team members. Recognitionshould come from the chief executive officer to reinforcethe commitment of the company to the process.Recognition helps to broaden participation. Celebratedsuccesses stimulate participation in the quality improve-ment process.

Just as important as recognizing internal team members isthe recognition of other members of the constructionteam, including the owner, the architect, engineers, thegeneral contractors, subcontractors, major suppliers andinspectors.

Independent reading and research

There is a great deal of information available in books,periodicals, and videos on the subject of quality andTQM. External customers can help, too. When an exec-utive gets serious about TQM, the first step is educationthrough independent reading and research programs.Reading this overview is only a start in the educationalprocess. The next place to go is to the AGC publication:An Introduction to Total Quality Management (availableat http://www.agc.org/). The serious executive must dedi-cate time to the subject to gain more than a cursoryunderstanding of TQM.

Continuous improvement process

Total Quality Management is a never-ending journey. Itis a continuous process of investigation, prevention, eval-uation, reviewing and taking corrective action. Theprocess requires top management’s total commitment andinvolvement and a willingness to change the corporateattitude if necessary.

All work is a process. As soon as one process isimproved and functioning properly, a TQM companymust improve the next process in order of priority andthen do it all over again.

Conclusion

Nearly all successful companies practice some form ofmanagement improvement program based upon satisfyingcustomers, striving to perform a task right the first time

D.4.a Guideline on Total Quality Management


and knowing that improvement must be continuous.

Total Quality Management provides an art and science forthe practice of good management. It also provides theintellectual foundation for advancing the study of man-agement techniques and how they can be used to better

satisfy the consumers of goods and services. TQM tech-niques have been successfully employed in many manu-facturing industries for some time and offer substantialbenefits to the construction industry.

D.4.a Guideline on Total Quality Management


Today construction projects are more complex withsophisticated and integrated systems requiring compli-ance inspections and/or corrections when installed andoperated and throughout various phases of the construc-tion process. As a consequence, traditional reliance on anend-of-project punch list is an inefficient and costlyapproach to ensuring that products, equipment, or sys-tems operate as designed and specified. The goal of theinspections process should be a zero punch list perform-ance through the use of periodic inspections throughoutthe project (see D.5.b Punch List Procedures).

The type and intensity of inspections vary greatly dependingupon project complexity and client needs. Virtually all proj-ects come under some minimum code standards with inspec-tions during various phases of the project by code off i c i a l s .Clients will often specify inspections to occur at specifiedintervals, for purpose of approving progress payments.

Absent an effective inspection system, experience hasdemonstrated that "end-of-the-project" punch lists can beoverwhelming and delay project completion.

The first step toward a zero punch list is a commitment toa project management process with all the key partiesinvolved. A properly planned project involves a detailedpre-bid process, continuing planning meetings throughoutthe various phases with everyone involved, and aninspection team committed to a timely completion and azero punch list. The cost of failing to implement a proj-ect-management process is substantial and often results inmore time for corrective action and a negative impact onthe operation of other integrated or related products,equipment or systems.

Purpose of the Inspections Protocol

• To ensure a higher level of quality by improvingcommunications and understanding of projectrequirements.

• To produce a zero punch list and timely, cost effec-tive project completion.

Coordination Requirements

A pre-project Inspection Conference should be held withthe inspector(s), contractor, owner, and designers all pres-

ent. The conference agenda should include the followingitems:

1. Scope of project.

2. Specification requirements.

3. Identification of design deficiencies.

4. Material product data sheets.

5. Pre-bid project minutes.

6. Project schedule.

7. Acceptance procedures.

8. Inspector(s) qualifications.

9. Inspector’s authority - Prior to the project start, allparties should be advised on the level and limits ofauthority and responsibility of the inspector(s).

10. Testing procedures and instrumentation - Testing pro-cedures and the required listing of instruments,including calibration, should be reviewed.

11. Procedure for the resolution of disputes.

12. Inspection HOLD Points and Documentation – (HoldPoint – a point in the installation schedule at which aspecific inspection or testing procedure is required byspecification to be performed.)

Upon agreement to these inspection specifics, a secondpre-project Inspections Conference should be held withthe project subcontractors. Depending on the complexityof the project, inspections may be discussed as part of theoverall Pre-Construction Conference for the project inlieu of the second Inspections Conference (see C.1. Pre-Construction Conferences).

Inspection Hold Points and Documentation

1. A schedule of hold points in the sequence of workoperations, at which the testing procedures are to beemployed (hold points) should be identified. In addi-tion, inspection hold points must be mutually agreed tominimize disruption.

2. The inspector(s) must be committed to the projectschedule with inspections conducted accordingly.

D.4.bGuideline on Project Inspections


3. Conditions or work practices inconsistent with speci-fication requirements or defective products, equip-ment, or systems must be reported in writing to theresponsible contractor representative.

4. Quality Assurance/Quality Control reports should beprovided to not only the owner but also to the per-forming contractor.

Resolution of Dispute Procedure

A written procedure should be in place to resolve any dis-pute or conflict between specifications, manufacturer’sliterature, work in progress, or completed work (seeD.3.a. Avoidance and Resolution of ConstructionDisputes).

Requirements for Inspection Personnel

1. Education, Training and Experience – Inspector(s)should have successfully completed an education andtraining program from a recognized organization offer-ing a curriculum equivalent to the disciplines of theproject and a minimum of five years experience in thediscipline related to the type of work to be inspected.

2. Physical Qualifications – an inspector should be physi-cally capable of performing the required inspectionusing standard, OSHA- approved, equipment.

3. Functional Qualifications – an inspector should have acurrent working knowledge of the operation and use ofthe inspection equipment required for the project.

4. Knowledge – an inspector should have an understand-ing of project specifications and plans.

5. Conflict of Interest – a full disclosure should be madeby the inspector of any reasons that would prevent animpartial evaluation of the contractor’s performance.

Completion of Work

1. If, after an inspection of work, proper completion is atissue, the inspector should issue a certificate that notesthose items in question.

2. If the owner or an installer of the owner’s equipment orfurnishings damages the work, the inspector shouldpromptly advise the owner of its obligation to repairthe damaged work. If the owner wants the contractor torepair such damaged work, or perform maintenancework not specified in the owner/prime contractoragreement, the contractor should be reimbursed forsuch work.

3. If completed and inspected work is damaged afterinspection, it should be repaired through change orders.

D.4.b Guideline on Project Inspections


The general contractor and subcontractors should cooper-ate in accomplishing the following objectives:

• Assure the owner and architect/engineer representa-tives that all work on the project will be completedin a timely manner and at a level of quality in accor-dance with the contract documents.

• Cause the owner to provide the general contractor apositive incentive to complete the work properly onor ahead of time by prompt and proper payment forwork satisfactorily performed.

• Provide the subcontractors a positive incentive tocomplete their work properly on or ahead of time byproviding prompt and proper payment for work sat-isfactorily performed.

• Prevent multiple punch lists by encouraging theowner, its architect/engineer and their consultantsto:

• Communicate any known issues throughout thelife of the project to the general contractor andsubcontractors to allow early agreement and cor-rection. The goal should be to create the shortestpossible punch list upon final inspection.

• Perform a prompt and thorough substantial com-pletion inspection and prepare a punch list of alldetected omissions and deficiencies of the desig-nated portion of the project.

• Include subsequently detected omissions anddeficiencies, if any, in such substantially com-plete portions of the work as part of the warrantypunch list.

1. After a subcontractor considers its work completed andbefore its workers leave the project, the general con-tractor’s and subcontractor’s authorized project repre-sentatives should prepare a list of items requiring cor-rection or completion. The subcontractor promptlyshould satisfy such requirements and arrange for anycontractually required tests.

2. No party should ask for a substantial completioninspection and punch list until the designated portion ofthe work has in fact reached substantial completion.

3. Upon achieving substantial completion of the work ordesignated portion, the general contractor should verifythat each subcontractor’s work is substantially com-plete and then request a prompt substantial completioninspection by the owner, its architect/engineer and/ortheir consultants as contractually required. The generalcontractor’s authorized project representative should bepresent during the inspection process along with theproject representative(s) of the subcontractor(s) whosework is being inspected.

4. Punch lists may contain items that fall into two cate-gories that are difficult to resolve in a timely manner:

• Scope issues: The punch list process may uncoverincomplete work scope that has not been contractedto any subcontractor. The general contractor shouldexpedite performance of such work by the appropri-ate party.

• Finish details: Visual inspection, especially ofdetailed finish work can uncover the need for addi-tional clarification between the general contractor,subcontractors, architect/engineer, and the owner.These items should be highlighted during the punchlist process and the project’s clarification processshould be used to document and formally resolvethese items.

These items should be pursued through the appropriateproject processes and resolved quickly in order not toimpede the overall completion and closeout of the project.

5. At substantial completion, the general contractor andeach subcontractor should be preparing the paperworknecessary to complete the closeout. This documenta-tion should include as-built drawings, operation andmaintenance manuals, warranties, lien releases, etc.

6. Upon receipt of the substantial completion punch list,the general contractor should request release of finalpayment, including retainage, less withholding suffi-cient to complete the punch list of omissions and defi-ciencies. Upon receipt of such payment, the generalcontractor should make payment to each subcontractorin the same manner (see D.3.k Retainage).

7. The general contractor promptly should establish aschedule for correction and completion of punch list

D.5.aGuideline on Project Closeout


items in a way that will minimize interference amongtrades. Disputes as to contractual requirements of anypunch list omission or deficiency should be reportedimmediately in writing to the owner and/orarchitect/engineer as appropriate, seeking an early reso-lution. The general contractor and each subcontractorshould immediately correct and complete all otheritems on the punch list, recognizing that failure to doso will delay payment to all parties.

8. Upon satisfaction that all omissions and deficiencies ofthe punch list have been completed, with the exceptionof any excusably delayed items, the general contractorshould immediately request a certificate of final com-pletion. Final inspection should determine only thesatisfactory correction of the previously documentedsubstantial completion punch list items. Release of

withheld funds should be conditioned solely upon satis-faction of substantial completion punch list items.Omissions and/or deficiencies noted after the substan-tial completion punch list should be treated as warrantyitems and therefore independent of substantial comple-tion, the punch list, and the final payment conditions.The general contractor should use its best efforts toassure such understanding by the owner and its archi-tect/engineer.

9. When feasible, the general contractor should seek fromthe owner release of claim and final payment for thatportion of the project performed by a single subcon-tractor and approved by the owner as satisfactorilycomplete (see D.5.b. Punch List Procedures for otherrecommendations).

D.5.a Guideline on Project Closeout


The following punch list procedures are recommended toowners, owners’ agents, contractors, and subcontractorsto assure timely completion and delivery of projects toowners and bring prompt and full payment to contractorsand subcontractors (see D.5.a. Project Closeout).

Pre-punch list procedures

1. The contractor and each subcontractor should carefullycheck its work throughout the performance period.

2. The contractor should prepare, maintain and distributea written record of all observed deficiencies as the jobprogresses, so that all necessary remedial action maybe taken promptly.

3. Unsatisfactory work should be corrected immediately,to prevent it from becoming part of the punch list.

4. Correction of each subcontractor’s work should bemade before that subcontractor leaves the project.

Punch list procedures

1. During the finishing stages of the work, the contractorand the owner’s agent, accompanied by the subcontrac-tors, should make frequent and careful inspections ofthe work in order to discover and ensure the correctionof any faulty or deficient work. Specific dates shouldbe established for equipment testing, acceptance peri-ods, warranty periods, and instruction sessions not pre-viously completed or agreed upon.

2. When the work is substantially complete in accordancewith the terms of the contract, the contractor shouldnotify the owner’s agent immediately.

3. Upon such notification by the contractor, the owner’sagent promptly should make arrangements to inspectthe work. Representatives of the contractor and thesubcontractors should be prepared to participate in thisinspection and answer questions about the work.

4. Following the inspection, the owner’s agent promptlyshould prepare a punch list setting forth in accuratedetail any items of the work that are not in accordance

with the contract documents. This punch list should beforwarded immediately to the contractor.

5. Upon receipt of the punch list, the contractor shouldassign appropriate punch list items and a list of defi-ciencies to each subcontractor.

6. The contractor and each subcontractor should correctassigned deficiencies in a timely manner.

7. When advised by the contractor that the punch listitems have been completed, the owner’s agent, accom-panied by the contractor and the subcontractors, shouldconduct the final inspection of the work. If the punchlist items have been completed satisfactorily, theowner’s agent should issue a certificate of final pay-ment for the work.

8. If after final inspection of the work, there remains aquestion of whether one or more punch list items havebeen properly completed, the owner’s agent shouldissue a certificate that notes those items remaining inquestion. Final payment including any retained moniesfor that portion should be made, less an amount whichthe owner’s agent reasonably estimates would berequired to cover the cost of completing any remainingpunch list item(s). This amount should be withheldonly until satisfactory completion of the remainingitem(s).

9. If the owner or an installer of the owner’s equipment orfurnishings damages the work, the owner’s agentpromptly should advise the owner of its obligation torepair the damaged work. If the owner directs that thecontractor repair such damaged work or perform main-tenance work not called for in the owner/contractoragreement, the contractor should be reimbursed forsuch work.

10. Neither the punch list nor the final acceptance of anyportion of the work should be used arbitrarily to estab-lish commencement dates of warranties or guarantees.Such dates should be established by contractual agree-ment between the parties.

D.5.bGuideline on Punch List Procedures


E.1 Subbid Proposal

Subcontractor _____________________________ Project ________________________________Address__________________________________ ______________________________________________________________________________ Location_______________________________________________________________________________________________________________ ______________________________________

General Contractor _________________________ A&E________________________________________________________________________Bid Time & Date________________________

Address__________________________________ Subbid Time & Date _____________________________________________________________

Type of Work (including specification sections)______________________________________________________________________________________________________________________________

(List the category(ies) this proposal will cover, such as plumbing, heating, air conditioning and ventilation, electrical and elevators)

This proposal includes furnishing all materials and performing all work in the category(ies) listed above,as required by the plans, specifications, general and special conditions and addenda _________________

(Here list addenda by numbers)Identify work to be excluded by specification paragraph. Otherwise, the subcontractor will be responsi-ble for all work in the above category(ies) required by the specifications and plans.

If this proposal, including prices, is accepted, the subcontractor agrees to enter into a subcontract and, ifrequired, furnish performance and payment bonds from _______________________________________

(Name of surety company or agency)guaranteeing full performance of the work and payment of all costs incident thereto, and the cost of thebond is not included in this proposal.

This proposal will remain in effect and will not be withdrawn by the subcontractor for a period of 30 daysor for the same period of time required by the contract documents for the general contractor in regard tothe prime bid, plus 15 days, whichever period is longer.

______________________________________Subcontractor

______________________________________By (Title)

(Continued)


E.1 Subbid Proposal (continued)

BASE BID _______________________________ Alternates________________________________________________________________________________

UNIT PRICES(Insert Unit Prices if Requested)

(Any Additional Information and Clarifications)

Add Deduct

1. $ $

2. $ $

3. $ $

4. $ $

5. $ $

6. $ $

7. $ $

8. $ $

Add Deduct

1. $ $

2. $ $

3. $ $

4. $ $

5. $ $

6. $ $

7. $ $

8. $ $


E.2 Subcontractor’s Application for Payment

TO: ______________________________________________________________________________________FROM: _____________________________________________________________________________________________________________________________________________________________________________

PROJECT:PAYMENT REQUEST NO.___________________________________________________________________

PERIOD__________________________________, 19____, to _____________________________, 19_____.

STATEMENT OF CONTRACT ACCOUNT:

1. Original Contract Amount $_________2. Authorized Changes (Net) (Add/Deduct) (As per attached breakdown) $_________3. Adjusted Contract Amount $_________

4. Value of Work Completed to Date: (As per attached breakdown) $_________5. Value of Authorized Change Orders Completed to Date: $_________

(As per attached breakdown)6. Materials Stored on Site: (As per attached breakdown) $_________7. Total (4+5+6) $_________8. Less Amount Retained (______________%) ($________)9. Total Less Retainage $_________10. Total Previously Certified (Deduct) ($________)11. AMOUNT OF THIS REQUEST $_________

CERTIFICATE OF THE SUBCONTRACTOR:I hereby certify that the work performed and the materials supplied to date, as shown on the above represent

the actual value of accomplishment under the terms of the Contract (and all authorized changes thereto) betweenthe undersigned and ___________________________________________ relating to the above project.

I also certify that payments, less applicable retention, have been made through the period covered by previouspayments received from the contractor, to (1) all my subcontractors (sub-subcontractors) and (2) for all materialsand labor used in or in conjunction with the performance of this Contract. I further certify I have complied withFederal, State and local tax laws, including Social Security laws and Unemployment Compensation laws andWorkers’Compensation laws insofar as applicable to the performance of this Contract.

Furthermore, in consideration of the payments received, and upon receipt of the amount of this request, theundersigned does hereby waive, release and relinquish all claim or right of lien which the undersigned may nowhave upon the premises described above except for claims or right of lien for contract and/or change order workperformed to extent that payment is being retained or will subsequently become due.

Date _________________________________________ ______________________________________________

Subscribed and sworn before me this ____________ day SUBCONTRACTOR

of , 19______ BY: __________________________________________(authorized signature)

Notary Public: _________________________________ TITLE: ____________________________________________My Commission Expires:


E.3 Work Authorization Form

SHEET NO. _____ OF _________DATE: ___________________________________ CUSTOMER ORDER NO.______________________PROJECT_________________________________ JOB NO. ____________________________________WORK PERFORMED BY_____________________________FOR _____________________________________

AUTHORIZED BY______________________________TITLE _______________________DESCRIPTION OF WORK _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

LABOR MATERIAL

EQUIPMENT & TOOLS

REMARKS:_______________________________________________________________________________

__________________________________________________________________________________________

ARCHITECTCONTRACTOR ______________________ OWNER ______________________ SUBCONTRACTOR _______________BY _________________________________ BY ___________________________ BY______________________________BILLING____________________________ BILLINGADDRESS___________________________ ADDRESS_____________________ ADDRESS _______________________

JOB COMPLETED ■ YES ■ NOWORK AUTHORIZATION NOT SIGNED BECAUSE:

NOTE: COMPLETE A SEPARATE DAILY WORK ORDER ■ UNABLE TO CONTACT REPRESENTATIVEFOR (1) EACH JOB (2) EACH DAY ■ AUTHORIZED BY PHONE(DO NOT ATTEMPT TO COMBINE JOBS OR DAYS) ■ FORM ISSUED FOR RECORD PURPOSE ONLY

AUTHORIZATION IN DISPUTE

DESCRIPTION TIME DESCRIPTION QUANTITY

Actual Hours WorkedName Trade Straight Time Premium Time Description Quantity


Part IDate:________________________________________

Contractor: _______________________________________________________________

Contractor Division No.:_____________________________________________________

Change Proposal Request No.:_______________________________________________

Project:__________________________________________________________________

Proposed By: _________________________________ Submitted By: ________________________________

TO: ___________________________________________(Subcontractor)

Change Description

A Change in the Scope of Work is indicated below. Except as otherwise specifically mentioned, the general character ofthe work required by this Change Proposal Request shall be the same as originally specified in the project. Where anitem is mentioned with no additional specifications given, reference is to be made to the original Contract Documents.

Detailed Labor and Material: Required______________________ Not Required___________________

Attachments: (Specify) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Description of Proposed Changes:_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

This is not an order to proceed with work unless signed below.

The undersigned hereby acknowledges that Subcontractor is authorized to perform the work and provide the material described above as an extrato the contract. Adjustments to the contract price caused by this extra work and material shall be computed and paid for at the fair and reasonablevalue of the work and material.

Authorized Signature: ____________________________________ Date: ____________________________

Position:_______________________________________________

Company Name: ________________________________________ (Continued)

E.4 Change Proposal/Order Form

Instructions:● Part I is to be completed by the Contractor;● Part II is to be completed by the Subcontractor;● Part III is to be completed by the Contractor and

executed by the Contractor and Subcontractor.


Part IIChange Proposal

A. ❏ Subcontractor agrees, subject to Contractor’s approval, to furnish all labor, materials, equipment and services to perform the work requiredfor all items described in Part I for the sum of ______________ dollars to (increase) (decrease) (unchange) the Contract Price and (increase)(decrease) (unchange) _________________ calendar days in Contract Time. Except as changed by this change proposal/order form all terms andconditions of the Contract shall remain the same.

B. ❏ Subcontractor agrees, subject to Contractor’s approval, to furnish all labor, materials, equipment and services to perform the work requiredfor all items described in Part I on a time and material basis at a labor rate of ______________ dollars per hour and a mark up rate of _____% forthe sum of _________________ dollars and an (increase) (decrease) (unchange) calendar days in Contract Time. Except as changed by thischange proposal/order form all terms and conditions of the Contract shall remain the same.

_______________________________________________ by ____________________________________(Subcontractor)

_______________________________________________ ______________________________________(Address) (Title)

______________________________________(Date)

Part IIIChange Order

Contractor ______________________________________ Contractor Division No.: _______________________________

Owner’s Change Order No.:________________________

Change Order No.: _______________________________ Contract Description:__________________________________

This Change as described in the Change Description as shown on Part I of this document is hereby ordered on the above-describedContract and the Subcontractor’s Change Proposal in Part II is hereby accepted. The Original Contract terms are modified as follows:

• The Original Contract Price $ _ _ _ _ _ _ _ _ _ _ _ _ _ _

• Net Change by Previous Authorized Change Orders $ _ _ _ _ _ _ _ _ _ _ _ _ _ _

• The Contract Price prior to this Change Order $ _ _ _ _ _ _ _ _ _ _ _ _ _ _

• The Contract Price will be (increased) (decreased) (unchanged)

by this Change Order $ _ _ _ _ _ _ _ _ _ _ _ _ _ _

• The New Contract Price including this Change Order $ _ _ _ _ _ _ _ _ _ _ _ _ _ _

The Contract Time will be (increased) (decreased) (unchanged) by ___________________ d a y s .

Date of Substantial Completion as of the date of this Change Order therefore is _____________________I N W I T N E S S W H E R E O F, the Contractor has executed this Change Order in four original counterparts.

Date:________________________ Contractor: ________________________________________

By: ________________________________________________________(Title)

Date:________________________ Subcontractor: _____________________________________

By: ______________________________________________(Title)
