Avoid These Common Contractor Mistakes!

June 2, 2017

Unforeseen and potentially damaging issues and events often arise on construction projects. These are often beyond the control of the contractors involved. It is tough enough on contractors to contend with the consequences of these impacts without also adding some of their own to the mix. Unfortunately, what contractors do control can sometimes result in a self-inflicted mistake as they inadvertently “shoot themselves in the foot”. Following is a brainstormed list of some typical contractor missteps that can undermine projects and profits:

Queue drum roll . . .

Not following specification requirements exactly and sending incorrect, non-compliant material and equipment submittals for approval. [Hardly a good way to start a project!]
Not ordering long-lead, limited sourced, materials or equipment in time to avoid delaying the project. [Whoops!]
Not attending a non-mandatory pre-bid walk-through and you win the job, during which you find a differing site condition, and notify and submit a change proposal. However, the change is rejected because had you attended the walk-through, that alleged differing condition would have been patently obvious, and therefore, is not a differing condition. [No change modification. You lose.]
Not doing a take-off / bid review to ensure the full scope of work is captured and accurately priced, and if subcontracted, all required work is covered.
Signing “release waivers” for progress payments and change modifications without taking exception for outstanding, unresolved change impacts, disputed issues, unforeseen impacts and claims. [This may be the biggest undermining mistake contractors make. It undermines any later efforts to Claim for equitable recovery. Always reserve your rights to Claim, at a minimum, until you no longer need to do so.]
Not supporting the project team, or providing a complete breakdown of the scope of work items and quantities obligations of the contract. [Scope Creep = lost profit or worse.]
Failing to timely obtain required approvals and permits as required under the Contract. [A costly, "do not pass go" mistake!]
Deciding you have a differing site condition AFTER doing the work involving the differing condition [You disturb it--you likely own it! Those are the rules!]
Federal: Performing work otherwise not in your scope because the government COR directed your guys to do it. [The COR does not have the authority (usually) to direct work. Only the Contracting Officer can direct the Contractor and bind the government. Make sure your project team memorizes that maxim.]
Federal: The COR is causing problems, hindering, interfering, over-inspecting directing, misinterpreting, etc. [Post the "COR Delegation of Authority" letter the KO provided prominently on the job site. Make sure it is visible to all, and your field personnel read it.]
Federal: Not paying the correct Davis-Bacon Wage Rates based on the actual work being performed. Underpayment and misclassification of wage rates can constitute grounds fo termination for default, Department of Labor audit, or other bad stuff.
Federal: Submitting incorrect Certified Payrolls, which differ from what you are actually paying your labor; or over-pricing changes leading to payment of contract modifications; or signing releases that state you have paid your subcontractors to date when you have not; or any of the following:

Knowingly presenting (or causing to be presented) a false or fraudulent claim for payment;
Knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

3. Conspires with others to commit a violation of the False Claims Act;

4. Knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay money or transmit property to the Federal Government.

[False Claims Act (31 U.S. Code § 3729 - False claims)]

CPM Schedules: Inaccurate and not updated. [A sure way to undermine the “time is of the essence” requirement, degrade timely performance, generate disputes, and prevent proof of excusable and/or compensable time extensions.]
Starting work on a project based on a LOI (Letter of Intent) in advance of an actual contract being prepared for acceptance. [A truly bad idea. Does this even need an explanation? Just say no!]
Failing to request clarification of bid ambiguities BEFORE submitting the bid. [If you want to lose a fight, this is a good ring to fight in.]
Failing to document and notify in writing on change conditions, disruptions, delays, work suspension, etc., accurately, timely, or at all.
Proceeding on verbal directives to perform change work, or proceeding with work you consider change work (a constructive change), despite the other contract party not providing written acceptance and directive. [Go ahead, take a walk on the wild side! Get it in writing first or risk a he-said, she-said confrontation later on.]
Not following, not enforcing, or not even knowing about, the Fair Labor Standards Act [This can be one of those "gotcha" moments in the life of a contractor. Contractors need to know this stuff.]
Front-end loading the Schedule of Values. [This neither benefits the contractor who does it, nor the project Owner who pays for it. A Schedule of Values needs to be balanced and accurately equate to the distributed value of work performed.]
Contract / Subcontracts: Failing to have your attorney review these critical documents and to negotiate the most egregious clauses. A contract is a counteroffer to whatever bid proposal you submitted. Once executed, your proposal no longer matters.
Not keeping accurate Daily Field Logs, writing too little detail to document the work, and not documenting problems and impacts in real-time.
Not capturing daily site photos to show progress and conditions, or failing to keep daily logs and photo records secure.
Not maintaining a current (to date) list of submittals and transmittals.
Accepting work not within the contractor's experience and skill set.
Accepting work (you are qualified to perform), but not having qualified personnel to manage the work.
Assigning the Superintendent multiple roles (safety, foremen, equip operator) to save money when the Superintendent really needs to be dedicated full time to leading the project work.

Self-inflicted mistakes and lapses can prove costly. Projects generate enough challenges without contractors adding those that they otherwise control. Set up a checklist and standard operating procedure to limit and prevent missteps on your projects.

Alan Paquette / Construction Analytix, LLC

Disclaimer: The information contained in this article is for general informational purposes only and reflects the opinions of the author. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice, or as advice applicable to specific situations.

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