Many milestones in a construction project are established or acknowledged through certification by a third party designated by the project owner. This individual, stipulated in the construction contract, is typically the project architect or engineer. It may be a different owner’s representative. But the operative word is owner’s representative.
The denial of certification or a delay in certification can be very costly for a contractor. The contractor, however, has very little influence over or leverage with the certifier. The certifier is the agent of the owner with a duty to protect the owner’s interests. The certifier has few obligations to the contractor, possibly just the obligation to avoid bad faith or fraud.
The nature of this relationship was illustrated in a couple of recent court opinions, one involving a project engineer and the other a construction manager. In both cases it was ruled that the owner’s representative could not be sued by a contractor for delay damages allegedly incurred as a result of project mismanagement. Any duty to the contractor would conflict with the rep’s obligation to protect the interests of the project owner. The contractor can sue the owner for breach of the construction contract. But the owner’s representative, as a disclosed agent operating with the authority of the owner, is virtually untouchable.
Read more from the Construction Claims Advisor
Construction contracts are rife with requirements that the contractor provide the owner or owner’s representative with written notice of occurrences: delay, changed work, unforeseen site conditions, anything that can lead to a contractor’s claim for relief under the contract. The issue which arises time after time is whether the contractor’s failure to provide timely written notice deprives the contractor of a remedy.
Usually, if the project owner had actual knowledge of the occurrence and was not denied any legal or practical options, the owner cannot use lack of written notice against the contractor. Differing site conditions, however, are a challenge in this regard. Once a physical condition has been disturbed or work has continued, the owner’s ability to respond to the situation may have been compromised. Notice requirement are more strictly enforced in this context.
This was illustrated in a recent Kansas case. The contractor failed to provide timely written notice of ground water conditions, but contended the project owner was well aware of the situation from the outset. The court had to decide whether to strictly enforce the written notice requirement or to adopt the more lenient approach used in federal construction contracting. The court elected strict enforcement.
As always, I welcome your comments on these issues. Are written notice requirements a reasonable tool for protection of project owners’ legitimate interests? Or, are they simply a legalistic device for tripping up the unwary contractor? As a contractor, do you always – as a precautionary policy – give written notice of every “occurrence?” When you do provide written notice, what sort of a response do you receive from the owner or its representative?
From the Construction Advisor Today
Under the standard Construction Manager as Agent delivery program, RMR Group acts as a first party manager to the owner and a third party manager of the construction process. This delivery method utilizes an open book approach, where owners have access to all of our project documents and are made aware of aesthetic, schedule and cost trade-offs before making program and design decisions. Owners have the opportunity to be involved at each stage of the process from pre-construction and trade contractor selection through construction and closeout.
As a CM as Agent, we are typically brought on board to help with projects where a contractor has not been selected or started the project. We simply work as a direct arm and agent for the owner to verify and oversee all aspects of the project. Our clients are primarily from out of town and/or a group of owners looking for a local representative with extensive construction knowledge who can look after and manage scope as well as the full program.
The team at RMR Group has the combined knowledge, experience and capacity to guide our clients’ projects from design to close-out and occupancy. Our CM as Agent program is set up to provide the owner with the best support team available to get the most out of the construction process.
We accomplish this with project teams that are comprised of project management and site supervision professionals with support from our office management personnel: estimating, buyout/procurement, scheduling, design, and engineering with vertical & horizontal construction support. Our team can manage all aspects of the project including:
- At cost estimating & bid evaluation
- Buyout and procurement – materials at cost
- Value engineering
- Contract management
- Office management
- Construction monitoring & inspections
- Post construction services
- Real estate investment and financing consultation
Our primary goal is to ensure that each member of the owner’s team of specialists collaborates in a manner that serves the owner’s overall interest.
In its basic form, the Construction Owners Representative is defined as a qualified third party who provides construction leadership for a defined scope. As owner’s rep, RMR will work as an agent for the owner to provide consultation and oversight on the project. The key to as unbiased approach in this position is the real and actual lack of financial gain from any aspect of the project. To achieve the highest results, we typically have an administrative relationship with the architect/engineer and general contractor (or prime contractors), but a contractual relationship only with our owner client.
As owner’s representatives, we provide comprehensive management and coordination of all construction project activities. Our primary goal is to ensure that each member of the owner’s team of specialists collaborates in a manner that serves the owner’s overall interest. We monitor and coordinate the efforts of all members of the project team, enabling the owner to achieve maximum value for each dollar expended.
Our experienced staff applies leadership skills to plan and direct the project team toward success. Our proactive approach encourages designers, contractors and vendors to work together to achieve the owner’s quality, cost and schedule objectives. We strive for positive working relationships among the project team members, facilitating timely resolution of the problems and conflicts that are common in the design and construction process.
The three major Owner Management programs RMR Group provides are:
When a project is in trouble, usually an outside party is brought in because the problems on the project are bigger than the current project manager realizes or can handle. By definition, troubled projects have major problems. These problems sometimes include:
- Financial concerns and non payment of sub trades
- Over billing by the General or Prime Contractor
- Difficulties in meeting milestones and/or completion deadlines
- Failure in delivering anticipated benefits
- Failure or unwillingness to allocate resources to the project
- The project is consistently and/or significantly behind schedule
- Significant and/or critical technical issues with the project
When called in to address a troubled project, RMR Group will review the work in progress, analyze past performance, review contract documents and solicit input from the client. After a thorough analysis of the problems encountered, RMR can make recommendations with a detailed plan to get the project back on track. If the project can be recovered, RMR generates critical path management (CPM) schedules; detailed, short interval work plans, equipment utilization planning, cash flow and budget projections, subcontractor requirements, and the financial remedies needed to support the project. In short, we set up a full Project Management package similar to our Construction Manager as Agent delivery program.
Our highly skilled team works with clients to mitigate and resolve claims while supporting project progress. Unfortunately, not all projects are recoverable without addressing disputed issues. When projects cannot be turned around, or disputes not settled – RMR assists its clients with documentation and strategic planning for dispute resolution.
1. Feasibility Study / Due Diligence / Permitting
– “Is there someone (with experience in construction) who can create the pro-forma for my project and see it through to completion?”
– “What is the best infrastructure system for my building site site?”
2. Cost Estimating and Monitoring
– “I want the best value, not necessarily the lowest bid – who can give me the options?”
– “What is the real cost of construction?”
– “Who will qualify and evaluate all bids?”
3. Buyout and procurement
– “Is there someone who can buy materials for me at cost?”
– “Who will qualify (quality and price) the subcontractors that will be working on my home?”
4. Value Engineering
– “Can I substitute materials or methods to save money or get a better value?”
– “Should I decide to sell the property upon completion, am I building above or below the current market value?”
5. Contract Management
– “Who will coordinate the architect, design review, permitting, general contractor, engineering, landscaping, interior design & property management?”
– “I don’t want to be bogged down with the day to day construction questions – who will be onsite daily acting as my representative and answering questions?”
– “Who will resolve disputes so the project doesn’t get stalled?”
– “Who will validate and monitor change orders?”
6. Office Management
– “Who will review invoices, make payments and secure all lien releases?”
– “I want forensic detailed accounting throughout my project – who can provide me with this detail?”
– “Who is monitoring my construction costs?”
– “Who is tracking legal and claim avoidance policies and procedures?”
7. Document Management
– “I would like someone to organize and track all project documents and provide me will electronic documentation at the completion of the project.”
– “I would like to see daily logs from the project.”
– “I would like to see a live video feed of the project.”
– “Who will build and monitor a complete project schedule?”
– “Who can make resource allocation recommendations when the project falls behind schedule?”
9. Construction monitoring and inspections
– “With no local building inspector, who will handle inspections?”
– “Am I getting what I am paying for –does the construction match the plans?”
– “Who will be monitoring the quality of construction?”
10. Post Construction Services
– “Who is the third party who can certify Substantial Completion?”
– “Who will create and monitor the punch list?”
– “Who should I choose to maintain the property in my absence?”