Most Popular Articles in DCD

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Five Common Misconceptions Regarding Surety Bonds

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Getting construction bonds is not as scary and difficult as some think.If you are a contractor working on public projects, you’ve most likely heard a lot of myths about construction bonds.Common misconceptions range from the idea that surety bonds are unaffordable to questioning whether they are even necessary. Due to all this misinformation, many contractors either avoid projects requiring bonds (thus missing great work opportunities), or sometimes even operate without them, jeopardizing their legal standing and putting their company at risk. Read More »

Tags: Legal

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Indemnity Clauses: Contractors Beware!

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You’ll see the words “defend, indemnify and hold harmless” in many construction contracts. That’s an indemnity clause – and it can be toxic for contractors.One common form of indemnity gives an owner or a designer the right to recover from a contractor for every loss on the job, even losses caused 100% by the owner or a designer. Is it fair to make a contractor cover losses like that? Read More »

Tags: Legal , More, Construction Management

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Pay-If-Paid in 50 States

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Subs and suppliers expect to be paid on time. That’s a problem when an owner is slow to pay the prime contractor. So what are you supposed to do about slow-pay? The obvious answer is a “pay-if-paid” clause in your subcontracts. With “pay-if-paid,” a prime contractor doesn’t have to pay subs until paid by the owner. That’s legal in about 25 states. If you’ve never used a “pay-if-paid” contract clause. Read More »

Tags: Legal

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Selecting the Right Construction Lawyer

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You probably have your favorite lawyer joke.You can laugh at the humor, but be careful not to buy into the message that every attorney is a bottom-dwelling bloodsucker. Sure, there are bad apples, but I often see responsible, ethical construction attorneys who come across negatively while they are simply trying to serve the aggressive goals of their clients. Read More »

Tags: Legal

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Easing the Pain of Change Orders

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The project is bid, the contractor is selected, the work gets started, and everything looks good. The contractor is anxious to complete the project and move on the then next one, the client wants the building finished so that they can quickly move in. Then out of the blue it’s “Sir, we’ve got an issue.” Read More »

Tags: Legal

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Get Paid for Surprises on the Job

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When was the last time you had a pleasant surprise on a construction project – something that cost less than estimated or was easier than expected? It’s probably been a while. Most surprises are bad news – extra work and higher cost. Read More »

Tags: Legal

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Can You Collect on Oral Change Orders?

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Every construction project deserves a written contract. For residential work, 31 states and the District of Columbia require a written agreement. But what about contract changes? Is a written change order required every single time you do extra work? Read More »

Tags: Legal

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Essential Legal Roles for CFOs in the Construction Industry

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The economy is driving all contractors toward highly sophisticated financial management in order to succeed in the construction industry. Now more than ever, CFOs are being called upon to serve in an increasing number of roles – which includes functioning as a legal stopgap by identifying and responding to potential risk or exposure. CFOs who effectively implement their optimal roles can help improve operations and reduce costly litigation. Read More »

Tags: Legal

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How to Prevent Subcontractor Collusion (Bid Rigging)

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Collusion can involve price fixing, market division or allocation schemes, and bid rigging. In any of these cases, the collusion among the subcontractors involved usually allows the pricing and profit to be set in such a way by the trade contractors that the owner spends more money than necessary in the bidding process, because that owner is losing the true benefit of competitive bidding. Collusion of any type is a criminal act and is prosecutable. Read More »

Tags: Legal

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Can Apprentice Programs Favor Local Bidders?

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Local government entities would like their public works projects to generate jobs for local residents – which is understandable. These projects are frequently funded, at least in part, by local taxpayers. An out-of-town contractor with out-of-town employees is a galling sight. The public procurement laws, however, with their emphasis on open competition, generally prevent hometown favoritism. The desire to create local employment opportunities is not base or self-serving. It is usually community spirited. Yet, open competition, free of favoritism, is a cornerstone of public procurement. What is your opinion? Read More »

Tags: Legal

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Protect Yourself - Build Warranties Into Every Contract

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No too long ago I took a call from a contractor in a dispute with a condo association. The contractor had laid pavers around the perimeter of their complex. It was a big job and the condo Board was pleased – at first. About two years later the pavers started to “pump” where trash trucks made stops. The association claimed the pavers weren’t laid to spec. They hired an engineer and a lawyer and demanded that the entire job be torn out and done again – at the contractor’s expense. The job had passed every inspection, including soil density tests. But the original contract didn’t say anything about warranty. Obviously, the contractor needed help. Read More »

Tags: Legal

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Owner Contracts - the Holy Grail of Contracting

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A contract from your customer is like the Holy Grail. Contractors put enormous effort into winning contracts. For a prime contractor, the customer is likely the project owner. Depending on the delivery model, this prime contractor may be a general contractor, a specialty contractor, a design-builder, or CM at-risk. Specialty contractors often find they are lower on the food chain, such that their customer is the prime contractor, or even a first- or second-tier subcontractor. When we turn to subcontracts, the provisions in the prime contract commonly flow down to bind the subcontractor with regard to its scope of work. Read More »

Tags: Legal

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Are Bonds of Any Value to the Bonded Contractor?

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Contractors are frequently required to furnish payment and performance bonds. It is mandatory on most public projects and common on private projects. The bonds guarantee the contractor’s payment of debts and performance of work. When a project owner requires bonds, the owner is the “obligee,” the recipient of the guarantee. When a prime contractor requires a subcontractor to furnish bonds, the prime is the “oblige”. Read More »

Tags: Legal

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Create a Time and Materials Type Contract That’s Legal in any State

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Nearly every home improvement job includes a surprise, something you couldn’t anticipate. “How can I set an exact price before work even starts?” Good question. The answer: You don’t have to – if the contract includes allowances, alternates or unit prices. All three are perfectly legal, even where state law prohibits cost-plus contracts. Read More »

Tags: Legal

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Finding Potential Disputes in Key Provisions of an Owner Contract

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A contract from your customer is like the Holy Grail. Contractors put enormous effort into winning contracts. For a prime contractor, the customer is likely the project owner. Depending on the delivery model, this prime contractor may be a general contractor, a specialty contractor, a design-builder, or CM at-risk. Specialty contractors often find they are lower on the food chain, such that their customer is the prime contractor, or even a first- or second-tier subcontractor. When we turn to subcontracts, the provisions in the prime contract commonly flow down to bind the subcontractor with regard to its scope of work. Read More »

Tags: Legal

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Does Pre-Bid Clarification Shift Design Risk to Contractors?

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The rule requiring pre-bid clarification of obviously ambiguous documents is founded in fairness and common sense. If a bidder is aware, or should be aware, of a mistake, contradiction, or omission in the drawings and specifications, the bidder should not be allowed to financially exploit the error. The bidder must call the matter to the attention of the project owner prior to bid submittal. If the bidder fails to do so, he will not be allowed to recover extra performance costs necessitated by the owner’s interpretation of the design documents. Read More »

Tags: Legal

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Should Owners Be Allowed to Delete Line Items of Work?

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Some payment schedules are structured as line items of estimated quantities of unit-priced work. When pricing its bid, the contractor necessarily allocated project overhead and anticipated profit among the line items. The contractor will be paid for the actual quantities of work performed. But what happens if the project owner deletes entire line items of work? Read More »

Tags: Legal

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Can You Collect on Oral Change Orders?

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Every construction project deserves a written contract. For residential work, 31 states and the District of Columbia require a written agreement. But what about contract changes? Is a written change order required every single time you do extra work? Read More »

Tags: Legal

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Are No-Damage-for-Delay Clauses Still Enforceable?

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No-damage-for-delay clauses have long been fixtures in construction contracts. The contractor acknowledges that its sole remedy for delay of any cause shall be an extension of the performance period. The contractor relinquishes the right to recover any costs or damages incurred as a result of delay. Project owners have imposed these terms on contractors who, in turn, have imposed them on subcontractors. Read More »

Tags: Legal

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Do Rogue Arbitrators Ignore the Law?

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Public policy and the courts favor the use of binding arbitration for the resolution of disputes. Once parties have contractually committed to that forum, they should assume the result will be final. There are only limited grounds for judicial intervention; but one basis for vacating an arbitration award is instructive. Read More »

Tags: Legal

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Early Planning Can Yield Long-Term Costs Savings

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Prudent project owners are increasingly looking for innovative ways to incorporate as much information about on their developments as early in the process as possible. One reason is that more and more owners today view structures of all sorts in terms of long-term performance — especially structures in, projects which themselves create goods and earn revenue. These types of projects are naturally subjected to long-term economic analysis. For example, A a power plant or water treatment facility, for example, is intended to perform in a very obvious sense way over a period of decades. It is easy to see imagine with on such a project that, over time, maintenance and operations over time costs will rapidly dwarf the initial costs of land acquisition, design and construction. But now, even a project such as an office building is increasingly, and wisely, seen in terms of continuing performance cost. Energy usage and maintenance costs significantly impact budgets long after the initial cost of the structure is paid for. Read More »

Tags: Costs, Legal , More, Construction Management

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Should Bid Correction be Allowed to Displace a Low Bidder?

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Correction of a mistaken bid is a controversial matter in the public bidding arena. It is contrary to the nature of sealed bidding to allow a bidder to alter its price after bid opening -- raising questions of impropriety and calling into question the integrity of the bidding process. This is particularly true when a bidder wants to correct its bid downward, displacing an apparent low bidder. Read More »

Tags: Legal

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The 3-Day Right to Cancel: a Contractor’s Checklist

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Every contractor knows about an owner’s 3-day right to cancel: Agree to build or improve your client’s primary residence and the owner has three days to cancel the deal. It’s federal law (12 C.F.R. 226.15) and it applies in all states. Make a mistake on this and the owner has three years to cancel. Here’s a checklist to keep you out of trouble. Read More »

Tags: Legal

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Ignoring Historical Data Can Have Disastrous Consequences

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The jurors solemnly filed back into the courtroom. After seven weeks of trial, it only took only 2½ hours to reach a decision. The courtroom was silent as the clerk read the verdicts one by one on the six matters to be decided. On all six, the jury unanimously awarded the City of Victorville $52.1 million against Carter & Burgess, a large engineering firm. To this day it is the largest verdict in the history of Riverside County, California. Read More »

Tags: Costs, Estimating Construction, Legal

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Types of Construction Contracts in Use Today

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There are several common forms of contract and project arrangements that may be selected by an owner for a construction project, depending on the individual circumstances and preferences. Understanding every little detail of the contract is extremely important. Read More »

Tags: Legal

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The Changing World of Contractors and Construction Managers

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Fifty years ago, most construction projects were run by a conventional general contractor. The lowest responsible bidder got the job. Much of the work was done by crews on the payroll of the general contractor. The remainder was done by contractor specialists (subcontractors) working under agreements with the general contractor. Invoices drifted up the chain of contractors to the owner, and money flowed down the same chain from the owner or lender to subcontractors and suppliers. The prime contractor ran the show, handling invoices, claims, disputes, payments, change orders and requests. Read More »

Tags: Legal , More, Construction Management

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Do You Need Certificates of Insurance?

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“Certificates of Insurance” are used in the construction industry in every state to reflect the identity of insurance carriers, types of coverage, policy numbers and policy limits. Historically, these certificates of Insurance have also been used to provide time limits for notices of cancellation requirements to “additional insureds” and certain other information. Read More »

Tags: Legal

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Green Construction Contracts

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There are many requirements specific to LEED contracts. The agreement will require that the contractor develop and implement a site management plan and favor certain types of materials. Read More »

Tags: Legal