Mission Statement

The Associated General Contractors of America, the American Subcontractors Association, and the Associated Specialty
Contractors have agreed to work together to develop, maintain and promote Guidelines for a Successful Construction
Project. The Guidelines represent the joint efforts and approval of these organizations who will continue to address
industry concerns as the need arises.
A. Introduction & Overview
1. General Contractor-Subcontractor Relations.................................................................................................................1
2. Owners Ability to Pay ..................................................................................................................................................5
3. Contractors Payment Rights, Obligations, 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
5. Exchanging Documents and Data in Electronic Form................................................................................................18
6. Volatile Price Adjustment Clauses ...............................................................................................................................20
7. Building Information Management .............................................................................................................................21
C. Preconstruction Planning
1. Preconstruction Conferences .......................................................................................................................................23
2. Partnering.....................................................................................................................................................................26
3. Sequenced Project Schedules.......................................................................................................................................29
4. Site Logistics ...............................................................................................................................................................31
5. Surety Bonding ............................................................................................................................................................35
Guidelines For A Successful Construction Project
Table of Contents
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors 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 a
reference to another Guideline will take you to the referenced document.
D. Successful Project Execution
1. Environmental Health & Safety
a. Project Safety and Health........................................................................................................................................37
b. Unforeseen Environmental Problems in Construction...........................................................................................38
2. Coordination
a. Communication.......................................................................................................................................................40
b. Project Meetings .....................................................................................................................................................42
3. Contract Administration
a. Avoidance and Resolution of Construction Disputes .............................................................................................43
b. Benefits to the Owner of Effective Allocation, Delegation, and Performance of General Conditions
Responsibilities ......................................................................................................................................................45
c. Consequential Damages..........................................................................................................................................46
d. Procedures for Change Orders................................................................................................................................49
e. Charges for Non-contracted Construction Services................................................................................................51
f. Prompt Payment ......................................................................................................................................................52
g. Payment for Stored Materials and Equipment........................................................................................................53
h. Purchase of Materials or Equipment by Owner .....................................................................................................54
i. Overtime, Construction Costs and Productivity......................................................................................................55
j. (Reserved) ................................................................................................................................................................58
k. Retainage.................................................................................................................................................................59
l. Terminations and Suspensions.................................................................................................................................60
4. Quality Assurance/Quality Control
a. Total Quality Management......................................................................................................................................62
b. Project Inspections..................................................................................................................................................65
5. Project Closeout
a. Project Closeout ......................................................................................................................................................67
b. Punch List Procedures ............................................................................................................................................69
c. Warranty for a Construction Project .......................................................................................................................70
E. Appendix - Forms
1. Subbid Proposal ...........................................................................................................................................................71
2. Subcontractors Application for Payment....................................................................................................................73
3. Work Authorization Form............................................................................................................................................74
4. Change Proposal/Order Form......................................................................................................................................75
Table of Contents
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. ii
Preamble
The primary objectives of every general contractor and
subcontractor are to successfully deliver to the owner the
specified project safely, on time, at the contract price and
achieve a reasonable profit in return for performance of
its work. Regardless of personal pride, business philoso-
phy, contractual authority or years of experience, no gen-
eral contractor can deliver a project successfully without
the cooperation of competent subcontractors.
Similarly, no subcontractor, regardless of skill and experi-
ence in its specialty, can perform its work successfully
without the corresponding measure of cooperation and
leadership of a competent general contractor.
Both seek a business relationship on which they can
depend. Usually, each wants to continue to do business
with the other on future projects as well as those at hand.
Skill, integrity, fairness, trust, respect, and responsibility
will make the contractual relationshipnow and in the
futurepossible, profitable and pleasant.
Contract Documents
A written contract document usually establishes the
framework for the relationship between the general con-
tractor and the subcontractor. To foster cooperation, the
subcontract 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 perfect
set of documents, and that no general contractor or sub-
contractor can perform perfectly. Likewise, contract docu-
ments cannot detail every industry practice or anticipate
every crisis or situation that will arise at the site.
Mistakes will occur and miscommunications will arise.
Most general contractors and subcontractors solve their
problems 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 to
all concerned. Mistakes that are admitted and corrected
immediately are the least costly mistakes.
Project Culture, Trust, and Teamwork
Key to successful construction relationships is mutual
trust which must be nurtured to develop a positive project
culture. Keeping everyone on a project working together
in a harmonious fashion, without unduly delaying or
damaging others, is a highly complex task requiring the
utmost coordination, cooperation, communication, and
sometimes, compromise. As difficult as it may be, this is
what makes a project profitable and the construction
industry rewarding (see D.2.a.Communication and
D.2.b.Project Meetings).
Each general contractor and subcontractor on a project
should be regarded with equal respect. Each is an expert
in its own field. Ethical conduct, regardless of contractual
"rights" or ability to make another firm suffer, is essential
for harmony. The golden rule, "Do unto others as you
would have others do unto you," is still the best guideline
in dealing with other individuals and businesses.
Contractors should also assist architects, engineers and
owners by advising them, when requested, on relative
costs of alternates while plans are being prepared so as to
reduce the number of alternates.
The following guidelines, developed by the Associated
General Contractors of America, the American
Subcontractors Association, and the Associated Specialty
Contractors, provide suggestions for mutually profitable
and 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 to
subcontractors, in sufficient time for subcontractors
to review the project documents and prepare respon-
sible and responsive bids (see B.1. Bidding
Procedures).
2. The general contractor should make the project
financing information available to subcontractors
before the deadline for subbids (see A.2. Owners
Ability to Pay).
3. The general contractor should furnish any special
bid proposal forms required and make necessary
bidding documents reasonably available to subcon-
tractor bidders. General contractors receiving sub-
contractor bids, as well as subcontractors receiving
A.1
Guideline on General Contractor-Subcontractor Relations
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 1
sub-subs bids, should provide a convenient plan
room or make documents available via the Internet
for subcontractors use in preparing estimates.
4. The general contractor should promptly make bul-
letin and addenda information available to bidding
subcontractors.
5. Each subcontractor should deliver to the general
contractor, at least 24 hours before the bid hour, a
written bid without dollar amount, setting forth its
proposed scope, alternates, unit prices, addenda
and/or bulletins to be included. The scope should
reference specification divisions or sections and
specifically identify any omissions or additions.
6. Proposals should not be invited, accepted, or consid-
ered from any subcontractor or supplier known to be
unqualified to perform the proposed work or render
the specified service, or from one who, for some
reason, has no genuine possibility of being awarded
a contract.
Bid period
1. The subcontractor should submit its finalized bid
dollar amount and any necessary clarifications to the
general contractor at least four hours before the gen-
eral contractor bid hour. The general contractor
should establish for all bidders a cutoff time for
receiving subcontractor bids, make it known, and
adhere to it.
2. Subcontractors should not quote on unapproved sub-
stitutions, except as an alternate.
3. The bid amount of one competitor should not be
divulged to another before the award of the subcon-
tract or order, nor should it be used by the general
contractor to secure a lower proposal from another
bidder on that project (see B.4 Bid Shopping & Bid
Peddling). If a bid is so low in comparison with
other bids as to suggest clearly an error, the general
contractor should notify the subcontractor immedi-
ately that its bid appears to be out of line. The sub-
contractor should either withdraw or stand on its
bid, but not modify it.
4. Fair and bona fide competition is a fundamental
service the industry brings to its customers. Any act
or scheme to restrict or suppress free and fair com-
petition by any method is a breach of faith and a
betrayal of principles. Any false or malicious word
or act that would harm, or is intended to harm, the
reputation of a competitor is unethical.
5. The amount of a bid should not be altered after the
opening, nor should alterations be requested, except
when a substantial change is made in the work (see
B.1 Bidding Procedures).
Award of contract
1. Upon execution of the general contract, the general
contractor should promptly award subcontracts at
the bid amounts to responsible subcontractors whose
bids were used in the preparation of the general con-
tractors bid. Subcontract terms should be the same
as those in the owner-contractor agreement as relat-
ed to the subcontractors work. The interests of all
parties in the construction process are well served
by each being fully aware of its responsibilities and
rights. All parties should pursue a full understanding
of their contract obligations; those included by ref-
erence as well as express terms. Likewise, a full
understanding of surety bond obligations, if any, and
rights of claims against such bonds should be pur-
sued.
2. The general contractor should establish a progress
payment procedure and schedule which is approved
by the owner and issue copies to the subcontractors
upon request. The general contractor should prompt-
ly coordinate with the owners payment approval
authority to assure that the procedure and schedule
will be followed (see D.3.f. Prompt Payment).
3. The general contractor should issue each subcontrac-
tor a timely written "notice to proceed" for the sub-
contractors work and promptly notify the subcon-
tractor of any changes in such date.
Pre-construction conference
The general contractor should arrange for and conduct a
preconstruction conference as soon as the schedule has
been prepared (see C.1. Pre-construction Conferences for
more detail beyond the summary outlined below). A
responsible representative(s) of each subcontractor, major
supplier, the architect/engineer and owners representative
should attend. Detailed minutes should be recorded and
A.1 Guideline on General Contractor-Subcontractor Relations
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 2
distributed to all such parties on the project. The purposes
of the meeting are:
1. To introduce members of the team to one another
and establish the project communication procedure
(see D.2.a. Communication);
2. To review the job schedule prepared by the general
contractor and ascertain that a reasonable time has
been allowed for performing the work of each trade
(see B.2. Project Scheduling, Delays, and
Liquidated Damages);
3. To coordinate the submission of shop drawings and
samples;
4. To set up change order procedures (see D.3.d.
Procedures for Change Orders);
5. To list all initial questions that will require an
answer from the architect/engineer or owners agent;
6. To ascertain whether there are likely to be any labor
or material problems which could seriously impede
progress of the project;
7. To establish how non-contracted services for
cleanup, temporary facilities, etc., will be authorized
and charged (see D.3.e. Charges for Non-contracted
Construction Services);
8. To describe temporary facilities for the project and
establish parameters for their use (see D.3.e.
Charges for Non-contracted Construction Services
and C.4. Site Logistics);
9. To explain punch list procedures (see D.5.b. Punch
List Procedures).
Scheduling
A workable project schedule is absolutely essential for a
successful project (see B.2 Project Scheduling, Delays,
and Liquidated Damages). It should be prepared by the
general contractor with input from major subcontractors
and suppliers. Failures to meet schedule requirements
hurt 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-
contractors work. The general contractor should
strive to coordinate the project in such a manner as
to permit subcontractors work to proceed in a rea-
sonable and logical sequence and manner.
2. A network diagram showing the critical path and
clearly showing when each subcontractor is to start
and complete the various portions of its work is a
valuable 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 discussed
when they arise. Resolution frequently necessitates
compromise.
4. The schedule should be continuously monitored,
updated and issued to all project participants on a
periodic basis (weekly or monthly depending on
project size and complexity)
5. When a schedule change is made, each subcontractor
affected should be notified immediately.
6. Dates for delivery and installation of heavy equip-
ment should appear on the project schedule. Access
for 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 with
input from suppliers involved and coordinated with the
general contractor. The sequence must:
1. Allow for the projects established approval process
turnaround time.
2. Prioritize subcontractor submittals to obtain approval
for the longest lead time deliveries first.
3. Comply with the project schedule.
Building codes
Strict compliance with all local and national building
codes should be observed and maintained.
Safety
Precautionary measures should be introduced and
observed to ensure safety and protection of the public and
those engaged in the industry. Subcontractors must abide
A.1 Guideline on General Contractor-Subcontractor Relations
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 3
by the safety requirements established by the general con-
tractor as well as those of their own safety programs and
applicable jurisdictions.
Payments
Prime contractors should make payment promptly and in
just proportion to work done by subcontractors and sup-
pliers, and any changes in retained percentages should
likewise be passed along in proper proportion (see D.3.f.
Prompt Payment).
In like manner, it is expected that the subcontractor will
pay 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 the
general contractor and by the general contractor with
respect to subcontractors are for the purpose of assuring
completion of the work. Any manipulation of retentions
for any other purpose, such as a credit device, is an
improper use of others money. Any adjustment of the
retained percentage in the general contract made during
the course of construction should be equally, proportion-
ately, and promptly applied to the subcontract interest. A
subcontractor that has completed its work properly should
not be penalized by having final payment withheld
because some other contractor has not completed its con-
tract.
Project closeout
All parties must work throughout the project with an eye
towards the final completion and acceptance by the
owner. As a result, Project Closeout procedures must be
integrated into all phases of the work beginning at con-
tract award (see D.5.a. Project Closeout).
A.1 Guideline on General Contractor-Subcontractor Relations
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 4
Delays or defaults by owners in meeting contractual pay-
ment obligations to contractors are a continuing cause of
litigation, liens, long delays in completion of construc-
tion, abandonment of contracts, and bankruptcy of con-
tractors and subcontractors. Qualified contractors often
are 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 of high-
er bids to the detriment of the owners.
The problem has been partially addressed in standard
contract documents. For example, ConsensusDOCS 200
Standard Form of Agreement and General Conditions
Between Owner and Contractor (2007 edition) states in
sections 4.2 and 11.5.2.1:
Prior to commencement of the Work and thereafter at
the written request of the Contractor, the Owner shall
provide the Contractor with evidence of Project
financing. Evidence of such financing shall be a con-
dition precedent to the Contractors commencing or
continuing the Work. The Contractor shall be notified
prior to any material change in Project financing.
In addition, upon seven (7) days written notice to
the Owner, the Contractor may terminate the
Agreement if the Owner:
.1 fails to furnish reasonable evidence prusuant to
Paragraph 4.2 that sufficient funds are available
and committed for Project financing
Even though these clauses alert owners to the need to
provide such "reasonable evidence" before construction
can commence and during the course of the project, they
may not completely reassure contractors who are consid-
ering bidding the work and investing many thousands of
dollars 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 that
procedures have been established to assure that contrac-
tors will, in fact, receive timely payments and will not be
forced to borrow working capital with interest to pay their
ongoing 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 all
progress payments and final payment promptly as provid-
ed for in the contract documents, as well as to pay for
changes and any damages for which the contractors are
entitled to reimbursement.
It is not advisable for construction contracts to be execut-
ed unless all necessary funds to pay for the construction
have been placed on deposit, or unless all of those who
bid on the project have full knowledge of deficiencies in
funding before preparing bids or signing contracts. It is
improper for any payment delay of even one day to occur
because of administrative lapses or because release of
funds is deliberately delayed while waiting for certificates
of deposit or investments to mature. Such actions pass on
to contractors the responsibility of financing the project,
which should normally not be a contractor obligation. A
means of avoiding these difficulties might be for pay-
ments to be issued to prime contractors by the lending
institution or a title company from loan commitments. In
addition, when a project is constructed with borrowed
funds then the loan should be tied to the contract
retainage provisions, so that there is an obligation by the
lender, as well as by the owner to pay retainage (see
D.3.f. Prompt Payment).
In order to obtain the most competitive bids, owners
should furnish current written information needed by gen-
eral contractors and subcontractors to enforce lien and
bond rights. The following procedure is suggested to own-
ers and to architects and engineers for recommendation to
owners at the time bidding documents are being prepared:
Invitations for bids should contain clear statements
that the owner has made sufficient financial arrange-
ments for the completion of the project and adminis-
trative arrangements for timely disbursement of
every payment, including change orders and claims.
Bidders should be invited to make inquiry about
these arrangements so that they may satisfy them-
selves about financial details.
Inquiries from contractors who have been invited to
bid the project should be answered quickly and can-
didly by the owner and/or the construction lender.
A.2
Guideline on Owners Ability to Pay
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 5
In the case of governmental bodies, statements that neces-
sary funds have been appropriated for the financing of the
project 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 governmental bod-
ies may have lost such confidence due to a number of
governments which have defaulted or approached default
on obligations. Because of the reputation of many gov-
ernmental bodies of delaying payments due to procedural
red tape, it is especially important that bidders on public
works have clear assurances that such delays will not
occur.
A.2 Guideline on Owners Ability to Pay
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 6
1. One of the most important aspects of the construction
process is timely and complete payment for work
accomplished.
2. At times, contractors fail to do adequate due diligence
in determining the terms and conditions for payment.
In addition, many contractors do not understand their
rights to determine whether or not an owner, under
contract with a general or prime contractor, has the
ability to fund the construction project.
3. The responsibility of the contractors and subcontractors
is to:
Understand the payment terms and conditions of
their contracts.
Confirm the owners 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 contract
or 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 a
prime contractor.
It is your responsibility, if a general contractor, to
research the owners ability to pay for the project
and to convey such information promptly upon
request to all members of your construction team at
the 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, to
research the owners ability to pay for the project
and the general contractors ability to pay those with
whom it has contracts for goods or services.
It is your responsibility to understand the adequacy
and source of the money for each project. You have
a right to this information upon request. In most
cases, there will be a financial arrangement in place:
e.g. loan, line of credit or owner supplied funds. It is
appropriate for you to assure yourself that enough
money and/or credit is in place and that you under-
stand the terms under which the money/credit can
be accessed (see A.2. Owners Ability to Pay).
It is your responsibility to understand the billing
process of the owner, contractor, and lender. Each of
their specific requirements could lead to significant
delays in actual payment. Ensure that your payment
forms are submitted in a timely manner, as pre-
scribed by contract, and that each requisition is
complete. Changes, revisions, or incorrect billing
forms may delay payment in some cases until the
next billing cycle (see D.3.f. Prompt Payment).
You must understand your obligations as required
by the contract. If you are not in complete compli-
ance with your contract, it may affect your ability to
collect on the work that you have completed.
It is your right to obtain any information deemed
appropriate to your work on the project. This
includes any financial conditions, terms, and the
ability to change or modify those terms and condi-
tions. It is important that your contract spell out if
any 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 any
bond or lien rights and file all required bond and
intent to lien notices promptly.
Understand the conditions of your contract as to
when you are entitled to stop work, if necessary,
for lack of payment. It is important that you retain
the contractual right on each project to stop work, or
to 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.3
Guideline on Contractors Payment
Rights, Obligations, and Responsibilities
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 7
tract before actions allowed by the contract provisions
can be exercised.
5. The person most responsible for prompt and com-
plete payment is you. Protect yourself and your
company. Understand and research the payment
requirements of each individual project and the
owners ability to pay. It is not only your right but also
a prerequisite for your success in the construction
industry.
A.3 Guideline on Contractors Payment Rights, Obligations and Responsibilities
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
8Subcontractors Association, Inc./Associated Specialty Contractors. 8
All owners, architects and other design professionals are
urged to uniformly accept responsibility for design-relat-
ed plans and specifications applying to construction proj-
ects. This design responsibility includes drafting complete
specifications for inclusion in project bidding documents,
initiating or approving all design-related additions, dele-
tions and changes to project specifications and accepting
ultimate responsibility for the safety and utility of all
project design elements. For design-build projects, the
responsibility for the plans and specifications must be
extended to the design-build entity in order to ensure
project success.
Delegation of professional services which constitute the
practice of architecture or engineering, should ordinarily
be limited to manufactured products such as curtain walls
and 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 the
contract documents and not be in violation of any
applicable 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 design
integration, safety of the public, compliance with
codes and other legal or owner requirements as con-
tracted. With respect to other than the manufactured
products themselves, the architect or other owner
designated design professional shall accept and
retain sole responsibility for overall design.
4. Contractors and subcontractors must not be held
responsible for the adequacy of the performance or
design criteria indicated by the contract documents.
5. The use of inappropriate or unclear specifications
ordinarily increases costs to the owner. Higher bid
prices, frequent change orders, and lost time usually
result when design documents lack clarity or fail to
adequately 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 without
shielding the owner against liability to others.
6. Specification divisions for each trade must be clear
and complete. Phrases such as "intended results,"
"including but not limited to" and "reasonably infer-
able" create bidding uncertainties, result frequently
in claims and lessen the owner's chances that the
project will meet its expectations (see also B.3.
"Scope" Bidding for Private Work).
7. Review of design drawings and documents by the
contractor should be for the purpose of facilitating
construction and not impose on the contractor a duty
to discover errors, omissions or inconsistencies. It
should 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 the
designer is another area that can create distress for
the project team. Some designers will "approve" a
submittal with an approval stamp that contains lan-
guage absolving the designer of responsibility for
any mistakes in the review process. During contract
negotiations and initial meetings between the owner,
designer, and construction team, this issue should be
frankly discussed.
Long experience demonstrates that a clear division of
responsibility between the architect, as designer, and the
contractor, as builder, offers an effective way to achieve
fast, safe, and economical construction results.
A.4
Guideline on Design Responsibility
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 9
The AGC-ASA-ASC Guidelines for a Successful
Construction Project are available online at
www.constructionguidelines.org. The guidelines may be
used as a framework for local industry discussions. They
may be distributed by individual contractors to their cus-
tomers as a vehicle for bringing about a better under-
standing of the complexity of the industry. Architects,
consulting engineers and members of construction users
groups should receive personally delivered copies.
Starting a construction industry liaison committee
In those areas of the country where some form of an
industry liaison committee now exists, much has been
done to jointly develop solutions to many of the vexing
but unnecessaryproblems that may occur in the work-
ing relationship between general contractors and subcon-
tractors.
Use and implementation of the Guidelines, adapting them
where required to fit local needs, will strengthen and
improve the efforts of existing committees. Where such
an effort has not yet begun, the Guidelines can be invalu-
able in initiating a productive and ongoing program. All
local leaders of AGC, ASA and ASC have access to the
Guidelines and related documents.
How to get going
I. To gain maximum support and strength from your
chapter members, establish an industry liaison com-
mittee within your chapter, including the chapter
manager or executive director. Members of this
committee may then serve as members of an indus-
try liaison committee. Take the initiative to organize
an informal industry liaison committee.
II. At the first industry liaison committee meeting, plan
a meeting of the members of all of the local con-
struction association chapters and members of spon-
soring organizations not having chapters. Organize a
thorough and frank discussion of the Guideline on
Better General Contractor-Subcontractor Relations
(see A.1. Contractor-Subcontractor Relations) and
other contents of the Guidelines.
a. Go over carefully the materials contained in the
Guidelines for a Successful Construction Project
so that all committee members are familiar with
the material. Discuss each item thoroughly.
b. Go over the list of the prearranged meeting items.
Get the information your group needs and keep
the discussion on a high planedont 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 and
seek a mutually acceptable solution. A start
towards a reasonable approach to common prob-
lems is a significant accomplishment.
III. Take action with respect to holding future meetings
of the entire industry liaison committee and of the
subcommittees or task forces which can carry out
many of the committees programs between full
committee meetings.
a. It would be advisable, for subsequent meetings of
the full committee, for the chairperson to be
alternated among the members, so that all groups
have an equal role. Make a full written report of
committee discussions and agreements and dis-
tribute them promptly to all committee represen-
tatives.
b. In the interest of continuity, it is quite helpful to
have permanent members from all organiza-
tionsrather than rotating membership.
c. Make distribution of copies of the Guidelines to
local architects, consulting engineers and owners
a priority objective of the industry liaison com-
mittee.
A.5
Guideline on Liaison Committees:
Starting or Expanding an Existing Program
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 10
Most construction projects in the United States are com-
petitively bid. However, bidding procedures from one
geographic region to another frequently vary widely. This
variety has become an increasing industry problem as
owners, design professionals, contractors and subcontrac-
tors more frequently move from construction market to
construction market.
As a result, there is a need to establish more uniform
guidelines for bidding competitively-priced projects in
order to reduce confusion, increase fair competition and
lower construction costs. Some key concepts for bidding
are summarized below:
Advertisement for Bids
Owners should advertise the availability and distribution
of bidding documents as far in advance as possible, but
no later than 30 days prior to bid document issue. An
advertisement should contain a short description of the
project, including bid date, time, approximate contract
amount, approximate size, project location, licensing
requirements, plus bid and performance and payment
bond requirements. It also should state the date of docu-
ment availability, location of documents, and deposit and
refund information. The advertisement should be circulat-
ed to both individual prime and major subcontractor and
material supplier prospect bidders, placed in construction
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 be
allowed for bid preparation. If a project is large and/or com-
plex, four to six weeks or even more may be necessary.
Bid documents should be made available to a sufficient
number of bidders to foster competition. Thus, the owner
should furnish each local plan room with at least four com-
plete sets of bidding documents. In addition, the owner
should provide each prime bidder with at least four sets of
bidding documents for its use and the use of its subcontrac-
tors and suppliers. Major subcontractors also should be
provided, by the prime bidders, with a copy of the bid doc-
uments. Any prospective bidder should be afforded the
opportunity to obtain complete sets of documents through a
plan deposit system and/or to purchase partial or complete
sets directly from a printer or the architect.
Recent developments in the use of "electronic plan rooms"
have increased the availability of project information to
multiple users. Owners and general contractors are encour-
aged to investigate and implement web-based plan access to
maximize plan availability while minimizing cost.
Plan Deposits
In order for an owner to receive the best possible price on a
construction project, it is important that all bidders on the
project (prime contractors and subcontractors) have access
to the most accurate and complete plans and specifications.
It is in the interest of owners to provide sufficient sets of
drawings and specifications to permit all interested con-
tractors, subcontractors and material suppliers to prepare
accurate bids. Afee for the use of such plans, when added
to the contractors other estimating costs, can be a factor
limiting both quantity and quality of the bids on the project
since only successful bidders can recover these costs.
Deposits, not exceeding reproduction costs for the plans,
are reasonable. There should be a provision, however, for
prompt refunds in full to anyone who pays the deposits and
who submits a bid or sub-bid on the project and returns the
plans within 30 days after bid opening (if its bid was
unsuccessful) 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 for
plans to those material suppliers or bidders on smaller
subcontracts who wish a set of plans for their own exclu-
sive personal use, yet for whom plan room or borrowed
sets of plans would normally be adequate for careful bid
preparation.
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 bids
should 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 to
the prime bidder at least 24 hours before the bid time.
B.1
Guideline on Bidding Procedures
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 11
The scope letter should contain any information the prime
bidder needs to evaluate the sub bidders bid, including
its proposed scope, alternates, unit prices, addenda,
and/or bulletins to be included. The scope letter should
reference specific divisions or sections and specifically
identify any omissions or additions. Each sub bidder
should submit its final bid dollar amount and any neces-
sary clarifications to the prime bidder at least four hours
before the prime bidders bid hour. The prime bidder
should 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 divulged
to another prior to bid time, nor should it be used by the
prime bidder to secure a lower bid proposal from another
bidder on that project. A subcontract bidder or supplier
also should not request information from the prime bidder
regarding 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 those
responsible and responsive bidders, at all levels of the
project, which submit the low bids for their portions of
the work prior to bid time. Bids should not be held longer
than 60 days without an award being made.
Bid Errors and Adjustments
If, after bids are opened, a low bidder claims it has made
a material error in the preparation of its bid and can sup-
port such a claim with satisfactory evidence, it should be
permitted to withdraw its bid, without forfeiting its bid
security. Under no circumstances should a bidder be
allowed to adjust its bid price as a result of an error in its
bid. If the owner opts to re-solicit bids for the project, the
erring contractor should not be allowed to bid for the con-
tract, unless precluded by local, state, or federal law.
Some construction owners allow a low bidder who can
demonstrate an error in its bid to upwardly adjust its bid
price to the extent of the error. The low bidder will be
awarded the contract at the adjusted price so long as that
price, as adjusted, is still below that of the second low
bidder.
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 competitive
bidding and is an open invitation to abuse.
Use of the following procedures is recommended when a
bid error is discovered:
When an apparent low bidder discovers an error in
its bid price, it shall have the following options:
1. The low bidder may, at its option, confirm its
original bid price; or
2. The low bidder may withdraw the bid, without
penalty or forfeiture of bid security if it estab-
lishes that a valid computational or transcribing
error resulted in an unintentionally low bid, but
shall not be allowed to re-bid the job under any
circumstances.
The owner shall then have the option of awarding
the contract to the second low bidder or of re-solic-
iting bids for the project. In the event the project is
re-bid, the former low bidder shall not be allowed to
bid for the contract. Unless required by statute, no
adjustment in bid price should be allowed a bidder
as a result of an error in its bid.
If a subcontractor bid is so low in comparison with other
bids as to suggest clearly an error, the general contractor
should notify the subcontractor immediately that its bid
appears to be out of line. The subcontractor should either
withdraw or confirm its bid, but not modify it. The
American Society of Professional Estimators has pre-
pared even more detailed Bidding Procedures for
Competitively Bid Construction Projects. It is available
online at http://www.aspenational.com/
RecommendedBiddingProcedures.htm
Other references include:
Recommended Guide for Competitive Bidding
Procedures and Contract Awards for Building
Construction published by AGC and the American
Institute of Architects:
http://www.agc.org/contracts
http://www.aia.org/documents/
Recommended Competitive Bidding Procedures
Construction Projects published by the Engineers
Joint Contract Documents Committee:
http://www.asce.org
B.1 Guideline on Bidding Procedures
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 12
Proper project scheduling and avoidance of delays are
critically important. When the owner has decided to
include liquidated damages in the contract, or reserves the
right to pursue un-liquidated, consequential damages,
then the owners design team must become involved with
the pre-bid scheduling process, including the following:
Review critical lead-time items: e.g., steel, mechani-
cal equipment, electrical distribution equipment, etc.
Determine in advance (within the time constraints
available) that the major equipment and supplies can
be purchased and delivered (within the time con-
straints available).
Determine in advance that responsible marketplace
participants can deliver this type of project within
specified 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 for
bid (IFB) process go forward. To expect the construction
industry to meet the owners requirements without owner
implementation of the above action items allocates unrea-
sonable risks to the construction contractor and adversely
impacts project costs.
Contractor Review
The contractor review of the construction documents and
schedule must be a realistic assessment of the project to
provide critique and direction for the owner and design
team before the contractor completes the pricing process.
This review is essentially a marketing opportunity for the
contractor that is honest and up-front with the owner, and
comes prepared with the documentation necessary to back
up its assessment.
When the construction contractor bypasses this step, the
contractor assumes the risk of accepting a project that has
no chance of meeting the project schedule.
In addition, the major subcontractors and suppliers must
accept 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 subcontractor
bypasses this step, it assumes the risk involved in not
completing the project on schedule.
Schedule Documentation and Communication
Documentation of schedule and a communication plan
must be comprehensive. Every tier of contractor, subcon-
tractor and supplier must have access to complete plans,
specifications, and the project schedule to be fully
informed of risks involved in non-performance.
Any subsequent variation to the projected schedule must
be communicated up and down the project ladder.
Without this communication, significant risk in project
expansion or contraction is assumed by those who do not
communicate (see D.2.a.Communication).
Team Responsibilities
The design team accepts an enormous responsibility for
drawing review, submittal review, change order approval,
and the impacts of tardy review and return. Contractors
must assume the responsibility for timely submission and
its impact on the project schedule, but the design team
must provide its review in time to meet schedule guide-
lines.
The entire construction team must understand that each
member is responsible for its performance in the project
schedule. Any hitch or stumble affects the entire process
and creates risk for claims by downstream contractors.
Project expansion and contraction are two of the risks
involved.
Project Closeout
Project closeout and delaying the processing of change
orders 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 their
payment while the paperwork for changes they were
directed to complete is delayed. While the owner may be
using the building, the construction contractor incurs an
increased financial burden, possible claims for non-pay-
B.2
Guideline on Project Scheduling, Delays,
and Liquidated Damages
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 13
ment on change orders and potential litigation (see D.5.a.
Closeout, D.3.c. Consequential Damages, and D.3.k.
Retainage).
Team Relationships
Utilizing project relationships to the detriment of a team
member of one project in the hope of winning a future
project 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, a
quality 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 owners
project (see C.2. Partnering).
B.2 Guideline on Project Scheduling, Delays and Liquidated Damages
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 14
So-called "scope" bidding has proliferated in recent years
in relation to traditional competitive bidding. On the one
hand, the concept has introduced flexibility in contract
administration that is useful and desirable. However, the
concept has also introduced an uncertainty and an
extreme risk to contractors and subcontractors by imply-
ing responsibility and liability for added work under the
"scope" concept which the contractor and subcontractor
could 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 stamp
on the plans or specifications that has many variations,
with infinite interpretations. One example is:
Scope Document
This document indicates the general scope of the
project in terms of architectural design, the dimen-
sions of the building, the major architectural parts
and the type of structural, mechanical, and electri-
cal systems. This document does not necessarily
indicate or describe all work required for full per-
formance and completion of the Contract
Documents. On the basis of the general scope indi-
cated or described, the contractor shall furnish all
items required for the proper execution and com-
pletion of work. Decisions of the architect, as to
the work included within the scope of this docu-
ment, shall be final and binding on the contractor
and 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 contract
document, owner-users, architects, engineers, contractors
and 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 and
engineer are responsible for design but plans and specifi-
cations do not cover every item necessary for a complete
project. It is recognized that, in practically all areas of
plans and specifications, every single item of construction
material and technique cannot be delineated. It is reason-
able to require the providing contractor, as part of its
work, to include those items which are part of its trade
and 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 cover
a multitude of changes and additions on the basis that
they come within the definition of the "scope," are
unwarranted and should be rejected. Design and design
changes for a project should be the sole responsibility of
the 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. Design
Responsibility).
Guideline Details
1. Performance specifications or scope criteria should not
be used in the award of competitively bid contracts for
public buildings. Scope and performance criteria do not
generate the best competitive bidding among contrac-
tors nor do they provide the awarding authority with
sufficient means for accurate and fair comparison of
proposals received.
2. Where "scope" plans and specifications are a part of
the project documents, each contractor should provide
the following:
a. All material and equipment of standard quality,
whether specified or not, and within the limitations
of the architectural, structural, mechanical and elec-
trical drawings and specifications, to cause the
installation to function in accordance with the inten-
tion and objective of the finished project. The origi-
nal intention should be specifically set forth in the
documents.
B.3
Guideline on Scope Bidding for Private Work
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 15
b. All material necessary for equipment to function in a
normal and acceptable peculiar or particular type
manner, unless that equipment is of a manufacture
which requires singular, unique or special installa-
tion devices or techniques. In that case, it should be
the obligation of the architect/engineer to specify
those requirements.
c. All work required to cause its operations to fit and
coordinate with others, causing the other trades no
added cost, subject to the limitations of the structure
as shown on plans.
d. All work required to comply with governing codes
with respect to its activity, except for design criteria
involving 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 equipment
in order to utilize the specified capacities of the
equipment.
3. The contractor should not be required to provide the
following:
a. Material or equipment not specified to be furnished,
unless required for normal functioning of the system
or to comply with the original stated intent.
b. Changes in location of equipment, materials and
facilities due to alterations in architectural concept
and design.
c. Changes in sizes, capacities and locations of compo-
nents of the installation due to modifications of the
building or its components.
d. Determination of capacities and sizes, unless made a
part of bidding and contract requirements, and the
furnishing of equipment to satisfy those capacities.
e. Basic design changes to meet applicable codes and
ordinances, including but not limited to, added
stairs, exits, added sprinklers, fire protection or
changes 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 the
word "scope" may be avoided.
B.3 Guideline on Scope Bidding for Private Work
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 16
Bid shopping and bid peddling are abhorrent business
practices that threaten the integrity of the competitive bid-
ding system that serves the construction industry and the
economy so well.
The bid amount of one competitor should not be divulged
to another before the award of the subcontract or order,
nor should it be used by the contractor to secure a lower
proposal from another bidder on that project (bid shop-
ping). Neither should the subcontractor or supplier
request information from the contractor regarding any
subbid in order to submit a lower proposal on that project
(bid peddling).
An important, but often unrecognized, business asset of
the construction contractor is its proprietary information.
Proprietary information includes the price, the design or
novel technique, or an innovative approach used in
preparing a proposal.
The preparation of bids, proposals, submissions or
design-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 that
is provided with an expectation that such information will
be kept confidential.
B.4
Guideline on Bid Shopping & Bid Peddling
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 17
The advent of alternative project delivery methods requir-
ing greater project communication levels, utilization of
new and emerging technologies such as project collabora-
tion software, and frequent owner insistence on shorter
project schedules, have increased the likelihood that proj-
ect team members, especially contractors and specialty
contractors, will be expected to receive and exchange
contract documents or other project information and data
in electronic form. Important notices, submittals, plan
changes, and other crucial documents are frequently
transmitted by means other than the U.S. mails or private
mail carriers, such as by posting to project-specific web
sites or FTP (file transfer protocol) sites. Often, the par-
ties neither have discussed any issues relating to the
exchange in advance, such as costs, safeguards and main-
tenance responsibilities, nor, in turn, addressed such
issues in their project agreements. Without careful consid-
eration of such issues, project parties exchanging elec-
tronic documents and data risk misunderstandings,
delays, additional costs and even increased liability.
Current industry standardized forms neither address these
issues in any detail, nor permit contractors and subcon-
tractors to make use of electronic documents or data that
are provided to them without considerable risk of liabili-
ty. For example, EJCDC C-700, Standard General
Conditions of the Construction Contract, 2002 Edition,
Subparagraph 3.06 Electronic Data, in part states:
A. Copies of data furnished by Owner or Engineer
to Contractor or Contractor to Owner or Engineer
that may be relied upon are limited to the printed
copies (also known as hard copies). Files in elec-
tronic media format of text, data, graphics, or other
types are furnished only for the convenience of the
receiving party. Any conclusion or information
obtained or derived from such electronic files will
be at the users sole risk. If there is a discrepancy
between the electronic files and the hard copies, the
hard copies govern
In the above provision, all risks are assumed by the recip-
ient of the electronic information, which in most cases is
the contractor. In effect, the provision establishes a prac-
tice where the contractor may receive electronic informa-
tion but may rely on it solely at his or her own detriment,
a practice counterintuitive to facilitating and expediting
document and data exchange, and out-of-step with pres-
ent industry communication and collaboration needs.
Moreover, in many instances where design professionals
do forward documents in electronic form to contractors,
such documents often are accompanied by statements dis-
claiming accuracy and completeness or exculpating or
limiting the design professionals liability. Such language
requires a conscious decision on the part of contractors
and specialty contractors to decide whether they are will-
ing to accept such documents in electronic form, thereby
increasing their potential liability, or if they would be bet-
ter served by waiting for the hard copies. A more bal-
anced approach would permit a standard of reasonable
use of electronic documents and data by project parties.
To that end, parameters governing electronic document
exchange would be described and agreed on in a written
protocol incorporated in or attached to the parties con-
struction agreement. Key to the successful exchange pro-
tocol is an agreement that clearly defines ownership,
management, and security responsibilities of the informa-
tion transfer. Such a protocol, at a minimum, should
address in detail the following points:
Identification of one party to manage the exchange
process, including responsibility for providing and
coordinating notifications.
Identification of an individual or individuals within
each firm or company responsible for compliance
with document exchange protocols.
The definition of documents to be accepted in elec-
tronic form and/or transmitted electronically, includ-
ing a specific listing of such documents for the proj-
ect (e.g., drawings, shop drawings, change orders,
requests for information, etc.).
The parties listing of, and responsibilities for com-
pliance with, equipment, software and services
impacting the transmission, receipt and/or utilization
of electronic documents and data (including any
prohibitions on or cautions as to utilization of differ-
ent operating systems or translation programs and any
equipment and software upgrading expectations).
B.5
Guideline on Exchanging Documents and Data in
Electronic Form
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 18
Document transmission standards, such as accept-
able formats, transmission methods and verification
procedures.
Identification of third-party providers, if any, with
copies of governing agreements/licenses.
Methods for maintaining version control of electronic
documents, including a depository of record copies of
transmitted and received electronic documents.
Specific privacy and security requirements.
Storage and retrieval requirements for electronic
documents and data.
Reciprocal indemnity obligations for violations of
the exchange agreement.
Applicable insurance requirements, if any.
During bid preparation, the parties should review their
respective construction documents relative to any
exchange agreements. Among the subjects for careful
review are the following:
They should assess whether provisions governing
ownership of documents are consistent with the pro-
visions of the exchange agreement, and that require-
ments for similar agreements and protocols are in
place with lower-tiered subcontractors and suppliers.
The parties should review contract provisions in the
design and construction agreements that address the
line and flow of communications among the project
parties to assess if such provisions need modifica-
tion in appropriate, limited circumstances to permit
direct communications among parties not in contrac-
tual privity, such as the principal design professional
and a specialty contractor performing a portion of
the design. In such circumstances, contemporaneous
notification of such communications or exchanges
should be given to the parties otherwise in the line
of communications.
Contractual reporting requirements for known or
observed errors or omissions in contract documents
should be reviewed to ascertain if they are adequate
and consistent given the potentially increased pace
of electronic document exchanges.
Confidentiality provisions should be reviewed for
consistency with similar requirements in exchange
agreements.
Rapid advances in technologies and the uniqueness of
each project will require parties to continually review and
assess the adequacy of their electronic document
exchange protocols and agreements. Although such agree-
ments cannot prevent errors in every instance, they do
give the parties assurance that they may reasonably rely
on documents and data transmitted electronically to per-
form their project services, so long as they comply with
clearly established protocols. With appropriate protections
in place, project participants may reap the productivity
gains and time savings offered by emerging project tech-
nologies.
B.5 Guideline on Exchanging Documents and Data in Electronic Form
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 19
Volatility of construction material and equipment costs is
greater now and in recent years than has previously been
the case. The combination of raw material and natural
resource scarcity, burgeoning infrastructure, commodity
and construction demand in the Far East and elsewhere,
and unpredictability of world political stability (and ship-
ping infrastructure too) argues for ever greater vigilance
in commodity purchasing and price commitments in pro-
curement planning for fixed-price construction contracts.
With volatility emerging as the norm in the 21st Century,
fair contract risk allocation will more frequently require
an equitable cost adjustment clause in fixed-price con-
struction contracts, as the most specific way to adequately
address an otherwise uncontrollable and unforeseeable
risk factor.
Cost adjustment escalation clauses set the basic parame-
ters for the foreseeable range of price fluctuation by a set
baselineeither actual costs, catalog prices, or common
price indexes. Shared risk of volatility beyond that range
is then allocated between the contracting parties. The
shared risk approach to either exceptional increases or
decreases in price can help eliminate bid contingencies,
avoid defaults and delays mid-project, for the benefit of
all parties and the project as a whole.
Force majeure and contract impossibility defenses are not
adequate to address the problem. Volatile price adjust-
ment clauses operate in the same way as common unfore-
seen site conditions clauses, by allocating uncontrollable
and unknown risk equitably, rather than putting all the
risk on just one party, subjecting the owner and the proj-
ect to price contingencies based on that unbalanced risk.
Cost adjustment clauses address material cost volatility
and unavailability in a way that is much more specific
than a standard force majeure clause. Force majeure
clauses (superior force, acts of God,) and contract impos-
sibility defenses are limited to very extraordinary extrane-
ous events, often are subject to very narrow interpretation
by courts, and may be limited to time extension remedies
only.
Fixed-price contracts with [an] economic price adjust-
ment should be used, when: (i) there is serious doubt
concerning the stability of market or labor conditions that
will exist during an extended period of contract perform-
ance, and (ii) contingencies that would otherwise be
included in the contract price can be identified and cov-
ered separately in the contract. Price adjustments based
on established prices should normally be restricted to
industry-wide contingencies. Price adjustments based on
labor and material costs should be limited to contingen-
cies beyond the contractors control.
The Federal Acquisition Regulation, ConsensusDOCS
and the American Institute of Architects contract docu-
ments all have prescribed methods to address these chal-
lenges.
Note: Contracting parties should scrupulously avoid any
claims for costs not actually incurred, as False Claims Act
provisions are strictly enforced and sanctions for viola-
tions are severe.
Note: As a private-sector form document, such percent-
age limits an adjustment must be left to the negotiations
among the contacting parties.
Actual costs, catalog prices or common published indexes
can all be used to set the baseline for cost adjustment
clauses. ENR publishes a series on common construction
material cost indexes. (Go to: www.enr.com). Also,
The U.S. Department of Labors Bureau of Labor
Statistics publishes a very comprehensive set of
Construction Material producer price Indexes along with
a comprehensive guide on the subject, Escalation and
Producer Price Indexes: A Guide for Contracting Parties.
(Go to: www.bls.gov/ppi.home).
Influential public and private contracting policy docu-
ments have been responsive to these trends and risks.
For further reference:
ConsensusDOCS www.consensusdocs.org
American Institute of Architects Supplementary
Conditions www.aia.org
FAR Contract Clause (Part 52-216-4)
B.6
Guideline on Volatile Price Adjustment Clauses
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 20
Building Information Modeling (BIM) is a tool that
enables the construction industry to more efficiently oper-
ate in new and increasingly expeditious ways. Initially,
BIM and 3D models have primarily helped eliminate
design conflicts with far more efficient coordination.
Other benefits of BIM include the following:
Project scheduling and the concept of 4D
(3D+Schedule), in which time considerations are
inserted into the modeling process. With manpow-
er loading inserted into the scheduling portion of the
model, the project team will be able, on a long term,
look ahead basis, to observe and plan to the detail
on a daily (perhaps eventually even hourly) basis.
Estimating and quantification when 5D
(3D+Schedule+Cost) concepts are incorporated
with the BIM process. As the 3D model is devel-
oped, a materials quantity report is instantaneously
available. Further, depending on the sophistication
of the software, pricing information could also be
instantaneously generated.
The speed of shop drawing development and the
associated coordination between all trades.
Simply put, with 3D, it is realistic to envision that
shop drawings could be developed simultaneously
as the design unfolds. Thus, the issued for con-
struction model is just thateliminating the need
for approvals and submittal turnarounds, as that
process will already have been accomplished during
the design period.
Request for Information (RFIs) will be signifi-
cantly reduced during field construction due to
the enhanced coordination and conflict reduction
with the use of 3D.
Accurate as-built drawings are available immedi-
ately at the close of construction with the use of
BIM and a 3D model. The 3D model, as it is
updated throughout the project duration, actually
represents in electronic format the physical design
and construction of the project throughout all trades.
The use of BIM and 3D modeling allows for the
optimization of lean construction techniques and
principles. This will lead to the potential for
increased prefabrication, the minimization of waste
in both the shop and the field, the reduction of field
interferences and collisions, and a general increase
in productivity at all stages of the project.
As the use of BIM accelerates within the design and con-
struction industry, it will lead to a revolution in project
delivery. Many are already referring to this revolution as
leading to the fully collaborative project team. The theo-
ry of full collaboration generally envisions the entire proj-
ect team: Owner, Architect, Engineers, Consultants,
GC/CM, and Specialty Contractors being involved from
the projects inception by sitting together at one table in
developing the project design. Essentially the team con-
structs the project electronically in 3D with the use of
BIM. This full collaboration allows for increased speed
of project delivery, enhanced economics for the project,
and true lean construction all levels not historically expe-
rienced in our industry. However, in order to make this
collaboration truly successful, the interoperability of BIM
software is essential for all parties involved in the project.
Useful resources in the implementation of BIM into con-
tracts is the ConsensusDOCS 200.2 (Electronic
Communications Protocol Addendum) and the
ConsensusDOCS BIM Addendum.
Key aspects of the ConsensusDOCS BIM Addendum
include:
Maintaining the contractual relationships and risk
allocation among the project participants unless oth-
erwise specifically stated in the contract.
Maintaining the Architect/Engineers obligation and
role as the person responsible for and in charge of
the design of the project.
Participation of the contractor or its subcontractors
and suppliers in contributions to a model shall not
constitute the performance of design services.
In general, a design model is not intended to provide
the level of detail needed in order to extract precise
material or object quantities.
The design model shall take precedence in the event
of a conflict between any other design models.
B.7
Guideline on Building Information Modeling (BIM)
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 21
Each party shall be responsible for any contribution
that it makes to a model or that arises from that par-
ties access to the model.
While this is a brief overview of the BIM process and
benefits, other information can be found on the following
websites:
Associated General Contractors of America (AGC)
BIMForum www.bimforum.org
ConsensusDOCS 200.2 and BIM Addendum
www.consensusdocs.org
BuildingSmart Alliance
www.buildingsmartalliance.org
National Building Information Model Standard
www.facilityinformationcouncil.org/bim
American Institute of Architects (AIA) Integrated
Practice www.aia.org/ip_default
B.7 Guideline on Building Information Modeling (BIM)
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 22
Conference time and participation
The best time for the preconstruction conference is after
all subcontracts have been awarded but before the begin-
ning of actual construction. This timing will permit the
important details discussed at the conference to become a
background for understanding the intended operational
plan among members of the project team.
It is essential that all members of the project team attend
the conference. The presence of the owner will enable it
to better appreciate the potential operational problems
encountered by the team on the project. This procedure
will aid the total building team by:
Providing greater insight on specific owner needs.
Helping the architect to secure and translate team
cooperation into a quality job consistent with the
scheduled time and costs.
Preconstruction conference
The preconstruction conference is a practical forum in
which problems of economic waste and disruptive con-
struction problems can be discussed and prevented. The
conference is designed to benefit all concerned parties by
recognizing the responsibilities for various tasks before
the project is begun. The benefits are as follows:
1. Recognition and elimination of delays and disagree-
ments.
2. Establishment of agreements that curb increases in
construction 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 a
construction 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 one
of the conditions of the contract documents. This action
will emphasize the importance of the conference.
Purpose
The primary purpose of the conference is to establish
acceptable ground rules for all parties concerned, and to
assure that each party understands the complete job require-
ments and coordinates its work to produce a completed job
in a minimum amount of time, with maximum economic
gains, and in proper coordination with the owner, architect,
engineer, prime contractor, and all subcontractors. The pre-
construction conference is primarily concerned with man-
agement and operational considerations. It is in these areas
of contract interpretation and clarification that the greatest
value of the preconstruction conference can be achieved.
Topics for discussion
The preconstruction conference should be scheduled to
permit sufficient time to cover the total agenda. Topics
for discussion typically depend upon the nature, size and
complexity of the project. It is, however, necessary to
assign priorities. Although each job is different, certain
factors are common to all types of construction.
Agenda for a typical preconstruction conference
1. Progress payments. When, how, and to whom, in exact
terms, stated clearly so that no question exists about
billing and payment requirements and responsibilities.
This should also apply to the areas of retention and
final payment (see D.3.f. Prompt Payment).
2. The form for payment requests. For a suggested form,
see E.2 Appendix "Subcontractors Application for
Payment." Are the suppliers waivers required? Is it
possible that waivers can be one payment behind; that
C.1
Guideline on Preconstruction Conferences
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 23
is, can a waiver for a particular request be submitted at
the time the next request is presented?
3. Payroll reports. The requirements, if any, for payroll
reports and accidents.
4. Shop drawing and sample submittal data including pro-
cedures for submittal, review, and approval. The form
in which data is to be submitted. The number of copies
required and the number to be returned; the type of
approval, e.g., "approved," "approved as noted,"
"approved as noted-resubmit," "rejected," etc.
5. Requirements, if any, for interference and/or composite
drawings. Who initiates them and what will be the
order of progression of these drawings; what is the
impact on time for performing the work if composite
drawings are required?
6. Insurance requirements.
7. Job progress scheduling. A preconstruction conference
provides an opportunity for the essential involvement
of subcontractors in the development and correlation of
the individual schedules that make up the construction
schedule. Many large projects are conducted with an
overall schedule, using the CMP (Critical Path Method)
or the PERT (Project Evaluation Review Technique)
systems. Such scheduling is most effective when it is
thoroughly understood by all parties.
8. Site logistics. Many utility and other services are
essential to the construction process but do not form a
part of the finished product. Under the uniform system,
the specifications related to this scope are spelled out
under "General Requirements"; under other systems the
requirements 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 that
should be covered).
9. Change orders. Since change orders are responsible for
more disputes than any other single aspect of a con-
struction project, they should be discussed in complete
detail (see D.3.d. Procedures for Change Orders).
Typical items for discussion include:
a. Percentage mark-ups for overhead and profit to be
applied to change orders; what costs will or will not
be included in the change order price.
b. Length of time that a change order proposal price is
to be considered firm.
c. Determination of the individual(s) authorized to
approve change orders.
d. Procedures to be followed when submitting change
order proposals.
e. Change order forms to be used. American Institute of
Architects, general contractors, subcontractors,
others.
f. Time extensionrequests 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. Overtimedue to change orders. Consideration of
decreased productivity (see D.3.i. Overtime,
Construction Costs and Productivity).
i. When materials or equipment are to be removed due
to a change, who owns it, and who removes it from
the site of the job?
j. Responsibility for as-built drawings brought about
due to change orders.
k. Acceptance and payment. Consideration of methods
for achieving expeditious acceptance and prompt
payment.
10. Warranty requirements. Since damage or defects
caused by abuse, modifications by others, improper
or insufficient maintenance, improper operation or
normal 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 timely
punch 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
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 24
16. Commissioning protocol to develop consensus as to
the extent, timing and procedures for commissioning
of 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 understanding
can the necessary planning and work proceed without
conflict or costly dispute. The preconstruction conference
is a practical means toward this end.
C.1 Guideline on Preconstruction Conferences
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 25
Construction contracting is a very high-risk business.
Intense competition, coupled with occasional, unfortunate
misperceptions of conflicting objectives among owners,
contractors, architect/engineers, subcontractors and sup-
pliers, can set the stage for adversarial and unrewarding
relationships. Litigation, with all of its negative impact, is
counterproductive to the mission of every construction
team member to profit while producing quality projects
on time and within budget.
In order for a construction project to be deemed success-
ful, all the members of a construction team must work
together to:
Emphasize cooperation and clearly define common
objectives.
Recognize the respective roles and inherent risks of
other 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 and
process called Partnering. Partnering is a strategy for
building relationships based on trust, honesty, and
respect. Partnering is a proactive process aimed at pre-
vention prior to dispute. For Partnering to have its most
effective results, all construction team members should
participate in the development of the Partnering strategy
for the project. A Partnering workshop should be conduct-
ed during the early stages of the contract process.
The key elements of Partnering are embodied in the 3Cs:
Commitment, Communication, and Conflict Resolution.
To ensure Partnering success, the following concepts
should be considered and incorporated into the process:
Commitment Commitment to Partnering must come
from 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 evolution
of the framework of the partnership charter.
Equity Every stake holders interests must be consid-
ered in creating mutual goals. There must be a commit-
ment to satisfying each stockholders requirements for a
successful project by utilizing win/win thinking.
Development of Mutual Goals/Objectives At a
Partnering workshop, the stakeholders should identify all
prospective goals for the project in which their interests
overlap. These jointly developed and mutually agreed to
goals may include achieving zero injuries during construc-
tion, value engineering savings, meeting the financial
goals of each party, limiting cost growth, limiting review
periods 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 develop
strategies for implementing their mutual goals and the
mechanisms for solving problems.
Continuous Evaluation In order to ensure implementa-
tion, the stakeholders should agree to plan for periodic
joint evaluation based on the mutually agreed to goals.
This will ensure the plan is proceeding as intended and
that all stakeholders are carrying their share of the load.
Timely Responsiveness Timely communication and
decision making will not only save money but can also
keep 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 of
defensive case building.
Lower risk of cost overruns and delays because of
better 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 disputes
and withheld payments.
Improved decision making that helps avoid costly
claims and saves time and money.
C.2
Guideline on Partnering
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 26
Enhanced role in decision making process as an
active team member.
Increased opportunity for a financially successful
project because of a non-adversarial win/win atti-
tude.
Improved long-term relationships between team
members for future projects.
The Partnering Process
Because every project is unique and the particular stake-
holders for each project will vary, the process should be
tailored by and for the stakeholders for each project. A
partnering process can be developed for any type project
and any size project.
The following is a model to guide the Partnering process.
1. Educate Your Organization. Whether you are an
owner, contractor, subcontractor or supplier, you
should educate your own organization about Partnering
before attempting a project using the concept.
Understanding and commitment are essential.
2. Make Partnering Intentions Clear. The owners
intention to encourage Partnering may be mentioned in
the project solicitation advertisement and specifica-
tions. The provision should emphasize the voluntary
nature of Partnering and that the costs associated with
implementing it would be shared. The pre-bid confer-
ence may include a presentation of Partnering. In the
context of a negotiated contract for private work, the
contractor may propose the use of Partnering. In public
works contracts, the contractor can propose and initiate
a Partnering agreement after the award because the
Partnering process does not change the contract.
3. Commitment from Top Management at the Start.
Following the award, the owner or the contractor can
request a meeting at the chief executive officer level to
discuss the Partnering approach to managing the proj-
ect and the CEO role. Commitment at this level is
essential for Partnering to achieve its potential. Upon
agreement, each entity will designate a Partnering
leader. These leaders will meet at a neutral site to get
to know one another as individuals and to plan a
Partnering workshop.
4. The Partnering Workshop. As soon as possible,
before problems arise, all key construction team mem-
bers should participate in a Partnering workshop, again
at a neutral site away from the job site and outside of
the respective corporate cultures of the various stake-
holders. Key team members from each stakeholder
organization at the workshop are those who actually
will be involved in contract performance and those with
decision making authority. They might include the con-
tractors area manager, project manager, superintendent
and project engineer; the architect/engineers chief
designer, construction administrator and consultants;
subcontractors project managers or superintendents;
the owners manager or representative; and, depending
on the project, special participants such as a representa-
tive from a testing laboratory or a key public official.
Larger projects might utilize a facilitator, as discussed
below, but a facilitator is not essential to the concept.
While partnering workshops are most effective at the
beginning of a new project, project relations and prob-
lem solving can be improved even midway on a proj-
ect.
a. Creation of a Partnering Charter. The mutually
developed objectives form the basis for the
Partnering charter. In this process the team members
get to know one another and develop team attitudes
rather than we/they or "us/them" attitudes. The
charter not only is a symbol of the stakeholders
commitment to Partnering, but also can be used as a
scale against which the implementation of the
process can be evaluated. The ceremonial signing of
the charter after the personal interaction necessary
for the development of mutual goals is an important
formalization of the bonds among all stakeholders.
This charter should be communicated throughout
the project and to all participants including other
organizations not directly involved with the charter
development. The charter should also be communi-
cated within each organization, especially to key
managers who may join the project team after the
charter has been finalized.
b. Development of an Issue Resolution Process. In
the workshop, the partners design systems for resolv-
ing issues on the project. They decide how issues
that are not resolved at their level will be escalated
to the next level of management in a timely manner
so that the decision-making process becomes more
efficient and costly delays are avoided.
C.2 Guideline on Partnering
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 27
c. Development of a Joint Evaluation Process. In
Partnering 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 which
everyone feels they can express their ideas and con-
tribute to the solution. Risks and potentially difficult
areas of the contract should be discussed openly.
Team members should be made aware of the poten-
tial for value engineering. Understanding other
stakeholders risks and concerns and seeing where
ones portion of the contract fits in relation to other-
s help to build the essential team attitude.
e. The Facilitated Workshop. Although not essential
to the process, a neutral facilitator can be very help-
ful in organizing the workshop agenda and provid-
ing training in conflict management, listening and
communication skills, as well as insights into indi-
vidual problem solving styles. Whether to use a
facilitator is a business decision to be made jointly
by all stakeholders. A qualified facilitator is particu-
larly valuable in initial Partnering experiences to
help develop comfort and confidence with regard to
the effective implementation of the Partnering pro-
gram.
Summary
Partnering is a challenging endeavor with lofty goals. It is
not a panacea. The participants must be committed to
change and to working in a team environment which
stimulates win/win relationships.
Successful construction projects do not simply happen;
they are made to happen. The essence and spirit of
Partnering is a winning strategy to make construction
projects successful.
Partnering has the potential to change our industry, one
project at a time!
C.2 Guideline on Partnering
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 28
The purpose of this guideline is to describe the sequence
and schedule of work, and to establish project criteria for
managing the work and responsibilities of all trades. This
guideline will allow contractors the opportunity to define
the job conditions and sequencing necessary to complete
their work in a timely and productive manner. It will also
assist the general contractor in determining the responsi-
bility of those contractors whose actions fail to properly
maintain a sequenced project schedule.
Definitions
Sequenced Project Schedule: A preliminary depic-
tion of project activities in sequential order that
identifies the critical path controlling project dura-
tion.
Critical Path: The longest sequence of project
activities that has no float and therefore determines
the actual completion date.
Float: Amount of time an activity finish can be
delayed without delaying the follow-on activity or
the total project completion.
Why plan and sequence project schedules?
To provide an aid to visualize the parts of the proj-
ect and identify conflict and problems before they
occur.
To communicate the project schedule plan.
To facilitate better time management.
To permit identification of activities most critical
to timely project completion.
To develop documentation of scheduled, and com-
pleted, work.
To allow for more efficient use of people and equip-
ment, minimize unproductive time, and promote
equal level of commitment from all participating
parties.
When should a contractor develop a
sequenced project schedule?
A "general" schedule for major trades should be part
of all projects.
For bid projects, scheduling should occur well
before any work starts, with the possible exception
of preparatory site work, such as grading.
A "detailed" schedule should be provided "up front"
for negotiated projects.
What information should be included in the
sequenced project schedule?
Project and task durations and milestones (e.g.
delivery dates for critical material and equipment).
Responsibility for various tasks (owner, designer
contractor, subcontractor, or vendor).
Design tasks.
Plan and permit review and acquisition.
Pertinent codes and building regulations.
Submittal review, response and procurement activi-
ties.
Establish start and completion times for each task
and provide an estimate of project completion date.
Effects of weather, other project conditions.
Inspection, punch list, and closeout activities.
Integration of the schedule with milestones and
known or anticipated time constraints and impedi-
ments.
Building project sequencing into a schedule
Assign a competent scheduler.
The scheduler should be familiar with all of the var-
ious trades and be able to communicate with each
trade.
The schedule should receive input and support from
all stakeholders.
Break the project down to discrete activities, estab-
lish the necessary and logical sequence of these
C.3
Guideline on Sequenced Project Schedules
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 29
activities, and represent the plan with a diagram or
chart.
Particular attention needs to be given to timely
receipt and approval of shop drawings, submittal
data and procurement times.
Determine duration, start and completion time for
each activity.
Determine early/late starts including the possibili-
ty of float.
Seek input for alternate sequencing in case problems
arise.
Consider alternate resources for labor and equip-
ment, and the adjusted costs for each activity
(resource loading).
Communicate the sequenced project schedule
Distribute the sequenced project schedule to all
project participants and identify critical path items.
Confirm all participants understanding of the
sequenced project schedule and obtain each partys
agreement to accept the agreed-upon schedule.
Monitor the progress of the job and compare with
the target schedule, and take corrective action if
required.
Summary
All parties will clearly benefit from the development and
implementation of sequenced schedules. Schedule devel-
opment will help guide the contractor through the
sequencing process, force the identification of what activ-
ities must be accomplished and identify who is responsi-
ble for each phase of the project and its schedule.
Conflicts or problems can be discovered before they
occur, enabling the contractor to avoid them or prepare
alternate solutions.
Remember that success will only be achieved if ALL par-
ties are committed to the creation of a properly sequenced
project schedule. Participation in the development of the
sequenced schedule and its implementation are impera-
tive for a successful project. In view of increased owner
awareness and enforcement of liquidated damages, proper
project scheduling and avoidance of delays are critically
important.
For more information on scheduling, see A.1. General
Contractor-Subcontractor Relations, B.2. Project
Scheduling, Delays and Liquidated Damages, and C.1.
Preconstruction Conferences.
C.3 Guideline on Scheduling
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 30
Overview
Providing the necessary facilities and services to support
successful project delivery is sometimes overlooked or
put low on the priority list when bidding or setting up a
project.
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 by
contractors and subcontractors in discussing job site con-
ditions relative to safety, temporary job utilities and tem-
porary services. Such discussions may help eliminate
misunderstandings and promote cooperation among the
members of the construction team. When adequate identi-
fication of temporary services is provided and logical
assignments of responsibilities are made, the costs of
such services may be adequately covered in contract
arrangements. This guideline is a comprehensive outline
of key issues to be considered and should be adapted to
local conditions, preferably by local industry liaison
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 the
organization of the contract documents, the scope of the
work of contracting parties who would ordinarily estab-
lish and maintain the services, and any jurisdictional divi-
sions of work that may exist. The following general
guidelines are suggested:
1. Each employer whether it be general contractor, prime
contractor or subcontractor shall be separately respon-
sible for all specific safety requirements promulgated
by any governmental authority, including without limi-
tation, the requirements of the Occupational Safety and
Health Act of 1970, as amended ("OSHA"), and all
standards and regulations which have been or shall be
promulgated by parties or agencies which administer
the Act. With respect to the requirements of OSHA,
each contractor and subcontractor is responsible for the
acts of its employees and for appropriate recordkeeping
and reporting.
2. Specific timing for the availability of each temporary
facility should be established during the preconstruc-
tion conference (see C.1. Preconstruction Conferences).
Before the established times, each contractor or sub-
contractor should satisfy its own requirements for such
services.
3. The contract documents prepared by the architect and
engineer should clearly indicate the location of existing
on-site and off-site utilities, and, where applicable, the
quantity 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 by
reviewing:
Your contractual responsibilities
Responsibilities of the owner, CM/GC, GC or other
participants
When determining the responsible party, the appropriate
specification section can be utilized and modified to fit
project specific requirements. After determining your
contractual responsibilities, a plan can be developed by
using the guideline below supplemented by project spe-
cific requirements, including who is to pay the temporary
services costs.
1. Access
The general contractor should provide an adequate access
and/or roads to the site of the structure, if required. The
general contractor should maintain onsite road conditions
to allow for easy access around the project and for a min-
imization of debris being tracked into the buildings or
carried offsite by traffic. The general contractor should
also provide and maintain at least one temporary or per-
manent access to each working elevation which is to be
permanently occupied.
a. Familiarize yourself with the area surrounding the
project (including visiting the project site if possi-
ble).
b. From what direction will most construction traffic
come?
c. How will nearby businesses, schools, or other facili-
ties be impacted?
C.4
Guideline on Site Logistics
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 31
d. Are there any overhead utilities that will impede
deliveries or cranes?
e. What type of onsite traffic flow is optimal to support
your plans for the project?
f. How many access points are needed and who will
develop the traffic flow on and off the site?
g. Is a truck wheel wash or other method required to
clean vehicles tires prior to leaving the project site?
h. How will access be provided to each level of any
structures?
i. Review your plan with the appropriate project organ-
izations and with local officials as required.
2. Hoisting Facilities
The general contractor and individual subcontractors
should be responsible for providing hoisting of their own
materials on construction of (fill-in based on grade state
or local practice) floors or less above. A tower hoist or
other 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 contractor
on construction more of than (fill-in) floors.
Subcontractors should conform to a mutually agreeable
schedule during normal working hours. Hoisting facilities
should be maintained until the bulk of all materials are
stored in the building. When materials exceed the capaci-
ty of normal hoisting facilities in either size or weight, or
demand excessive time, the individual subcontractor
should be required to make its own arrangements. When
the magnitude of the work force and the height of the
work requires, a suitable personnel elevator or man lift
should also be provided by the general contractor.
OSHA compliance for all hoists, conveyors, and elevators
on the job site is the responsibility of the installing con-
tractor. Maintenance of the facilities in compliance with
the 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 and
perimeters, and stairways installed and/or constructed by
its own forces. If movement of these protective facilities
is required for the subcontractor to perform its work, it
should be the responsibility of that subcontractor to give
prior notification to the general contractor and to replace
same in satisfactory manner.
4. Security
a. Does the project require security fencing?
b. Will you be interfacing with or subject to existing
client security plans? If so, familiarize yourself with
the requirements and determine any impact to your
personnel and plan.
c. Does the project require off-hours security patrols
and/or staffed gates?
d. Locate adequate gates to support traffic flow.
e. Determine who will be responsible to open and close
gates to support work hours.
f. Will the security plan require modification throughout
the 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 offsite
parking and logistics for getting workers to and
from the site. Review local labor requirements for
terms related to offsite parking and travel time for
additional cost impacts.
6. Safety Orientation/Training
a. Determine what type of safety training will be
required (see D.1.a. Project Safety and Health).
b. Determine who will provide the training:
i. CM/GC or GC.
ii. Your company or outside resources.
iii. Client (for interfacing with their facili-
ties/operations).
7. Trailers/Shantys
a. What are the space needs for your staff and subcon-
tractors?
b. Determine a location for your trailers/shantys (Can
you use existing ones or other existing structures
instead?)
c. Locate utility connection points (see Section 9 below).
C.4 Guideline on Site Logistics
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 32
8. Break/Lunch Facilities
a. What are the local requirements for break/lunch
facilities?
b. Determine peak headcount for your employees.
c. Determine your space requirements (25sf/person
average).
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 on
the job site.
a. What are the local requirements for facilities?
b. If flush toilets and running water are required, locate
facilities to minimize utility runs.
c. Provide separate facilities for men and women as
needed.
10. Storage Facilities
The general contractor should coordinate the allocation of
storage areas to the various subcontractors.
a. Determine lay-down, storage, staging requirements.
b. Will there be any onsite storage available other than
inside the work area?
c. Establish maximum loading restrictions, if appropriate.
11. Temporary Utilities
a. Drinking water: Potable drinking water on the job
site should be provided free of charge to subcontrac-
tors, in convenient and accessible locations, by the
general contractor, so long as the general contractor
has personnel on the job requiring drinking water.
b. Sewer: The general contactor should extend and
connect sewer service to support construction toilets
as required.
c. Water service: The general contractor (through the
plumbing contractor) should furnish a temporary
water supply at each floor of a building, and at other
access points if indicated by the architect/engineer
in the specifications, which should also indicate the
size, quantity and pressure at the water outlets. In
any case, the plumbing contractor should provide at
minimum a ____-inch hose bibb supply (state/local
practice). During the course of construction the
water bill should be paid by the general contractor.
Any contractor or subcontractor whose water
requirements are in excess of those specified should
be responsible for their facility.
d. Electrical service: The general contractor (through
the electrical contractor) should furnish and main-
tain temporary electrical service for both power and
lighting, if indicated by the architect/engineer in the
specifications, which should also indicate the type,
quantity, wattage, amperage and voltage character-
istics of temporary lighting, power circuits and out-
lets. But in any case the electrical contractor should
provide at a minimum, _____ amperage (state/local
practice), _____ voltage (state/local practice),
_____ phase electrical receptacles (state/local prac-
tice) at each floor of each building so that any point
on each floor can be reached by a _____-foot
extension cord (state/local practice). Energy charges
should be paid by the general contractor. Any con-
tractor having requirements for power, lighting or
service other than those discussed in this guideline
should make the necessary arrangements at its own
expense.
e. Telecommunication Service: The general contractor
should provide for sufficient voice and data phone
lines to support the anticipated needs of the general
contractor and onsite subcontractor offices. A con-
venient connection terminal should be provided by
the general contractor to minimize installation costs.
Each subcontractor should be responsible for plac-
ing orders and paying for their phone charges.
12. Temporary Lighting
During construction, the general contractor should provide
temporary lighting (via the electrical contractor) as follows:
a. Exterior: Provides security lighting and general
lighting in trailer, parking, lay down, traffic, and
other exterior areas to support project work hours.
b. Interior: Meets the OSHA minimum requirements
for general access lighting. Subcontractors should be
responsible for task specific lighting needs.
C.4 Guideline on Site Logistics
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 33
13. Weather Protection and Temporary Heat/
Ventilation
During construction, weather protection and heat-
ing/ventilation may be required for protection of workers
and protection 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 contract
documents should establish the type, duration and level of
requirements for heating/ventilating and weather protection.
Generally, the general contractor should be responsible
for providing general weather protection. The heat-
ing/ventilating contractor should be responsible for pro-
viding heating/ventilating of workers and construction
after permanent enclosures have been installed and the
permanent heating system is sufficiently completed to
allow safe operation, as determined by the archi-
tect/engineer and/or owner. Subcontractors having specif-
ic or unusual HVAC requirements should be responsible
for their own requirements.
Because of the many variable climatic conditions which
occur throughout the United States, no guidelines are sug-
gested regarding the specifics of weather protection and
heating/ventilation requirements. However, such specifi-
cations for local use may be prepared in such a manner
that the heating and/or ventilation contractor should be
required to furnish temporary connection to the perma-
nent heating or ventilation system and the removal of the
same. (This also should include placing the system back
in first class condition before turning the system over to
the owner.) Also, in order that an allowance can be estab-
lished in the contract price, the architect/engineer should
incorporate in the specifications a lump sum dollar
amount 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 furnishing
labor for temporary heat, in order that a cost adjustment
may be made against the stated allowance. The cost of all
fuel, water, electricity and other consumable products
should 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. Each
contractor or subcontractor should be responsible for col-
lecting and depositing its debris in such collection facili-
ties. The general contractor should be responsible for the
removal of all debris from the jobsite. Trash and debris
should not be allowed to accumulate.
a. What are the contract requirements for trash and
recycling?
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 should
be responsible for their own specialty requirements.
Permanent fire protection equipment used for fire protec-
tion during construction should be the responsibility of
the installing contractor.
C.4 Guideline on Site Logistics
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 34
Contract surety bonds offer an important means of protec-
tion for project owners and for project participants to
address construction risks of non-performance and/or
financial failure. They are statutorily required on most
public projects and a requirement on a significant number
of private construction projects.
Public Projects:
At the Federal level, the Miller Act (40 U.S.C. 3131 et.
seq.) requires that contractors performing contracts for
the construction, alteration or repair of public buildings or
works exceeding $100,000.00 furnish performance and
payment bonds. States have enacted similar laws, termed
little Miller Acts, which require performance and pay-
ment bonds on state and local construction projects.
These laws ensure that federal, state, and local govern-
ments are positioned through requirements for contract
surety bonds to manage the risk of contractor nonperfor-
mance, thereby protecting precious taxpayer dollars.
Payment bonds assure payment to certain categories of
subcontractors and materials suppliers, who are not in
direct contractual relationships with contracting agencies
and in most jurisdictions are without lien rights against
public property. Project delivery method selection, such
as design-bid build, construction management at risk or
design-build, does not change the need for public sector
bonding requirement.
Private Projects:
Many private owners also seek to manage project risks
through contract requirements for performance and pay-
ment bonds. Commonly used standard form documents
include provisions in which the owner can require perform-
ance and payment bonds. In addition, prime contractors
performing commercial construction often decide to handle
the risk of subcontractor default through inclusion of sub-
contract requirements for performance and payment bonds.
Important Surety Issues & Considerations
Traditional
The relationship between a contractor and its surety pro-
ducer is one of trust and confidence, similar to the rela-
tionship of a contractor with its banker, attorney, or
accountant. The surety and the surety producer should be
selected by the contractor to best serve the contractor. An
important role for the surety producers is to develop a
high degree of knowledge of the contractor's character,
experience and financial capacity to present to the surety.
Items to consider when specifying and/or selecting the
surety include that the surety be certified by the U.S.
Department of the Treasury and listed in Circular 570 and
admitted in the state where the bond is issued.
The bond amount will be the same amount as the contract
price.
Default Insurance Products
Subcontractor default insurance (SDI) is an insurance
policy that is intended to address the risk of subcontractor
default. SDI is marketed to prime contractors as an alter-
native to bonding subcontractors. It requires prime con-
tractors to undertake rigorous pre-qualification of subcon-
tractors, a service otherwise performed by the sureties,
and to self-insure a significant portion of the risk associ-
ated with subcontractor default through deductibles and
co-pays. The information obtained in this prequalification
process is confidential and will be used for this process
only.
SDI programs are not a substitute for prime contractor
performance and payment bonding on public sector proj-
ects. Lien or claim rights for all contractors should be
protected at all costs.
Directed Suretyship
Direct suretyship is the practice of forcing a contractor to
use a designated surety producer or surety company unfa-
miliar with the contractor's needs and service require-
ments. It imposes a relationship not voluntarily assumed
and subjects the contractor to disclose business informa-
tion to persons that may not act in the best interest of the
contractor.
Further, the practice of directed suretyship may serve to
lessen competition on projects: a single surety likely will
not accept all bidders and many contractors likely will be
reticent to disclose confidential personal and business
financial information to an unknown third party. For
these reasons, most states and the federal government
have enacted statutes that prohibit the practice of direct-
ed suretyship.
C.5
Guideline on Surety Bonding
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 35
References
ConsensusDOCS 200 Owner/Contractor Standard
Agreement & General Conditions (Lump Sum)
(www.consensusdocs.org)
American Institute of Architects (AIA) A201 General
Conditions of the Contract for Construction
(www.aiacontractdocuments.org)
C.5 Guideline on Surety Bonding
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 36
Safety must be the number one concern in the
construction industry!
The construction industry, by its inherent nature, is sus-
ceptible to potentially dangerous conditions that affect the
safety 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 constant
built into each project.
The Associated General Contractors of America (AGC),
the American Subcontractors Association (ASA), and the
Associated Specialty Contractors (ASC) are committed to
maintaining a safe, healthful industry and to protecting
the public against any potential hazards caused by con-
struction operations. Every member of the construction
team is responsible for safety and should be held account-
able for ensuring a safe and healthful worksite.
Developing a project culture that supports
worker safety
The foundation to executing a safe project is the early
establishment and nurturing of a project culture that is
based on the values of good working relationships and
candid communication. Without these values, the proba-
bility of a safe project is likely to decrease.
The development of the project teams approach to safety
is intertwined with the overall approach developed by the
general contractor in partnership with the owner and
architect and in consultation with major subcontractors.
Safety should be an integral part of any Partnering (see
C.2. Partnering) or Preconstruction Meetings (see C.1.
Preconstruction Conferences).
The General Contractor holds the key role in developing
coordination and communication methods that will allow
for the planning and execution of the work safely (see
D.2.a. Communication). These communication channels
should allow for:
Early analysis of the project scope to identify key
risk 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 of
retribution.
All parties involved must be totally committed
to 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 and
respectful manner.
Developing a written safety policy that spells out its
commitment to run each project in a safe manner.
That policy should emphasize the firms pledge to
comply with all federal and state safety laws and
regulations.
Informing employees of employment requirements
for safety, and advising them that they will be held
accountable for their own actions on the job site.
Making available to all jobsite personnel a list of all
available safety equipment, jobsite safety require-
ments and prohibited unsafe work habits.
Enforcement by subcontractors of safety their
responsibilities and penalties.
Every member of the construction team, including the
project owner, design team, general contractor, and sub-
contractors, must appreciate the value of a good safety
program.
AGC, ASA and ASC each have produced comprehensive
safety materials for the use of employers and employees
in the construction industry, as have many other trade and
professional organizations associated with the construc-
tion industry. For more information on safety, contact
your sponsoring association.
D.1.a
Guideline on Project Safety and Health
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 37
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 hazardous
waste that was not discovered or anticipated by the
Owner, or some other environmental contamination,
invariably it will require highly specialized responses
that are expensive, time consuming, and sometimes
risky. 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 cost
or the liability related to handling the unforeseen envi-
ronmental complication.
2. The discovery of an unforeseen environmental problem
also damages the owner or client. Because the cost of
the problem will not have been built into the original
project 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, the
pressure to take care of it quickly and remain as close
to the schedule as possible will mean less opportunity
to get the most competitive price for the environmental
work. Environmental problems may also jeopardize
project funding by triggering concerns about a lenders
liability or affect the availability and cost of insurance.
Industry Practice and Relevant Authorities
3. Best practices in the industry recognize that the fairest
and most cost-effective allocation of this risk and
responsibility is for the project owner who did not dis-
close the conditions to undertake full responsibility for
the proper remediation of the condition. Environmental
laws and regulations, such as the Resource
Conservation and Recovery Act, have made owners
responsible for all environmental wastes and byprod-
ucts of construction projects as the "generator." This
means that owners will always retain the authority and
control over how environmental issues are handled.
4. Owner responsibility for remediation is embodied in
the recognized industry standard form documents such
as the AIAA201 form General Condition of the
Contract for Construction (contract between the owner
and the general contractor) and the Federal Acquisition
Regulation Changed Conditions clause. The relevant
passages 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 person
resulting from a material or substance, including but
not limited to, asbestos or polychlorinated biphenyl
(PCB) encountered on the site by the Contractor, the
Contractor shall, upon recognizing the condition,
immediately stop Work in the area affected and
report the condition to the Owner and Architect in
writing."
4.1.2. Article 10.3.2
" When the material or substance has been ren-
dered harmless, Work in the affected area shall
resume upon written agreement of the Owner and
Contractor. The Contract Time shall be extended
appropriately and the Contract Sum shall be
increased in the amount of the Contractors 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 Owner
shall indemnify and hold harmless the Contractor,
Subcontractors, Architect, Architects consultants
and agents, and employees of any of them from and
against claims, damages, losses, and expenses,
including but not limited to attorneys fees, arising
out of or resulting from performance of the Work in
the affected area if, in fact, the material or substance
presents the risk of bodily injury or death as
described in Subparagraph 10.3.1 and has not been
rendered 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.b
Guideline on Unforseen Environmental Problems
in Construction
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 38
tion of a hazardous material or substance solely by
reason of performing Work as required by the
Contract Documents, the Owner shall indemnify the
Contractor for all cost and expense thereby
incurred."
4.2. FAR Changed Conditions Clause, 48 CFR
52.243-5
"(b) The Contractor shall promptly notify the
Contracting officer, in writing, of subsurface or
latent physical conditions differing materially from
those indicated in this contract or unknown unusual
physical conditions at the site before proceeding
with the work.
"(c) If changes under...paragraph (b) increase or
decrease the cost of, or time required for performing
the work, the Contracting officer shall make an
equitable 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 drafted
contract should reflect the owners responsibility for
such 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 in
AGC #1184, Construction Contractors Environmental
Risk Management Procedures Manual, published by
the Associated General Contractors of America:
http://www.agc.org/contractdocuments/
D.1.b Guideline on Unforseen Environmental Problems in Construction
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 39
A key ingredient in all successful construction projects is
clear, efficient and effective communication between all
participants. Good communication does not automatically
occur on construction projects, but must be nurtured from
project inception through close-out.
The owner, general contractor, and designer must set the
stage for effective project communication during initial
contract negotiations and teamwork discussions. Use of
the Partnering process can facilitate the beginnings of
good communication (see C.2. Partnering). Effective Pre-
Construction Conferences can also be a vehicle to devel-
op communication channels including subcontractors and
inspectors (see C.1. Preconstruction Conferences). The
use of clear and concise meeting minutes can minimize
miscommunication between parties (see D.2.b. Project
Meetings).
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. Each major
subcontractor should have a competent foreman on the
job backed up by an outside superintendent and/or
project manager who is readily available to represent
the subcontractor. Each subcontractor employing only
one or two workers on the job should have at least a
competent crew leader in charge of the work backed up
by an outside superintendent and/or project manager
who is readily available to represent the subcontractor.
2. Coordination should be assured through regular on-the-
job meetings of the general contractors authorized
project representative and the on-site subcontractors
authorized project representatives. Additional meetings
may be required for subcontractors whose work might
interfere with another at a given time. Minutes of such
meetings should be prepared promptly and distributed
to 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 adversely
affect the work of others. The general contractor should
monitor and coordinate the work of all parties to ensure
compliance with the project schedule.
4. The general contractor should establish a comprehen-
sive Site Logistics plan to support all phases of the
project (see C.4. Site Logistics). This plan should
include, 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 designat-
ed areas only.
Adequate personnel lifts, when required, and cranes
and hoists at times and places that will minimize
waiting time as much as possible, regardless of who
is contractually responsible.
Adequate lighting, heating, weatherproofing, venti-
lating, fire protection, and cleanup is provided in a
timely manner regardless of who is contractually
responsible.
5. The general contractor should monitor and expedite the
processing of shop drawings, samples and other sub-
mittals for approval. This procedure is especially
important when change orders are involved.
6. The general contractor and all subcontractors should
respect one anothers work. When damage or loss does
occur, it should be reported immediately to the injured
party, appropriate insurance carriers, and the general
contractor, and corrected promptly.
Cooperation
1. The general contractor should make a good faith effort
to effectively and equally represent each subcontractor
in disputes with the owner or architect and invite the
affected subcontractor to attend and participate in any
conferences related to the subcontractors work.
2. The general contractor and subcontractors should nego-
tiate disputes in good faith with the intent of achieving
a fair and expeditious agreement. The general contrac-
tor also should make a good faith effort toward resolv-
D.2.a
Guideline on Communication
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 40
ing disputes between subcontractors on the project.
Monetary issues in connection with disputes should be
settled as promptly as possible; however, every effort
should be made to avoid departing from the schedule
or delaying the project (see D.3.a. Avoidance and
Resolution of Construction Disputes).
3. A work authorization form should be completed and
signed prior to performing any work for another con-
tractor or subcontractor. "Back charges" work should
not be performed unless authorized by such a form or a
specifically agreed alternative (see D.3.e. Charges for
Non-contracted Construction Services and E.3. Work
Authorization Form).
4. Each subcontractor should submit progress and final
payment applications in accordance with the contracts
established procedure (see E.2. Subcontractors
Application for Payment).
5. It is improper to demand releases or waivers of future
claims or claims that, although properly made, remain
unpaid.
6. Communications between the subcontractor and the
architect/engineer or its consultants for the project
should go through the general contractor, in the
absence of a specific agreement to the contrary. For
example, one such agreement may be for the subcon-
tractor to make reasonable requests directly to the
architect/engineer, upon the architect engineer/s con-
sent, about action taken on that subcontractors pay-
ment application.
7. On-the-job relationships should be conducted between
the general contractors and subcontractors authorized
project representatives. Conflicts or problems not
promptly settled on site should be handled by home
office personnel without disruption to the job.
Communication can either bolster the development of a
positive project culture, or can lead to its downfall. All
project parties must invest time in developing an effective
system for communication and then effectively imple-
ment the process.
D.2.a Guideline on Communication
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 41
Regularly scheduled project meetings, when correctly
planned and conducted by the controlling/coordinating
contractor/owner agent (responsible contractor), will
facilitate the orderly and cost-effective construction and
completion of a project.
Meeting Schedule and Participants
Typically, meetings should be held weekly at the same
time each week with bi-weekly meetings appropriate on
some projects. Each contractors authorized representa-
tives should attend meetings starting two weeks prior to
mobilization and continuing until their work is complet-
ed. Attendance should be required and with authorized
representatives knowledgeable of the project scope and
requirements. In the event a specific contractors work is
intermittent, it may not be necessary to attend meetings
when not on site. One meeting per month should include
home office management from each contractor and
owners representative.
Meeting Content and Structure
The responsible contractor should have previously com-
pleted project schedule and sequencing (see C.1.
Preconstruction Conferences and B.2. Project Scheduling,
Delays, and Liquidated Damages). In addition, the
responsible contractor should assign a person who has a
comprehensive 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-determine
order of each contractors participation and when prac-
tical, excuse contractors from the meeting after receiv-
ing their input and determining if subsequent agenda
items 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 with
assigned responsibilities. The task list automatically
becomes an item on the agenda for the next project
meeting.
4. Prepare, distribute in advance, review and revise a two
week "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 information
exchange is in an electronic format, integrate project
meeting minutes with follow-up lists of assigned respon-
sibilities, sequencing, changes, and other pertinent project
information into the web site.
Summary
Properly planned and conducted Project Meetings will
result in positive attitudes, committed participants, less
lost motion, better production, on time completion and
higher profits.
D.2.b
Guideline on Project Meetings
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 42
The construction industry is, by nature, a complex one. In
the process, inevitable differences arise concerning scope
definition, delays, accelerations, obstructions, and
changed conditions. All the while, the process of building
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 of
the construction process. The net result is all too often
that only lawyers, consultants and expert witnesses bene-
fit from lengthy court actions.
Disputes avoidance
The Associated General Contractors of America, the
American Subcontractors Association, and the Associated
Specialty Contractors support programs to minimize dis-
putes through equitable allocation of risks in contracts
and fostering cooperation among members of the con-
struction team throughout the building process. Dispute
avoidance and resolution may be accomplished through
teamwork programs such as the partnering concept that
involves post-award, several-day meetings of owner,
design professional, construction manager, and major
contractor representatives working together to identify
potential problems and to develop practical solutions (see
C.2. Partnering). The concept also may involve group
bonuses payable only if all trades achieve established
project goals.
In principle, a vast majority of construction disputes are
susceptible to settlement through a give-and-take process
by decision-makers of construction team members with-
out resort to formal third party intervention. All parties in
construction projects are urged to minimize the role of
lawyers, inasmuch as construction problems usually relate
to fact and customary industry practice rather than
emphasis on legal issues.
Because of the desirability of settling disputes quickly
and inexpensively, language calling for the parties to
endeavor to settle disputes through direct discussions
before considering mediation or arbitration should be
included 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. Mediation
consists of one or more impartial parties advising and
consulting with those involved in a dispute. The mediator
can not impose a settlement, but rather guides the parties
toward their own settlement. Mediation is available to the
parties by mutual agreement even though a contract may
specify arbitration. Language recommending considera-
tion of mediation prior to arbitration, if the parties so
agree, is strongly encouraged for inclusion in all contacts.
Another non-binding ADR method available for use is the
mini-trial. This process is not a trial in the usual sense of
an adversarial judicial proceeding. Instead, it is a relative-
ly structured process whereby management representa-
tives of the parties to a dispute operate within mutually-
agreed upon time limits to conduct informal conferences
and hold non-binding, confidential discussions. Typically,
attorneys prepare positions for the parties. The basic idea
is to have the principals of firms see the relative strengths
and weaknesses of their cases and to serve as a basis for
negotiations between them to resolve the dispute.
Disputes resolution and counseling panels are other non-
binding ADR services. These panels use members who
are ordinarily technical experts, chosen in advance, to
address disputes at the times they arise on a project. The
aim is to act quickly on moderate size disputes before
confrontational attitudes harden. Panel decisions entered
as evidence in arbitration or litigation or, by agreement of
the parties can be accepted as final and binding.
Still other ADR techniques are:
1. Step negotiations involving the passing of disputes to
successively higher levels of management until
resolved,
2. Referral of technical questions to project architects for
initial decisions,
3. Advisory rulings by neutral experts and,
4. Fact-based mediation whereby a mediator suggests a
settlement amount and then assists in negotiation.
D.3.a
Guideline on Avoidance and Resolution
of Construction Disputes
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 43
4. Fact-based mediation whereby a mediator suggests a
settlement amount and then assists in negotiation.
Arbitration
Unlike most other ADR methods, arbitration is final and
binding. Decisions are subject to challenge only on nar-
row grounds such as prejudice or bad faith. Arbitration is
used widely in the construction industry, and the practice
is encouraged by provisions in standard documents call-
ing for arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration
Association (see http://adr.org/commercial_arbitration).
Arbitration may involve one or three arbitrators jointly
chosen by the parties. The process normally is faster and
less costly than litigation and has the major advantage of
cases 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 an
advantage to this approach. However, excessive use of
legalistic approaches that unnecessarily slow the settle-
ment process and increase costs to the parties is
deplorable.
Conclusion
AGC, ASA and ASC support initial efforts to settle dis-
putes through direct negotiations. If it becomes necessary
to use neutral third parties to assist in the resolution
process, we encourage consideration first of the use of
mediation or other non-binding ADR methods because of
speed and cost considerations. Finally, where parties to a
dispute want final and binding resolution, the associations
support arbitration using qualified, properly trained per-
sons as arbitrators and utilizing expedited procedures to
the extent practical.
D.3.a Guideline on Avoidance and Resolution of Construction Disputes
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 44
1. As construction processes change to meet the needs of
effective construction project delivery, owners must
take care to ensure that all necessary functions of the
building process, often called general conditions, are
performed on a coordinated, interactive basis.
2. In the traditional project delivery system, there is a
clear relationship between the general contractor and
its subcontractor. Contract documents, prepared by the
owner and/or the owners representative, spell out the
obligations for which each is responsible. The general
contractor maintains continuous supervision, adminis-
tration, and control of a project. Communication of the
many details and coordination of the various phases is
handled by the general contractor as the job progresses.
These responsibilities are part of the general conditions
of the project, and the general contractor has a contract
with the owner to deliver these services. These general
conditions include the temporary infrastructure and
services 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 an
effort to shorten project delivery times and to gain
other efficiencies and savings. Responsibilities are
often 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 construction
manager, but they may not be contractually required to
perform all of the traditional duties contained in the
typical general conditions. The use of such alternate
delivery systems can create confusion among the stake-
holders on the jobsite and problems for the owner in
the form of delays and additional costs.
4. Regardless of the project delivery system used, owners
must ensure that a general contractor or appropriate
entity responsible to the owner performs and is liable
for the completion of general conditions items. The
person 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 Safety & Health)
Scheduling/Coordination (see B.2. Project
Scheduling, 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 in
contract terms that express the unique characteristics
and requirements of the project, maximum efficiency
and successful project delivery are achieved when the
owner ensures that a responsible party performs the
general conditions work. The value to the owner
includes timely project completion, reduced costs,
delivery of a quality project, and reduced likelihood of
claims.
D.3.b
Guideline on Benefits to the Owner of
Effective Allocation, Delegation, and
Performance of General Conditions Responsibilities
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 45
Overview
1. Growing windfalls and disproportionately large court
and arbitrator awards on lost profit and similarly specu-
lative claims have led to major losses by owners and
contractors and increased litigation. These claims
involve highly subjective, ripple-effect cost impact
estimates growing out of project delays and disrup-
tions.
2. Individual consequential damage awards may far
exceed the total value of a contract or subcontract.
They are neither insurable nor subject to being
recouped through pricing in todays highly competitive
construction marketplace. Besides legal and award
costs, valuable time is often required of key employees
to defend claims. Finally, delays and their resulting
costs generally involve complex circumstances where
fault is shared by numerous parties. The end result has
been uncertainty and a misallocation of risk to those
lacking adequate control.
Contract Language
3. All parties in the construction process are best served
through clear contractual understandings that achieve
certainty and restrict recovery of claimed damages to
amounts, if any, specifically agreed upon by the par-
ties. Accordingly, relevant text should be included on
mutual consequential damage waiver language in con-
struction agreements. Both AGC 200 and AIAA201
contain language that accomplishes this goal. Section
4.3.10 of The American Institute of Architects docu-
ment A201, General Conditions of the Contract for
Construction (1997 Edition) reads as follows:
The Contractor and Owner waive Claims against
each other for consequential damages arising out of
or relating to this Contract. This mutual waiver
includes:
.1. damages incurred by the Owner for rental
expenses, for losses of use, income, profit,
financing, business and reputation, and for loss
of management or employee productivity or of
the services of such persons, and
.2. damages incurred by the Contractor for principal
office expenses including the compensation of
personnel stationed there, for losses of financing
business and reputation, and for loss of profit
except anticipated profit arising directly from the
Work.
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 owners
and contractors have had to devote significant
resources to deal with these claims.
1
5. Specific waiver language is necessary on each job to
avoid liability for consequential damages. Contracts
and subcontracts that are silent on the subject offer no
protection against all sorts of indirect cost claims for
alleged damages or performance deficiencies.
6. Construction projects are frequently based on aggres-
sive target completion dates that make no allowance
for delays due to weather, late infrastructure work,
labor shortages, changes to plans, and coordination
problems. Owners who place reliance on these aggres-
sive target dates in obtaining financial commitments
and leasing the premises should be prepared to accept
the associated risks.
7. Consequential damages may arise from performance as
well as delays. For example, an owner may contend that
office-building leasing was slower than anticipated and
rental rates were below plan because of intermittent
HVAC problems.
8. Liquidated damages, unlike consequential damages,
allow contractors and subcontractors to make business
decisions about whether or not to bid the work and to
include contingencies in their pricing. On projects
where it is foreseeable that delay beyond a given date
will result in known, specific costs, the parties may
agree in advance on a reasonable dollar amount of liq-
uidated damages for each day of unexcused delay.
Owners should be aware that inclusion of liquidated
damages generally may result in higher prices and per-
haps fewer bidders.
D.3.c
Guideline on Consequential Damages
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 46
Conclusion
9. Certainty and predictability are principles on which
construction 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, with
each party specifically disclaiming any right to assert a
claim for consequential damages.
______________________
1
General Contractors and subcontractors may wish,
instead, to routinely charge project specific costs (such as
salaried supervision) to each job to avoid the consequen-
tial damages waiver impact on these well-established cost
items.
D.3.c Guideline on Consequential Damages
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 47
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 owners requirements. Other common
reasons for change orders include: changing requirements of
public authorities; deletion of project features; resolution of
project coordination problems; correction of errors or con-
flicts in the plans or specifications; changes in materials or
equipment; unavailability or delayed delivery of specified
items; or changes in technology.
As the number of change orders on a project increases, so
does the possibility of misunderstanding among the con-
tracting parties. Such a misunderstanding may occur
because one or more of the parties lacks full knowledge
of the change order process itself, the costs involved in
implementing changes, or the delays, conflicts, and inter-
ruption of the construction sequence and schedule which
can adversely impact project coordination.
The following procedures are recommended to owners,
architects, contractors, and subcontractors to minimize
the possibility of misunderstanding and project disruption
stemming from change orders.
Owner-initiated change order
When a change order is initiated by the owner or owners
agent, the process should begin with a request for propos-
al (RFP). The RFP should contain all the information
needed by the contractor or subcontractors to make a rea-
sonable and realistic estimate of the costs and the time
needed to implement the change. This information should
include, but may not be limited to:
1. Revised plans and specifications that permit accurate
quantification of work to be added, deleted, or substi-
tuted and its relation to unchanged work.
2. The time span for making the change and specific
authorization for overtime, if required.
3. The amount of supplemental work to be performed if
the change is in a completed area.
4. The degree of detail expected in the cost breakdown of
the contractors change order proposal.
5. The period of time during which the change proposed
will be open for review, acceptance, or rejection.
Contractor or subcontractor-initiated change
order
When a change order is initiated by the contractor or a sub-
contractor, 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 the
plans and specifications, the benefit to the owner and
the project, and the effect of the change on the project
sequence.
2. The effect of the proposed change on the contract time
and price in sufficient detail to permit proper evaluation
by the contractor, the owner, and the owners agent.
3. A reasonable but definite time period for the owner to
accept 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. All
parties 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 the
project is not acceptable and will most likely lead to a
dispute. Late changes in the contract documents can be
reduced by the owner through continual review of the
documents and inspection of the work as it progresses.
The owners agent, the contractor, and subcontractors also
can reduce conflicts and last-minute revisions by review-
ing plans and specifications before construction and mak-
ing timely requests for necessary clarifications. The
owners agent should be diligent in the issuance of clarifi-
cation responses and submittal approvals, thus avoiding
interruption 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 of
change order. It is preferred because it defines precisely
D.3.d
Guideline on Procedures for Change Orders
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 48
the total cost or credit and time variation to the contract.
It is negotiated by the parties and agreed upon before the
work is executed, in most cases.
Unit price change order
The unit price change order is used when unit prices for
specific items or trades are prenegotiated and made part
of the contract. Thus, only quantities of each item of
work are estimated or measured before or after the
changes are performed. However, problems or inequities
can arise when the performance of the work conflicts
with other trades or delays the construction schedule, or
when substantial variations are made to the total quantity
of work on which the original prices were based.
Time and material change order
The time and material change order is most often used
when the scope of the change cannot be defined properly
before work must begin, either because the parties can
not agree or because there is not enough time for standard
change order processing. When using a time and material
change order, the parties should be sure to have a clear
definition of reimbursable costs before the work is begun.
Following are some examples of reimbursable items to be
clearly defined:
Labor rates to be charged, including specific per-
centages for payroll taxes and other statutory and
employer-provided benefits.
Rates for machinery and equipment supplied by the
contractor, whether owned or rented.
Costs of small tools and miscellaneous material,
regardless of whether consumed in the work (this
may be stated as either a percentage of labor and
materials incorporated into the work, or as individ-
ual line items).
Expenses for estimating, engineering coordination
and field supervision.
Overhead expenses on the job and in the home
office and a reasonable fee for the additional work.
Overhead and fee or profit is not normally deducted
on deductive change orders.
Change directive
Construction change directives formally alter the scope of
the 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 not
waive its rights to time and price adjustments when it
proceeds pursuant to a signed change directive.
Recorded minor change order
The recorded minor change order in most cases is initiat-
ed by the owners agent and is used when the change is
so minor that there is no significant effect on project cost
or time, but the variations to the plans or specifications
nevertheless should be recorded for later incorporation
into the as-built drawings. This type of change order also
is useful to avoid problems later when memories of
unrecorded changes might fail or when authorization for
the change may be questioned. This procedure also per-
mits the contractor or subcontractor to recover expenses
when a large number of minor changes accumulate.
Authorization of change
Change order work should not begin until after the owner
or owners agent issues a written authorization to pro-
ceed. Adherence to this precedence will promote smooth
and efficient adjustments by all parties. This written
authorization should reflect the variations in the work and
the contract cost or time schedule. The authorization also
should specify that variations are made in accordance
with the terms of the original contract, and, to the extent
provided in the contract documents, allow for payment of
undisputed amounts as part of monthly progress pay-
ments.
When the contract is finalized, the owner should identify
those individuals who have authority to authorize changes
on the owners behalf. The contractor and subcontractors
also 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 is
important that the owner or the owners agent deal only
with the contractors authorized representative.
Special care should be taken with subcontractors and
material suppliers to clarify the proper communication
paths and to identify the persons in authority. Direct com-
munication between subcontractors and the Owner,
Owners agent, designer, or designer sub-consultants can
result in ambiguous contractual issues. Appropriate com-
munication processes should be clearly outlined during
the Pre-Construction Conference attended by all parties
(see C.1. Preconstruction Conferences).
D.3.d Guideline on Procedures for Change Orders
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 49
The major problem affecting the proper execution of
change orders is the time lag between the submittal of the
cost and time estimates for the changes and later accept-
ance or rejection by the owner (see B.2. Project
Scheduling, 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 the
completion 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 price
may be considered firm and after which the project will
be delayed.
Emergency changes require expedited procedures which
should be developed and communicated as part of the
Pre-Construction Conference. Regardless, emergency
changes should be documented by written authorization
immediately following.
Conclusion
Although each change order must be evaluated separately,
certain procedures are applicable to most change orders
and 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. This
information should be made known to all parties during
the preconstruction conference.
3. No work beyond the scope of the base contract should
be performed without prior written authorization from
the owner, except in emergencies.
4. The scope of the change order should be clear and the
request for the change should contain enough informa-
tion to enable the contractor or subcontractors to make
a realistic estimate of the costs and time involved.
5. Proposals should be submitted as soon as possible after
the receipt of a request and, once submitted, should be
acted upon immediately.
6. The proposal should acknowledge the contractors or
subcontractors right to include overhead and profit
percentages in additive changes, and to exclude these
from deductive changes.
7. All parties should acknowledge and honor the contrac-
tors or subcontractors right to compensation for the
cost of time delays, the cost of processing additive as
well as deductive changes, the cost of legally disposing
of materials, and all other costs incurred in the execu-
tion of the change.
D.3.d Guideline on Procedures for Change Orders
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 50
The following guidelines are recommended to ensure
proper notice and compensation for additional services:
(1) Services should be rendered or material or equipment
furnished by the contractor to or on behalf of the sub-
contractor only on the basis of prior notice by the
contractor and concurrence by the subcontractor
(Appendix E.3. Work Authorization Form is suggest-
ed).
(2) Services should be rendered or material or equipment
furnished by the subcontractor to or on behalf of the
contractor on the basis of prior notice by the subcon-
tractor and concurrence by the contractor (Appendix
E.3. Work Authorization Form is suggested).
(3) Where prior notice cannot be given due to the need
for immediate action, such action as is necessary may
be taken by the contractor or subcontractor on behalf
of the other.
(4) No charges for services rendered or materials fur-
nished by the contractor to the subcontractor or by the
subcontractor to the contractor should be valid unless
a 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, as
distinct from changes in the work as required by the con-
tract documents (see D.3.d. Procedures for Change
Orders).
D.3.e
Guideline on Charges for
Non-contracted Construction Services
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 51
Undue delays by owners, architects/engineers, general
contractors, subcontractors and sub-subcontractors in pro-
cessing payments or in making timely payments impose
hardships and improper financial burdens on the contrac-
tors and suppliers who await payment, and amount to
extensions of credit by the contractor and suppliers to
their respective higher tiers.
In order to avoid such problems, all payments should be
made on all contracts promptly. This should include pay-
ment for all labor, services and materials stored on the job
site or other approved storage sites as of the closing date
of requisitions. This applies to both progress payments
and final payments.
Contractor and subcontractor requisitions should not
include amounts that the requisitioner does not intend to
pay its subcontractors or suppliers because of a dispute or
other reason.
The following schedule of billings, certificates and pay-
ments by various participants in the construction process
is suggested. The schedule assumes normal trade contract
terms allowing monthly progress payments for work per-
formed and materials suitably stored through the end of
the month. This schedule does not refer to payments to
suppliers who are not subcontractors.
It is important to note that along the sequence of events,
any recipient of a payment request who takes exception to
an 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 appropriate
billings and payments on the last working day prior to
any 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.f
Guideline on Prompt Payment
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 52
7 Days max 7 Days max
22
10th
or sooner
17th
or sooner
24th
or sooner
Advance procurement of construction materials and
equipment is a prudent practice that saves money and
promotes the timely completion of construction projects.
Construction project owners garner the full benefit of
advance procurement by allowing progress payments to
include payment for materials and equipment stored at the
construction site or some other agreed location.
As a matter of careful construction practice, contractors
and subcontractors often purchase and request delivery of
construction 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 to
assure that specified materials and equipment are avail-
able for installation or use in accordance with the con-
struction schedule. Early procurement of materials and
equipment also guards against escalating costs, particular-
ly in long-term contracts, and enables the contractor and
its subcontractors to make timely purchases when short-
ages may be a problem.
The contractors and subcontractors progress payments
for suitably stored material or equipment should not be
withheld until the material or equipment is actually
installed 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 owners inter-
ests are protected from diversion, destruction, theft, or
damage 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/or
photographs to substantiate delivery.
Inspection of stored material by the owner or
owners representative.
Provision of proof of insurance coverage for off-site
storage material.
Inclusion of all of the above with the progress pay-
ment request.
D.3.g
Guideline on Payment for Stored Materials and Equipment
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 53
When an owner decides to purchase materials or equip-
ment directly, it is imperative that adequate details for
proper installation be included in all bid documents. In
addition, owner purchased materials or equipment may
increase the project price because a contractor will have
to cover contingencies over which it has little or no con-
trol. Before deciding to exercise the direct purchase of
equipment or materials option, owners are encouraged to
consider the following:
When an owner purchases equipment and when
equipment is installed by the owners or equipment
suppliers employees, there will always be the addi-
tional burden of coordinating delivery and installa-
tion. There is also a possibility of craft jurisdiction
problems.
Contract performance can be adversely affected on
projects experiencing untimely, unscheduled or
failed delivery of equipment and materials.
A contractor is most familiar with local building
code requirements, which often address both materi-
als and equipment installation requirements.
The issue of shipping charges is also important
because most manufacturers ship materials so that
title passes to the purchaser at the manufacturing or
shipping point.
Under an owner direct purchase option, unless other
arrangements are made, the owner may have to
assume responsibility for warehousing, transfer and
security of materials or equipment.
When an owner buys materials or equipment, the
owner also assumes the responsibility of resolving
any warranty issues with the manufacturer.
A contractors overhead cost remains the same. In
addition, in states in which a contractor is required
to pay the sales tax on any equipment it installs
whether it purchases it or not, the contractor may
build taxes on the retail price of the equipment into
its bid.
Owners should consider potential consequences of direct-
ly purchased equipment or materials. Complete and full
disclosure of all aspects of owner purchases should be
communicated and coordinated with the contractor.
D.3.h
Guideline on Purchase of
Materials or Equipment by Owner
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 54
The practice of scheduling overtime in machine-paced
fabricating and other types of manufacturing operations is
widespread. Perhaps some scheduled overtime to main-
tain production schedules is less costly than bringing new
employees into the work force in some repetitive,
machine-paced factory operations. However, any advan-
tages of scheduled overtime which might be found in
manufacturing do not apply to construction. Non-repeti-
tive work, fatiguing physical labor and other features
make construction work far different from machine-paced
factory employment.
Scheduled overtime is seldom found on competitively
bid, firm-price contracts. Most contractors are mindful of
some of the negative effects of overtime on costs and pro-
ductivity. However, scheduled overtime is sometimes
ordered by owners or construction managers, particularly
on large cost-reimbursable projects, in an effort to:
Accelerate completion;
Make up for previous delays;
Complete as originally scheduled a project which
has been increased in size and complexity by
change orders; or
Compensate for shortages of skilled construction
workers in the area.
One of the worst but most common reasons to use over-
time premium pay is to induce needed workers to leave
other jobs and accept employment on the project on
which the overtime is scheduled.
Productivity Impacts
Simple arithmetic shows that premium pay for double
time or time and one-half makes overtime work much
more expensive. However, people who insist on overtime
seldom realize that other costs associated with overtime
may be even more significant than premium pay.
Premiums affect only overtime hours, but continuing,
scheduled overtime drastically affects the costs of all
hours.
All available research findings indicate a serious inverse
ratio 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 as
much more as the number of additional work hours. After
seven to nine consecutive 50- or 60-hour weeks, produc-
tivity is likely to be no more than that attainable by the
same work force in a 40-hour week. Productivity will
continue 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, so
that total work accomplished during the entire period over
which weekly overtime was worked will be no greater, or
possibly even less, than the work accomplished if the reg-
ular schedule had been used.
When the loss of productivity is added to the higher wage
cost with premiums, productive value per wage dollar
paid 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 Labor
Statistics of the U.S. Department of Labor, the
Construction Industry Institute, the Business Roundtable,
the National Electrical Contractors Association, and the
Mechanical Contractors Association of America produced
similar results. All of them showed that continuing sched-
uled overtime has a strong negative effect on productivity
which increases in magnitude proportionate to the amount
and duration of overtime. Abandonment of the overtime
schedule appears to be the only effective remedy. Only
the BLS study evaluated what happens when scheduled
overtime is discontinued. That study showed a dramatic
jump in productivity per hour upon return to a 40-hour
week.
Reasons for declining productivity under over-
time schedules
Several logical reasons have been found to account for
declining productivity under overtime schedules.
D.3.i
Guideline on Overtime, Construction Costs and Productivity
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 55
Work pace inertia
Industrial engineers have found that workers expend ener-
gy at an established pace determined by long periods of
adaptation. Hence, when the hours of work increase, there
is a tendency to adjust the pace to accomplish about the
same amount of work in an extended workday or work-
week as was accomplished before the extension. The
interdependency of construction workers with others on
the same crew and with workers of other trades on the
same 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 the
survey: the longer the hours, the more scheduled work
time lost through absenteeism." Absenteeism is promoted
when the effects of cumulative fatigue, desires of workers
to spend more time with their families, and need for time
away from the job to take care of personal business com-
bine with lack of economic necessity to work all available
hours because of the high pay received during overtime
weeks. Absenteeism of even a few employees seriously
disrupts scheduled daily operations and reduces total
project efficiency.
Accidents
When extended overtime is employed, the result is
increased accidents and injuries, along with the produc-
tivity-killing effects on morale. The BLS Bulletin states:
"Injuries also increased as hours increased, not only in
absolute numbers, but also in rate of incidence. In most of
the observed instances, the number of injuries per million
hours worked was very much higher at the longer hours."
Fatigue
Physical and mental fatigue build up at an accelerated
rate 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. In
work such as construction, which is not machine-paced
and which requires sustained physical effort as well as
mental alertness, fatigue obviously reduced productivity
during all hours worked. The BLS Bulletin stated: "For
hours above 8 per day and 48 per week, it usually took 3
hours of work to produce 2 additional hours of output
when work was light. When the work was heavy, it took
about 2 hours of work to produce 1 hour of additional
output."
Morale and attitude
Anything which adversely affects morale and which
lessens cooperative and positive attitudes toward the
work, the employer, and the customer will result in low-
ered output. Fatigue causes deterioration in morale and
positive attitude along with an overall negative impact to
the project culture. In addition, continuing expensive
overtime can quickly result in an attitude that, "Cost
means nothing to the customer, so why should we work-
ers worry about efficiency?" Deteriorating morale and
attitude coupled with fatigue increase friction among the
workers, 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 considerable
amount of time is needed to train them to the specific
needs of the project and orient them to what they will be
doing and how it meshes with the work done by others on
the job. Turnover can be expected at an accelerating rate
as overtime schedules continue because of fatigue, poor
morale 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 finding
the project having the highest premiums than in getting
the work accomplished. If other construction employers
feel induced to schedule overtime to keep their share of
the area work force, a daily "auction" for available man-
power is likely to occur.
Supervision problems
Because of their greater responsibilities, supervisory
employees are likely to feel the fatiguing and demoraliz-
ing effects of prolonged overtime schedules even more
than production workers. Loss of key supervisors part
way through a construction job can have highly detrimen-
tal effects, but such loss can be expected on a job with
prolonged overtime due to illness or resignations because
of overwork. Pressures resulting from scheduled overtime
also cause supervisors to become careless, to make errors
D.3.i Guideline on Overtime, Construction Costs and Productivity
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 56
time also cause supervisors to become careless, to make
errors in judgment and to become irritable, adversely
affecting their relations with workers and others.
Obviously, the alternative of not having experienced
supervisors present during all overtime hours being
worked can have even more serious consequences.
Stacking of trades
Scheduled overtime almost always distorts the orderly
sequence schedule originally adopted. This inevitably
results in space conflicts and undesirable mixing of
employees of different crews and different contractors.
Pressure for more overtime
It is common for jobs with scheduled overtime to have
worker pressure for more overtime and slowdown among
workers receiving less overtime pay than others.
Competition to get the largest paychecks seems to
become a greater motivator than pride of participating in
a successful project.
Avoiding the effects of scheduled overtime
The following steps are recommended to avoid the effects
of scheduled overtime:
(1) All parties concerned with planning and scheduling
construction projects, including owners, construction
managers, architects, engineers and contractors,
should be fully aware of the magnitude of the extra
costs caused by scheduling overtime and that produc-
tivity losses will affect work during normal hours as
well as during overtime hours. All must recognize that
the supposed benefits to be gained from scheduling
overtime, such as accelerating completion or making
up for previous delays, are unlikely to be realized and
very costly to attempt.
(2) Initial completion schedules should be realistic and
take into account such factors as availability of skilled
manpower 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 unavoidable
delays. Design should be completed and construction
started early enough that the customer need for a
completion date will be taken care of without artificial
acceleration.
(3) Change orders of a size or number which will delay
completion should be avoided unless the completion
time can be extended to permit performance of both
the changed work and the original work without
resorting to overtime. No change should be contem-
plated or authorized without full consideration by all
parties of its effect on completion time.
(4) If the costs of scheduled overtime are to be paid by
the customer under a cost-reimbursable contract or
under cost-reimbursement provisions for changes or
acceleration orders, the contractor should not be per-
mitted to proceed with scheduled overtime without
the previous written agreement of the customer.
Before agreeing to the proposed overtime schedule,
the customer should thoroughly study the inherent
disadvantages, consult with contractor associations in
the area for their opinions on what the effects of
scheduled overtime will be, and make sure that no
other alternative is available.
(5) Contractors on firm-price contracts should be fully
compensated for loss of productivity as well as for
overtime premiums and additional supervisory and
administrative costs resulting from working on over-
time schedules when required by the customer to per-
form changed or accelerated work which necessitates
scheduled overtime.
(6) An effort should be made to negotiate and utilize
workable shift work clauses to perform much of the
work which must be performed outside scheduled
working hours with employees who are not employed
during regular working hours. It should be recog-
nized, however, that productivity during shift periods
is not likely to equal that during regularly scheduled
working hours.
(7) Overtime should never be used to induce needed
workers to leave other jobs and accept employment
on the project for which the overtime is scheduled.
D.3.i Guideline on Overtime, Construction Costs and Productivity
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 57
A guideline on this topic is being developed.
D.3.j
Guideline on Risk Allocation
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 58
The holding of retainage is a traditional and common
business practice in the construction industry and is used
to 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 be
eliminated, an acceptable alternative form of security in
lieu of retainage may be used. If retainage is required, the
percentage retained should be as low as possible.
Where withholding a retained sum from progress pay-
ments is deemed necessary to secure performance on a
construction project from prime or subcontractors, the
following guidelines are recommended:
The percentage level of any retainage should be the
same for subcontractors as for prime contractors on
the project. This approach is applicable provided the
subcontractor exhibits the ability to provide the
same level of security as the prime contractor and
the prime contractor underwrites the cost of any
excess required security that is not included in the
contract documents.
Early release of retainage for completed and accept-
ed work should be encouraged. Upon substantial
completion of a contractors or subcontractors
work, a line item basis should be used by owners
and contractors in determining the point of any
reduction in the rate of retainage, the time for
release of retained funds, and the time for making
final payment. For unit price quantities, retainage is
not released until final quantities are approved and
paid by owner (see D.5.a. Project Closeout and
D.5.b Punch List Procedures).
Progress payments, reduction of retainage, release
of retained funds, and payments for completed work
should not be delayed because work under change
orders has not been finalized. Final payments for
change order work should be made promptly after
its completion.
Where retainage is used, retained amounts should be
deposited in an escrow account accruing interest to
the contractor and the subcontractor in their respec-
tive shares.
Consideration should also be given to not holding
retainage on subcontracts and material purchase
agreements of less than $10,000 in order to mini-
mize contract administration efforts.
D.3.k
Guideline on Retainage
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 59
Overview
Most construction contracts and subcontracts entitle the
parties to terminate or suspend work for good cause and,
under more limited circumstances, for the owners con-
venience. Contract termination procedures typically call
for adequate notice plus an opportunity to correct defi-
ciencies before the owner or a contractor or subcontractor
can be terminated for default.
Communication and Documentation
Good communications and documentation are helpful in
avoiding or mitigating the impact of termination for cause
and suspension for cause. All parties benefit when con-
cerns about such problem areas as job performance and
slow pay are addressed as soon as practical. Many prema-
ture terminations result from misunderstandings or insuf-
ficient information due to a lack of prompt, clear commu-
nications. This includes the need for complete job meet-
ing minutes and regular communications between meet-
ings. The faster that problems are reported, the better the-
ses can be addressed cooperatively to mitigate any unfa-
vorable impact and to lessen the chances of inappropriate
terminations, suspensions or takeover of work.
Termination of Contractors and
Subcontractors for Cause
Owners and prime contractors are customarily entitled to
terminate a contractor or subcontractor for persistent or
repeated failure to adequately supply sufficient workers,
for failure to pass through payments to subcontractors and
suppliers or for a material breach of contractual duties.
Such terminations require prior written notice plus rea-
sonable time for the contractor or subcontractor to com-
mence and diligently pursue correction of the deficien-
cies. The owner or prime contractor is entitled to com-
plete the work and to be reimbursed for its reasonable
completion costs. The terminated partys jobsite material
and equipment can be used by the owner or prime con-
tractor provided payment has been made in full for such
material and equipment. Hence, contractors having equip-
ment such as cranes and rented equipment that they wish
to exempt from such contract provisions should routinely
clarify their contractual right to remove general purpose
tools and equipment which will not be incorporated in the
completed structure. Terminations should be a last resort
because replacement of a contractor often causes job
progress to be delayed and costs to increase, as well as
creating divided responsibility for the completed work.
Claims are often asserted by contractors alleging prema-
ture termination which require time and money to be
spent defending actions seeking recovery for monetary
losses and for damage to reputation. If an owner or prime
contractor is unable to establish that a termination was for
just cause, the termination is deemed to be for conven-
ience, thereby entitling the terminated party to compensa-
tion as noted below in the Termination by Owner for
Convenience section. In either event, contractors and
subcontractors warranties may be voided when their
work is completed by others.
Right to Carry Out the Contractors or
Subcontractors Work
As an alternative to termination for cause, most construc-
tion contracts and subcontracts also allow an owner or
prime contractor to correct deficiencies in contractors and
subcontractors work. Deductions covering the reasonable
costs for such work are made from payments owing to the
contractors and subcontractors. Prior written notice is
generally required along with reasonable time to cure the
deficiency prior to such takeover of the work. Many con-
tracts and subcontracts require a second notice to help
avoid disputes which may result from an earlier lack of
communication or clarity about the claimed deficiencies
and action being taken to address them. Disputes also fre-
quently arise concerning the reasonableness of correction
costs and the divided responsibility for the completed
work inasmuch as contractors and subcontractors war-
ranties may be voided when others complete their work.
Hence, owners frequently use the threat of takeover to
speed job progress, but normally takeover the work only
in extreme cases.
Termination by Owner for Convenience
Terminations by Owner for convenience ranges from situ-
ations where projects are cancelled for reasons well with-
in the owners control to drastic changes in circumstances
D.3.l
Guideline on Terminations and Suspensions
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 60
such as the owner running out of money. Construction
contracts typically call for the contractor and its subcon-
tractors to immediately stop work, follow the owners
instructions and strive to minimize further job costs by
canceling subcontracts, orders and commitments.
Recommended industry practice calls for contractors and
their subcontractors to be reimbursed for work performed
and material delivered to the termination date, plus an
agreed upon premium.
Suspension by Owner for Convenience
Owners are customarily permitted by contract to order the
contractor in writing to suspend, delay or interrupt all or a
designated portion of project work for the convenience of
the owner. The contractor and its subcontractors must
then immediately suspend, delay or interrupt that portion
of the work as ordered by the owner. Both contract time
and price are subject to adjustment through change orders
because of owner directed suspensions, delays or inter-
ruptions. This usually includes contractors and subcon-
tractors shut-down and start-up costs associated with
their suspension of project work.
Termination by Contractor for Cause
Construction contracts typically allow contractors to ter-
minate their contracts if work is stopped for thirty consec-
utive days or longer, through no fault of the contractor or
its subcontractors, because of owners failure to make
contractually required payments to the contractor, as well
as for court orders, national emergences, or owners fail-
ure to provide evidence of adequate project financing.
Contractors are usually permitted to terminate for repeat-
ed, prolonged suspensions, delays or interruptions or for
owners persistent failure to fulfill its contract obligations
following contractors written notice. The same termina-
tion rights commonly flow through to subcontractors.
Contractors and subcontractors initiating such termina-
tions are generally entitled to be paid for their demon-
strated losses, including overhead, profit and damages.
However, contractors and subcontractors need to be sure
that payment was unreasonably denied before discontinu-
ing performance of their work for untimely pay.
Otherwise, they may be portrayed as having improperly
abandoned the job and charged with the costs of others
finishing their work. Construction contracts typically
allow the withholding of payments for work deficiencies
and many other causes such as probable claims or unex-
cused contractor delays. Subcontracts may contain contin-
gent payment terms whereby monies owing to subcon-
tractors may not become due until paid by the owner to
the prime contractor. Consequently, many subcontractors
prefer to reduce the number of jobsite employees when
experiencing payment delays rather than risking the many
perils associated with terminating their contract work.
Suspension by Contractor for Cause
Contractors are often permitted by contract to suspend
their work if not paid timely for properly performed
work. Contractor suspension is similarly authorized if the
owner fails to provide adequate evidence of project
financing, upon encountering hazardous substances or for
reasons beyond the contractors reasonable control such
as unusually severe weather conditions. These contractor
suspension rights normally flow through as well to their
subcontractors. Contractors and subcontractors who stop
work because of owner or prime contractor failures are
customarily entitled to additional completion time and
payment for their reasonable costs of shut-down, delay
and start-up. Many contracts also entitle them to interest
if suspension is due to untimely payment. For reasons
noted in the Termination by Contractor for Cause section
above, contractors and subcontractors are generally reluc-
tant to pull all of their workers off of a project because of
late payment. By reducing a companys work force
instead, there is less vulnerability to claims of work aban-
donment and also the opportunity to safeguard the con-
tractors or subcontractors material and equipment stored
at the jobsite.
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 61
D.3.l Guideline on Terminations and Suspensions
Every member of the construction team can benefit from
the implementation of Total Quality Management (TQM)
within their companies. The purpose of this guideline is
to provide a brief overview of TQM and to assist con-
struction company executives in their understanding of
the benefits of implementing TQM in their companies.
There is misunderstanding by many in the construction
industry over differences between Total Quality
Management and Quality Control or Quality Assurance.
TQM is a continuing process of improvement involving
all aspects of the business. The wider aim of TQM is to
prevent mistakes before they happen. Quality Control and
Assurance is just one aspect of the process.
In the construction industry, a total commitment to TQM
includes applying the principles of partnering to the indi-
vidual construction project. All of the construction team
members must be given the opportunity to participate in
the 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 continuous
improvement are commitment and teamwork. This commit-
ment must start with the chief executive officer and filter
throughout the entire organization. TQM will not work
without 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, equipment
and work place environment to accomplish the assigned
task. The task or requirements must be clearly defined.
TQM Benefits
Significant improvement in profitability has been
achieved 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 managements commitment and
involvement
Total Quality Management cannot be achieved without
the active involvement and firm commitment of top man-
agement. The chief executive officer must initiate the
quality policy and commit the necessary corporate
resources to carry out that policy.
Management must undergo quality training and lead the
improvement process in creating a quality attitude within
the organization. This training should start at the top and
filter down through all levels of management and on to
the job site.
TQM is not a program. It is a management process
through which quality products and services are provided
on a continuing basis. A company can expect a behavioral
change as well as a technical change in the corporate atti-
tude. The commitment must be for the long term.
Develop and communicate mission statement
The companys first step in the TQM process is to devel-
op a mission statement that describes the organization, its
values, guiding principles, purposes and vision. It should
identify the organization to employees, customers and
community as one deserving of admiration.
When the mission is clearly transmitted throughout the
organization, employees will identify with it and will be
guided by its principles.
D.4.a
Guideline on Total Quality Management
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 62
Quality policy
A clearly defined statement of an organizations public
commitment to quality and continuous improvement
makes a powerful impression on the entire company
about the importance of quality. The quality policy is
focused on quality as it relates to customers, whereas the
corporate mission statement encompasses all aspects of a
companys existence.
Resources
Implementation of the TQM process requires an invest-
ment of todays resources in the companys future.
Training requires time and money. Top management must
be prepared to commit both its time and its employees
time, including that of busy managers at all levels. This
cost is the first part of the cost of quality, the cost of pre-
vention. The cost of quality is defined as the cost of pre-
vention, plus the cost of errors. The cost of errors
includes rework, delays, unplanned work, accidents,
excessive paperwork, lost jobs, idle time, excessive crew
size, equipment failure and late starts. The cost of preven-
tion includes supervision, training, inspection, planning
and meetings.
Coordinate overall quality improvement
process
Quality action teams are established to study needed
improvements for targeted processes. Once implemented,
the results are monitored and measured against previous
performance standards and goals. Employees working in
a 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 for
improvement without fear of reprisal. For some compa-
nies or some individuals, this feedback will be foreign to
their corporate culture. Management should be committed
to recognizing individuals who offer good ideas when
presented and again when implemented, regardless of the
source. A formal feedback, or "lessons learned" process
should be put in place to gather, evaluate, and implement
corrective actions.
Recognition program
Recognizing individual and team achievement is critical
to the success of the TQM process. Celebrate success sto-
ries by publishing them in the company newsletter along
with a photo of the individual or team and discuss them at
meetings. Indicate a description of the problem, the solu-
tion, cost savings and team members. Recognition should
come from the chief executive officer to reinforce the
commitment of the company to the process. Recognition
helps to broaden participation. Celebrated successes stim-
ulate participation in the quality improvement process.
Just as important as recognizing internal team members is
the recognition of other members of the construction
team, including the owner, the architect, engineers, the
general contractors, subcontractors, major suppliers and
inspectors.
Independent reading and research
There is a great deal of information available in books,
periodicals, and videos on the subject of quality and
TQM. External customers can help, too. When an execu-
tive gets serious about TQM, the first step is education
through independent reading and research programs.
Reading this overview is only a start in the educational
process. The serious executive must dedicate time to the
subject to gain more than a cursory understanding of TQM.
Continuous improvement process
Total Quality Management is a never-ending journey. It is
a continuous process of investigation, prevention, evalua-
tion, reviewing and taking corrective action. The process
requires top managements total commitment and
involvement and a willingness to change the corporate
attitude if necessary.
All work is a process. As soon as one process is improved
and functioning properly, a TQM company must improve
the next process in order of priority and then do it all over
again.
Conclusion
Nearly all successful companies practice some form of
management improvement program based upon satisfying
customers, striving to perform a task right the first time
and knowing that improvement must be continuous.
D.4.a Guideline on Total Quality Management
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 63
Total Quality Management provides an art and science for
the practice of good management. It also provides the
intellectual 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 substantial
benefits to the construction industry.
D.4.a Guideline on Total Quality Management
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 64
Today construction projects are more complex with
sophisticated and integrated systems requiring compli-
ance inspections and/or corrections when installed and
operated and throughout various phases of the construc-
tion process. As a consequence, traditional reliance on an
end-of-project punch list is an inefficient and costly
approach to ensuring that products, equipment, or sys-
tems operate as designed and specified. The goal of the
inspections process should be a zero punch list perform-
ance through the use of periodic inspections throughout
the project (see D.5.b. Punch List Procedures).
The type and intensity of inspections vary greatly depending
upon 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 officials.
Clients will often specify inspections to occur at specified
intervals, for purpose of approving progress payments.
Absent an effective inspection system, experience has
demonstrated that "end-of-the-project" punch lists can be
overwhelming and delay project completion.
The first step toward a zero punch list is a commitment to
a project management process with all the key parties
involved. A properly planned project involves a detailed
pre-bid process, continuing planning meetings throughout
the various phases with everyone involved, and an
inspection team committed to a timely completion and a
zero punch list. The cost of failing to implement a proj-
ect-management process is substantial and often results in
more time for corrective action and a negative impact on
the operation of other integrated or related products,
equipment or systems.
Purpose of the Inspections Protocol
To ensure a higher level of quality by improving
communications and understanding of project
requirements.
To produce a zero punch list and timely, cost effec-
tive project completion.
Coordination Requirements
A pre-project Inspection Conference should be held with
the inspector(s), contractor, owner, and designers all pres-
ent. The conference agenda should include the following
items:
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. Inspectors authority - Prior to the project start, all
parties should be advised on the level and limits of
authority 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 (Hold
Point a point in the installation schedule at which a
specific inspection or testing procedure is required by
specification to be performed.)
Upon agreement to these inspection specifics, a second
pre-project Inspections Conference should be held with
the project subcontractors. Depending on the complexity
of the project, inspections may be discussed as part of the
overall Preconstruction Conference for the project in lieu
of the second Inspections Conference (see C.1. Precon-
struction Conferences).
Inspection Hold Points and Documentation
1. A schedule of hold points in the sequence of work
operations, at which the testing procedures are to be
employed (hold points) should be identified. In addi-
tion, inspection hold points must be mutually agreed to
minimize disruption.
2. The inspector(s) must be committed to the project
schedule with inspections conducted accordingly.
D.4.b
Guideline on Project Inspections
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 65
3. Conditions or work practices inconsistent with speci-
fication requirements or defective products, equip-
ment, or systems must be reported in writing to the
responsible contractor representative.
4. Quality Assurance/Quality Control reports should be
provided 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, manufacturers
literature, work in progress, or completed work (see
D.3.a. Avoidance and Resolution of Construction
Disputes).
Requirements for Inspection Personnel
1. Education, Training and Experience Inspector(s)
should have successfully completed an education and
training program from a recognized organization offer-
ing a curriculum equivalent to the disciplines of the
project and a minimum of five years experience in the
discipline related to the type of work to be inspected.
2. Physical Qualifications an inspector should be physi-
cally capable of performing the required inspection
using standard, OSHA-approved, equipment.
3. Functional Qualifications an inspector should have a
current working knowledge of the operation and use of
the 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 made
by the inspector of any reasons that would prevent an
impartial evaluation of the contractors performance.
Completion of Work
1. If, after an inspection of work, proper completion is at
issue, the inspector should issue a certificate that notes
those items in question.
2. If the owner or an installer of the owners equipment or
furnishings damages the work, the inspector should
promptly advise the owner of its obligation to repair
the damaged work. If the owner wants the contractor to
repair such damaged work, or perform maintenance
work not specified in the owner/prime contractor
agreement, the contractor should be reimbursed for
such work.
3. If completed and inspected work is damaged after
inspection, it should be repaired through change orders.
D.4.b Guideline on Project Inspections
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 66
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 completed
in a timely manner and at a level of quality in accor-
dance with the contract documents.
Cause the owner to provide the general contractor a
positive incentive to complete the work properly on
or ahead of time by prompt and proper payment for
work satisfactorily performed.
Provide the subcontractors a positive incentive to
complete their work properly on or ahead of time by
providing prompt and proper payment for work sat-
isfactorily performed.
Prevent multiple punch lists by encouraging the
owner, its architect/engineer and their consultants
to:
Communicate any known issues throughout the
life of the project to the general contractor and
subcontractors to allow early agreement and cor-
rection. The goal should be to create the shortest
possible punch list upon final inspection.
Perform a prompt and thorough substantial com-
pletion inspection and prepare a punch list of all
detected omissions and deficiencies of the desig-
nated portion of the project.
Include subsequently detected omissions and
deficiencies, if any, in such substantially com-
plete portions of the work as part of the warranty
punch list.
1. After a subcontractor considers its work completed and
before its workers leave the project, the general con-
tractors and subcontractors authorized project repre-
sentatives should prepare a list of items requiring cor-
rection or completion. The subcontractor promptly
should satisfy such requirements and arrange for any
contractually required tests.
2. No party should ask for a substantial completion
inspection and punch list until the designated portion of
the work has in fact reached substantial completion.
3. Upon achieving substantial completion of the work or
designated portion, the general contractor should verify
that each subcontractors work is substantially com-
plete and then request a prompt substantial completion
inspection by the owner, its architect/engineer and/or
their consultants as contractually required. The general
contractors authorized project representative should be
present during the inspection process along with the
project representative(s) of the subcontractor(s) whose
work 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 uncover
incomplete work scope that has not been contracted
to any subcontractor. The general contractor should
expedite performance of such work by the appropri-
ate party.
Finish details: Visual inspection, especially of
detailed 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 punch
list process and the projects clarification process
should be used to document and formally resolve
these items.
These items should be pursued through the appropriate
project processes and resolved quickly in order not to
impede the overall completion and closeout of the project.
5. At substantial completion, the general contractor and
each subcontractor should be preparing the paperwork
necessary to complete the closeout. This documenta-
tion should include as-built drawings, operation and
maintenance manuals, warranties, lien releases, etc.
6. Upon receipt of the substantial completion punch list,
the general contractor should request release of final
payment, including retainage, less withholding suffi-
cient to complete the punch list of omissions and defi-
ciencies. Upon receipt of such payment, the general
contractor should make payment to each subcontractor
in the same manner (see D.3.k. Retainage).
7. The general contractor promptly should establish a
schedule for correction and completion of punch list
D.5.a
Guideline on Project Closeout
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 67
items in a way that will minimize interference among
trades. Disputes as to contractual requirements of any
punch list omission or deficiency should be reported
immediately in writing to the owner and/or archi-
tect/engineer as appropriate, seeking an early resolu-
tion. The general contractor and each subcontractor
should immediately correct and complete all other
items on the punch list, recognizing that failure to do
so will delay payment to all parties.
8. Upon satisfaction that all omissions and deficiencies of
the punch list have been completed, with the exception
of any excusably delayed items, the general contractor
should immediately request a certificate of final com-
pletion. Final inspection should determine only the sat-
isfactory correction of the previously documented sub-
stantial completion punch list items. Release of with-
held funds should be conditioned solely upon satisfac-
tion of substantial completion punch list items.
Omissions and/or deficiencies noted after the substan-
tial completion punch list should be treated as warranty
items and therefore independent of substantial comple-
tion, the punch list, and the final payment conditions.
The general contractor should use its best efforts to
assure such understanding by the owner and its archi-
tect/engineer.
9. When feasible, the general contractor should seek from
the owner release of claim and final payment for that
portion of the project performed by a single subcon-
tractor and approved by the owner as satisfactorily
complete (see D.5.b. Punch List Procedures).
D.5.a Guideline on Project Closeout
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 68
The following punch list procedures are recommended to
owners, owners agents, contractors, and subcontractors
to assure timely completion and delivery of projects to
owners and bring prompt and full payment to contractors
and subcontractors (see D.5.a. Project Closeout).
Pre-punch list procedures
1. The contractor and each subcontractor should carefully
check its work throughout the performance period.
2. The contractor should prepare, maintain and distribute
a written record of all observed deficiencies as the job
progresses, so that all necessary remedial action may
be taken promptly.
3. Unsatisfactory work should be corrected immediately,
to prevent it from becoming part of the punch list.
4. Correction of each subcontractors work should be
made before that subcontractor leaves the project.
Punch list procedures
1. During the finishing stages of the work, the contractor
and the owners agent, accompanied by the subcontrac-
tors, should make frequent and careful inspections of
the work in order to discover and ensure the correction
of any faulty or deficient work. Specific dates should
be 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 accordance
with the terms of the contract, the contractor should
notify the owners agent immediately.
3. Upon such notification by the contractor, the owners
agent promptly should make arrangements to inspect
the work. Representatives of the contractor and the
subcontractors should be prepared to participate in this
inspection and answer questions about the work.
4. Following the inspection, the owners agent promptly
should prepare a punch list setting forth in accurate
detail any items of the work that are not in accordance
with the contract documents. This punch list should be
forwarded immediately to the contractor.
5. Upon receipt of the punch list, the contractor should
assign appropriate punch list items and a list of defi-
ciencies to each subcontractor.
6. The contractor and each subcontractor should correct
assigned deficiencies in a timely manner.
7. When advised by the contractor that the punch list
items have been completed, the owners agent, accom-
panied by the contractor and the subcontractors, should
conduct the final inspection of the work. If the punch
list items have been completed satisfactorily, the
owners agent should issue a certificate of final pay-
ment for the work.
8. If after final inspection of the work, there remains a
question of whether one or more punch list items have
been properly completed, the owners agent should
issue a certificate that notes those items remaining in
question. Final payment including any retained monies
for that portion should be made, less an amount which
the owners agent reasonably estimates would be
required to cover the cost of completing any remaining
punch list item(s). This amount should be withheld
only until satisfactory completion of the remaining
item(s).
9. If the owner or an installer of the owners equipment or
furnishings damages the work, the owners agent
promptly should advise the owner of its obligation to
repair the damaged work. If the owner directs that the
contractor repair such damaged work or perform main-
tenance work not called for in the owner/contractor
agreement, the contractor should be reimbursed for
such work.
10. Neither the punch list nor the final acceptance of any
portion of the work should be used arbitrarily to
establish commencement dates of warranties or guar-
antees. Such dates should be established by contractu-
al agreement between the parties.
D.5.b
Guideline on Punch List Procedures
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 69
Warranty is the last component in the completion of a
construction project. Action under a project warranty is
best handled in the line of contract from General
Contractor (GC) to subcontractor to lower tier subcon-
tractor(s) for that specific project. Normally the GC is
notified about an item subject to a projects warranty and
the GC then notifies the subcontractor(s) responsible for
the specific item or equipment in question.
The warranty document should be clear and direct. It
should be understood by all parties that if materials, prod-
ucts, components or equipment need to be addressed
under a warranty it should be addressed as soon as issues
are identified.
Warranty Management
The General Contractor is responsible for warranty man-
agement. The GC is the first point of contact and man-
ages warranty action according to the contract and
through directions to the appropriate subcontractor to
resolve the issue identified by the project owner.
A written warranty consists of three parts:
One is labor. The GC assigns one or more individuals to
review, document and complete the repair or replacement.
Two is product warranty, which in line of contract is
facilitated by the contractor whose area of responsibility
includes the item installed. Generally, all repairs, replace-
ment or alterations of a product installed by this contrac-
tor are the responsibility of that contractor unless the spe-
cific item at issue is outside the original contract for the
construction project. In such a case, a change order must
be issued, or in most instances a direct purchase order
would be issued by the owner of the project.
Three is owner-supplied equipment. Owner-supplied
equipment is not covered by the project warranty.
If materials, a product, component or piece of equipment
is defective and in need of repair or replacement, the con-
tractor or subcontractor responsible for its purchase must
seek reimbursement of the costs for its repair or replace-
ment from the manufacturer. The manufacturer is respon-
sible for these costs through its contract with the contrac-
tor or subcontractor that has purchased the warrantied
material, product, component or equipment. Likewise,
labor costs for warranty repairs or replacements on or for
structural and/or finish material, products, equipment or
components purchased by a GC and installed by a sub-
contractor at the GCs direction are the responsibility of
the GC.
Time
A construction warranty usually lasts for one year.
However, product warranties may last for more than one
year. In such a case, it is the Owners responsibility to
resolve warranty issues directly with the manufacturer of
defective or malfunctioning materials, products, compo-
nents or equipment.
The warranty starts on the earliest of the following two
events: (1) the date the Owner begins to use the project
for its intended purpose, whether the project is complete
or partially complete, or (2) upon notice of substantial
completion. However, installed equipment may be placed
in use prior to either of these events. If there is an issue
as to warranty start date it should be resolved with the
construction team at the time installed equipment is
placed in use. It should also be noted that warranty issues
and contract retainage are separate and unrelated issues.
Retainage is not intended, and should not be used, as a
contingency to address potential warranty issues.
The Owner of a construction project should under-
stand that notification is critical in the warranty
process. Notification delays interfere with and impede
the resolution of warranty issues.
D.5.c
Guideline on Warranty for a Construction Project
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 70
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, if
required, 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 the
bond 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 days
or for the same period of time required by the contract documents for the general contractor in regard to
the prime bid, plus 15 days, whichever period is longer.
______________________________________
Subcontractor
______________________________________
By (Title)
(Continued)
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 71
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. $ $
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 72
E.2 Subcontractors Application for Payment
TO: ______________________________________________________________________________________
FROM: ___________________________________________________________________________________
__________________________________________________________________________________________
PROJECT:
PAYMENT REQUEST NO. ___________________________________________________________________
PERIOD__________________________________, 20____, to _____________________________, 20_____.
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) between
the undersigned and ___________________________________________ relating to the above project.
I also certify that payments, less applicable retention, have been made through the period covered by previous
payments received from the contractor, to (1) all my subcontractors (sub-subcontractors) and (2) for all materials
and labor used in or in conjunction with the performance of this Contract. I further certify I have complied with
Federal, State and local tax laws, including Social Security laws and Unemployment Compensation laws and
Workers 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, the
undersigned does hereby waive, release and relinquish all claim or right of lien which the undersigned may now
have upon the premises described above except for claims or right of lien for contract and/or change order work
performed to extent that payment is being retained or will subsequently become due.
Date _________________________________________ ______________________________________________
Subscribed and sworn before me this ____________ day
SUBCONTRACTOR
of , 20______
BY: __________________________________________
(authorized signature)
Notary Public: _________________________________ TITLE:_____________________________________________
My Commission Expires:
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 73
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:_______________________________________________________________________________
__________________________________________________________________________________________
ARCHITECT
CONTRACTOR ______________________ OWNER _______________________ SUBCONTRACTOR________________
BY _________________________________ BY____________________________ BY ______________________________
BILLING____________________________ BILLING
ADDRESS___________________________ ADDRESS _____________________ ADDRESS ________________________
JOB COMPLETED I YES I NO
WORK AUTHORIZATION NOT SIGNED BECAUSE:
NOTE: COMPLETE A SEPARATE DAILY WORK ORDER I UNABLE TO CONTACT REPRESENTATIVE
FOR (1) EACH JOB (2) EACH DAY I AUTHORIZED BY PHONE
(DO NOT ATTEMPT TO COMBINE JOBS OR DAYS) I FORM ISSUED FOR RECORD PURPOSE ONLY
AUTHORIZATION IN DISPUTE
DESCRIPTION TIME DESCRIPTION QUANTITY
Actual Hours Worked
Name Trade Straight Time Premium Time Description Quantity
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 74
Part I
Date: ________________________________________
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 of
the work required by this Change Proposal Request shall be the same as originally specified in the project. Where an
item 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 extra
to the contract. Adjustments to the contract price caused by this extra work and material shall be computed and paid for at the fair and reasonable
value of the work and material.
Authorized Signature: ____________________________________ Date: ____________________________
Position: _______________________________________________
Company Name: ________________________________________ (Continued)
E.4 Change Proposal/Order Form
Instructions:
G Part I is to be completed by the Contractor;
G Part II is to be completed by the Subcontractor;
G Part III is to be completed by the Contractor and
executed by the Contractor and Subcontractor.
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 75
Part II
Change Proposal
A. J Subcontractor agrees, subject to Contractors approval, to furnish all labor, materials, equipment and services to perform the work required for
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 and conditions
of the Contract shall remain the same.
B. J Subcontractor agrees, subject to Contractors approval, to furnish all labor, materials, equipment and services to perform the work required for
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 _____% for the
sum of _________________ dollars and an (increase) (decrease) (unchange) calendar days in Contract Time. Except as changed by this change
proposal/order form all terms and conditions of the Contract shall remain the same.
_______________________________________________ by ____________________________________
(Subcontractor)
_______________________________________________ ______________________________________
(Address) (Title)
______________________________________
(Date)
Part III
Change Order
Contractor ______________________________________ Contractor Division No.: _______________________________
Owners 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-described
Contract and the Subcontractors 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 ___________________ days.
Date of Substantial Completion as of the date of this Change Order therefore is _____________________
IN WITNESS WHEREOF, the Contractor has executed this Change Order in four original counterparts.
Date:________________________ Contractor: ________________________________________
By: ________________________________________________________
(Title)
Date:________________________ Subcontractor: _____________________________________
By: ______________________________________________
(Title)
Guidelines for a Successful Construction Project. Copyright 2008, The Associated General Contractors of America/American
Subcontractors Association, Inc./Associated Specialty Contractors. 76