Commercial Investment Real Estate March/April 2019 | Page 33

also affect the critical path, which is the chain of interrelated activities required to attain substan- tial completion by the deadline. A trade or activ- ity that was not on the path last month may now be needed and vice versa. Being on the critical path means that a delay to any one activity delays the entire project. Hence, there are consequences to a sub if it falls behind. These issues must be expressed clearly in the contract. No AIA form (or any other form) of contract is suitable for every circumstance. But they all have been subjected to judicial scrutiny at some point, and they can be modified to include lan- guage specific to a job. If nothing else, they can provide the base contract, and you can prepare and execute an addendum. The same is true of the gen- eral conditions. Again, an AIA version is likely to have been scrutinized at some point. Knowing how a court will likely interpret yours is a big step toward resolving disputes early. A sales force cannot make a project proceed on sched- ule, but it can easily put it behind. A healthy percentage of modern construction is build-to-suit; many projects are sold or rented before ground is broken. Understandably, the owner wants to fit out the building as requested by the buyer/renter. It is up to the sales force to work with custom- ers to make decisions on a variety of options. Many options have little to no impact on the construction itself, though they often impact procurement and finishing trades such as the carpet/tile installer, millworker, and painter. But in other cases, especially multistory structures, they do impact the construction process and can, therefore, be a source of delays and job friction. The sales force must know the difference and understand the impact. The sales force also must get customers to make their selections on time. Tardi- ness could result in delays. If the job falls behind schedule, customers cannot take possession when promised, and revenue does not come into your pockets when you told the bank it would. The AIA forms adequately state the relationship between the parties, define success, provide remedies for failure — and do all three in terms that have but one meaning. the project. However, the AIA updates its forms every 10 years, so avoid using the latest version of that form if it is less than five years old becasue in all likelihood, there is no existing case law yet interpreting its language. Conversely, the forms that have been around awhile have probably been litigated a few times. The AIA forms adequately state the relationship between the parties, define success, provide remedies for failure — and do all three in terms that have but one meaning. Most contracts have flaws in their language that can lead to dis- agreements in interpretation. A court may have to interpret the language and determine its meaning. If the owner is using his own form or one chosen by the architect, there is a good chance no court has ever interpreted it — at least with respect to the issue now facing the project. That is seldom true of AIA forms. The goal is to avoid litigation. Still, if a court already has interpreted the relevant portion of a contract, the resolu- tion becomes easier. A typical example is where a prob- lem arises with monthly pay applications. How much the contractor and each of the subs are entitled to depends on production plus stored materials. The contract generally establishes the criteria and the means of determining the proper amounts. If the parties cannot agree on how that mechanism is to be interpreted, disputes can and do arise. The problem can be exacerbated if both sides are taking a principled position. Another common example is schedule updates. Every project has some sort of fixed scheduling. Depending on the complexity, the scheduling tool could be relatively simple or could be based on critical path methodology. In either event, updates usually are necessary as the project progresses. Because activities on the project tend to be interrelated, the timing on one activity is going to impact others. Changes usually occur when each trade can, or must, mobilize. If the contract does not address that reality binding the contractors to the updates as they are produced, a problem will develop when a given trade is accelerated or delayed. Such changes CIREMAGAZINE.COM Moving Forward Addressing these issues can help you assess whether your operation is organized and optimized to recognize and address small problems before they grow. All that is required is understanding both the source of a problem and an efficient means of fixing it. Some can be fixed prior to putting the bids out; some will be a bit more on the fly. Whatever the problem, it is not a disaster — at least not yet. Your job is to make sure it never becomes one. Wendell L. Jones is an attorney at Kentucky Surety & Construction Law PLLC in Louisville, Ky. Contact him at [email protected]. March | April 2019 31