Tough Markets Breed Controversy

The recession has been less severe in western PA but it is real. One of the byproducts of tighter conditions is increased competition & therefore more angles played & corners cut. Bids have been coming in well below budget on most projects for a year, although architects/developers have now moderated those budgets down to meet the expected market. Still, when the low contractor is 10-15% below the mean (or often the second low bid) that usually means that he has an angle or corner the architect/developer hasn’t considered.

This can be a more creative solution to the problem of building the job but often it means doing a better job of finding the holes in the documents to be exploited later, or counting on the conditions to create enough confusion or slow response to RFI’s that delays (and claims) will follow. Neither of these are good things for the owner.

Add to that now the gulf that is growing between the revised AIA 201 contract documents (a historical standard for construction contracts) updated in 2007. The revision was the first not endorsed by the Associated General Contractors of America because there are several revisions that attempt to shift the risk of uncertainty in documents to the contractors without compensation & that put the onus for interpreting design intent on the contractor not the designer.

Locally that has led to some interesting documentation on project plans & specs. In the case of the $80M Bethel Park HS there were notes on the addenda drawings to the effect that the drawings were to be considered a convenience for bidding & that the architect wasn’t responsible for the accuracy of those drawings. There was also an interesting mechanical spec section that stated that the specs were intended to outloine the best system available but the contractor was to figure out if something else was better. In the case of Montour’s $45M project the bidders were asked to sign a document that certified that they understood the documents to be an accurate representation of the architect’s intent, which would effectively close the door on future “re-interpretations” of the intent.

(Montour bid March 30 and came in just under budget. Yarborough Development was low at $23.948M on the general. The other bids were Burchick at $25.189M & Mascaro at $25.198. None of them verified the accuracy of the documents as was requested in the documents. See the complete results at the Pgh Builders Exchange http://www.pbe.org/ipin/ProjectAL.asp?txtPID=2006-09FE-A)

These changes in documents are an understandable attempt by archtiects to deal with a trend that has resulted from their dealing with tighter competitive conditions for some time. Tighter fee structures and unrealistic expectations from the clients have resulted in less and less complete plans over the years. Contractors have exploited those incompletions to create change orders (mostly a reaction to their own competitive pressures) so this change in language to shift the risk of the owner’s expectations to the contracting side of the table is meant to reverse the trend. Contractors don’t have a professional liability or the training to interpret owner’s intent into a design, however, and this strategy isnt likely to hold up when challenged in court.

The Montour project will be an interesting test. Roughly half the bidders chose not to verify the accurate intent of the documents statement, including several of the low bidders. If the district accepts the bids as is there will be no incentive for similar disclaimers to be included. If the district decides to reject the bids that did not consent to the disclaimer there will have to be a re-bid of a job that has already bid twice over two years, and that was in under budget. The politics of that will be interesting.

School board members are volunteers, often with a single issue ax to grind. Rejecting these bids will cause a hailstorm from taxpayers & the rejected bidders will probably sue. That would test the risk-shifting pretty quickly. Stay tuned to the local news….

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