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Behold: The construction contract

June 11, 2014
It would require the text equivalent of "Gone with the Wind" to adequately describe the details necessary to execute an average dental office construction project.
Oddly enough, it's not the fine print to which you are vulnerable

By Garrett Ludwig

It would require the text equivalent of "Gone with the Wind" to adequately describe the details necessary to execute an averagedental office construction project. As a result, most contracts, including the American Institute of Architects document, defer the "description of services" to the respective construction documents (AKA: drawings, plans, etc.).

The dreaded fine print in the construction contract, although duly worthy of scrutiny and evaluation, is simply additional legalese intended to protect one or both parties in the agreement. Eyes wide open: no harm, no foul.

So if the contractual fine print is essentially harmless, you might ask how you might otherwise be vulnerable. The answer is right there in big bold print: construction documents. The signed contract itself, replete with its legal jargon of both large and small print, is only an agreement stating that your contractor will "provide … in accordance with the construction documents" and you will "pay…."

As such, the actual contract for the services to be provided is contained in the construction documents. To wit, according to Merriam Webster a "doc-u-ment: [is] an original or official paper relied on as the basis, proof, or support of something." Those pretty pages containing dream-inducing images of your future office – formerly referred to as benign "plans" or "drawings" – will heretofore be known as "exhibits of the contractual agreement." Here's the kicker: The author of these documents is not a required signatory on the contract.

In most cases, there is no three-party communication (client, contractor, designer) prior to the signing of the two-party agreement. This often results in costly change orders. Yes, change orders are sometimes unavoidable. But, they should be limited to things such as unforeseen site conditions – not to be the expected norm.

I have witnessed projects that grew by as much as 30% in cost overruns. That is $90,000 on a $300,000 project, and 98% of those costs were predictable, preventable, or at least known potentials to be included in the construction cost proposal. No excuses.

We were recently asked to review plans that were prepared by another firm. The results of that review, although daunting, are immaterial. But I will note that the first sheet in the set of drawings contained a large text table listing services, dates, and trades for "change orders." Talk about your "red flags."

Also, visible in blazingly bold print were disclaimers exempting the designer from the responsibility of anything from building and life-safety code compliance to construction detail, deferring them to be addressed in the field or "by others." This placed the bulk of responsibility on the contractor. Despite this complete communication and budgetary disconnect, the client was prepared to sign a construction contract that left that person vulnerable to extensive additional costs.

Analogously, construction is much like dentistry. Both will have a superior result when thoroughly prepared and detailed. So, I would like to cite an example of the deficiencies that are quite common in construction documents. The drawings referenced above did note that a backflow preventer should be installed "per code."

This would be perceived by many laypeople as having met the obligations associated with compliance and inclusion as a budgetary line item. The fact is that the directive did not include: location (at water source/inline to defined locations), whole-house or dedicated run, size, manufacturer, model number, associated plumbing specifications (hard-plumbed/air gap/vacuum breaker), testable/nontestable.

The cost differential could easily span several hundred dollars. This is just one small, but costly, example of a predictable and preventable cost overrun. Professional design fees are fractional by comparison.

Besides construction details such as those that have been noted, it is vital that all materials be defined in advance. This is necessary for two budget-related reasons: 1. The cost of the products has an obvious impact on the budget; 2. The labor associated with the installation of different products can vary significantly.

This information is typically provided on the drawings and is referred to as construction schedules. This includes, at the very least, door, window, plumbing, lighting, and finishes. This data takes the guesswork out of construction cost estimating, and aids in the process of value-engineering (substituting a similar product of a lower cost) if needed.

For example, a door schedule will contain the following: height, width, thickness, detail (flush/raised panel/inlay/glazed), construction (hollow-core/solid-core) species, stain/finish, lights (glass – full/partial, divided), type of frame (wood/metal), direction of swing, type and finish of hardware, rating (fire protection).

The cost differentials can range in the thousands of dollars. You may have wanted cherry or maple doors with a distinctive grain. But the budget may only allow for standard Douglas fir. Imagine first-class dentistry in an average facility. This is what you're moving from.

So, that brings about another forfeiture – quality. Besides accommodation for growth and improved operational function, the most desired result is the achievement of an enhanced professional image – the "wow" factor. If you plan and budget for a granite transaction counter (as opposed to plastic laminate), it is likely that the cost would be quite manageable particularly if other products and services provided in the contract are value-engineered (if necessary) to make that accommodation.

Clearly your attorney will protect you from the potentially harmful legal vernacular of the contract with the general contractor or construction manager. But who is governing the content of the construction documents for the actual services that the contractor has agreed to perform? No one.

But all costs are yours to absorb because you agreed to pay for them whether by definition or by tacit acceptance of the designer's documents. In a nutshell, you have given the designer a blank check to spend as he or she sees fit with no accountability or remorse. There is good reason and practicality to hire a professional. They are the only ones who are capable of actually defining and managing your project and the associated costs of development.

Here is a footnote to hiring a professional designer. Make certain that the designer is not deferring any services such as MEP (mechanical, electrical, and plumbing) to a third party. It is essential that the designer have a full and articulable understanding of all equipment and associated construction materials and services.

Without that knowledge, the contractor will be unable to effectively control and manage the project. Please note that most of the contractors with whom we have worked are honest, hard-working, and accommodating people. Regardless, they are in business to make a living, and cannot perform their services for free.

Consequently, if additional work is required as a result of missing or insufficient information, they are entitled to be compensated for that work. That's the good news. For this small percentage of unscrupulous contractors – caveat emptor.

Finally, the contract to which your attorney's attention should be directed is the one between you and your designer. Paramount within that agreement are two major concerns: 1. Beware of disclaimers. Professionals "own" their work. 2. Request verification that the person is capable of providing the necessary construction details that will allow you to establish and adhere to a budget.

Garrett Ludwig is president of Diversified Design Technologies and specializes in dental office design. His design expertise is best summarized by his company slogan, "Profit By Design." The slogan speaks to the purpose and intent of creating functional, efficient, and fiscally sound design concepts. Contact Garrett at (800) 622-5563 or [email protected].

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