Negotiating a Construction Contract as a General Contractor
Negotiating any type of complex business transaction is a skill. Construction contract negotiations require much foresight and anticipation of possible delays and other difficulties. Each party is theoretically on the same side, however, there is a tug and pull. The owner will want little to no delays and the general contractor wants to agree on design technicalities to stay within the scope of work. Therefore, there will be instances where the two sides are at odds. As a general contractor the key is to focus on a three major items that will facilitate a smoother project (1) statement of work, (2) project schedule, and (3) dispute resolution.
“Lock Down” the Statement of Work
During contract negotiations, the contractor should push the owner for a strong statement of work. The statement of work details and captures all aspects of the project including the activities, project deliverables and timeline. The statement must be “airtight” in that it must completely chronicle all the work the contractor expects to deliver to the owner within a certain timeframe. Other important components of a statement of work include scope and payments. The scope will discuss the boundaries of the project. The contractor should not leave this section as open-ended. If things change in the future, the contractor can use this portion of the statement of work to dictate how much more work they are willing to complete. The payments section simply details when the contractor should expect payment.
Use Project Schedule to Your Benefit
The schedule associated with a construction project can sway toward the interests of the owner or the general contractor. As the general contractor, you are interested in having enough time to meet your deliverables and providing quality work. The owner may very well have the same goal. On the other hand, the owner may want things done expeditiously as a cost-saving tactic. A great negotiation tool is to leverage the owner’s need for a speedy job to a schedule that encompasses more milestones–thus more payment dates. Quality, of course, should not suffer. So when negotiating around the schedule, the contractor should know based on their expertise that they can deliver a quality service.
Dispute Resolution Strategies
Each party will select a dispute resolution process that is advantageous and less costly. Sometimes, it is less costly to file in court than go through an arbitration process. Similarly, perhaps mediation is a happy median between court and arbitration. As a contractor, it is wise to anticipate the areas where disputes can arise including possible delays, scope and design issues. Before going through a formal dispute resolution process, a contractor should negotiate an administrative, non-legalistic process to reach a resolution. This should be limited to the type of issue being addressed and other important limits.
Your Florida Construction Law Attorney
Attorney Brendan A. Sweeney is an experienced Florida construction law attorney with years of experience negotiating, drafting and advising on construction contracts. Your construction project does not have to experience avoidable delays and costs. Contact us now for a consultation.