Its already April and the first quarter of 2011 is behind us. As we enter the second quarter and the construction busy season I offer the following tips to help contractors avoid problems and get paid in full and on time. There are no new breakthroughs here, but sometimes in the construction industry we need to take a step back and look to the basics of efficient project management:
1. Read your contract. Not all contracts are the same so no matter how much you think you know, read the contract. Better yet, have your attorney review your contract before you sign it. Paying your attorney for a couple of hours to review and edit your contract can save you thousands of dollars down the line.
2. Get your change orders in writing. I know, the project foreman authorized the change and needed it done right away but he gave you his word. His word is much better in writing. A good tip is to keep a set of blank change orders on site or in your project super's truck. If something comes up on site and an immediate change order needs to be carried out you can write up a quick change right there on site and avoid any delay. If you have the time for a formal change order to be exchanged between offices then by all means do it. But a quick hand written change order written on site and covered in dirt is better than a dispute over what was orally requested.
3. Read your lien waivers. If you are receiving progress payments you are undoubtedly signing lien waivers with each payment. Make sure they are not final lien waivers and make sure the amount reflected in the waivers is accurate. Never sign a final lien waiver until the project is complete and you have received or will simultaneously receive your final payment.
4. Know and understand your contract's dispute resolution procedures. Don't assume you know what to do and don't assume that because you have done it a certain way before than you can handle this project the same way. Many contracts identify a specific period of time in which you must raise a dispute. Sometimes the period is as short at 10 days. The AIA A201-2007 will require you to submit the dispute to the initial decision maker before you can take any other action.
5. Decide quickly when to lien. I've written several articles about the choice of whether to file a mechanic's lien or not. Rather than go into the details again I will simply say this: a mechanic's lien that is filed too early can be just as problematic as a lien that is filed too late. However, waiting too long may result in the lien fund being extinguished.
7. Act quickly when dealing with missed payments and be proactive. It all starts with the contract. Identify late payments in your contract and identify your rights. Make sure you address who is responsible for mobilization and demobilization, make sure you identify when you can demobilize, make sure you identify when you can suspend work and when you can terminate work. Once a payment is missed, go to your contract and see what your options are. Don't wait and hope that payment will be coming. Begin the process of securing the claim and beginning the dispute resolution process.
Vincent T. Pallaci is a partner in the New York law firm of Kushnick Pallaci, PLLC where his practice focuses primarily on construction law. He can be reached at email@example.com or (631) 752-7100.