This article is for clients with Residential Construction problems, and seeking to hire a residential construction expert with single-family and multi-family housing expertise. Our examination of other residential disputes can be found at our Single-family, Multi-Family, Assisted Living Construction page.

We advise clients about how to avoid some of the common construction disputes issues that have arisen on custom, semi-custom, tract home and multi-family residential projects on which we have worked as construction defects consultants, construction claims expert and/or construction expert witness over the past 22 years.

Residential Construction Experts Consultants

The problems that we see repeated over and over again by owners, architects and contractors fall into all phases of residential construction work:

  1. Design Problems
  2. Bid and Award Issues
  3. Construction Problems
  4. Construction Closeout Problems

DESIGN PROBLEMS

E1 – The architect’s failure to understand or satisfy its responsibilities under B141, A201, and other contract documents. Waiving consequential damages under the 1997 B141 document, and approving or denying contractor time extension requests and delay claims without having performed a CPM-based schedule analysis are examples. Delay assessments akin to “Kentucky Windage” currently seem to be popular.

E2 – Architectural design and specification errors resulting in change orders, cost growth, diminution of value, delays, and construction defects.

E3 – Inadequately coordinated civil, structural, architectural, mechanical and electrical designs. Issue No. 41 of the E-M@il Construction Reporter addressed related topics.

E4 – Designs performed by, or under the direction of, the architect that are inconsistent with the owner’s budget and cost objectives. This issue is one of the most common and predictable causes of disputes.

E5 – Incomplete designs and specifications prepared by the architect resulting in changes, budget/cost growth, delays, and defects.

E6 – Architect over-billings for services, incidental costs, and project administration.  The architect’s requests for payment of amounts associated with design phase milestones, without having fully performed all of the duties and deliverables defined for each phase or milestone, is an example.

E7 – Problems arising from deficient site investigations, topographical, geo-technical, soils and water studies and related designs resulting in cost overruns, delays, and defects. Inadequate or improper expansive soils investigations will be discussed.

E8 – Unrealistic owner expectations with regard to the desired square footage, features and finishes versus cost budgets. This issue is also one of the most common and predictable causes of disputes. We have found that decisions as to the type and quality of finishes are often made or influenced by the owner’s interior decorator or designer without regard to, and without input from the contractor on, budgets or unit costs.

E9 – The owner’s failure to contract with the architect for design coordination or to otherwise ensure that the work of all design consultants are being coordinated. E.g., Penny-wise and pound-foolish.

E10 – The owner’s failure to contract with the architect for construction administration/construction observation services. Cases involving absentee and inexperienced owners will be presented.

E11 – Architectural design and specification errors resulting in change orders, cost growth, delays, and construction defects.

E12 – Inadequately coordinated civil, structural, architectural, mechanical and electrical designs.

E13 – Despite the guidance and direction provided by carriers, counsel and consultants, many architects continue to fail to understand and satisfy their responsibilities under standard form AIA documents such as B141, and A201, and similar custom form contract documents. Waiving consequential damages under the 1997 B141 document, and subsequently approving or denying contractor time extension requests and delay claims without having performed an analysis even remotely comparable to a CPM-based schedule analysis are recent examples.

E14 – Designs performed by, or under the direction of, the architect that are inconsistent with the owner’s budget and cost objectives. This issue is one of the most common and predictable causes of disputes.

E15 – Architect over-billings for services, incidental costs, and project administration.  The architect’s requests for payment of amounts associated with design phase milestones, without having fully performed all of the duties and deliverables defined for each phase or milestone, is an example.

E16 – Problems arising from deficient site investigations, topographical, geo-technical, soils and water studies and related designs resulting in cost overruns, delays, and defects.

BID AND AWARD ISSUES

BA1 – Owner failure to perform adequate, if any, contractor pre-qualification and background investigations.

BA2 – Owner failure to solicit more than one competitive bid for construction.  This is often a consequence of the owner’s desire to bring in a sole source contractor. “A friend said that he did a good job.”

BA3 – Project problems resulting from a fundamental lack of understanding and agreement between the owner and contractor as to whether the contract is a Lump-Sum or Cost Reimbursable with, or without, a Guaranteed Maximum Price. Hard to believe, but this might be the most common issue in disputes.

BA4 – During contract formation and negotiations, we find that the following issues are often inadequately defined and lead to conflicts during and after construction:

1. The basis for, and composition of, the contractor’s fee.

2. The definition of allowable, unallowable, reimbursable and non-reimbursable costs.

3. The composition and level of budget breakdown for pay items necessary to adequately control and report billed costs, progress and earned revenue.

4. The allocation of change orders to budget or pay items relative to billing practices and progress measurement.

Have you ever seen a residential contractor allocate change orders back to the original pay app budget line items?

CONSTRUCTION PROBLEMS

Our experiences reveal that all too many architects perform time extension and delay assessments without performing any type of schedule analysis. A change order to move or add a door in a room might cost several thousand dollars and the work might take weeks to complete, but it might not be critical path work or the basis for a time extension.  If the architect is not proficient in CPM schedule analysis, hire a schedule consultant.

Message to Clients: Schedules that are at best an afterthought during construction often transform into gold bullion during a dispute.

C1 – Construction start before the design and specifications are complete, resulting in budget/bid allowances for undefined scopes, and ultimately in changes and cost increases. What percentage of pleadings would you guess contain the word “allowance?”

C2 – Delays to construction work for utilities, earthwork, foundations, framing and dry-in resulting in work during unfavorable winter conditions leading to increased inefficiency and delay related costs.

C3 – The contractor’s lack of timely notice and quantification of delays, impacts, and changes, if contractually required, particularly for Lump-Sum and Guaranteed Maximum Price contracts.

C4 – Contractor periodic pay applications that are either inadequately supported or that improperly calculate pay item percent completion resulting in over-billings.

C5 – The architect and contractor’s contributions to construction defects resulting from poor workmanship, and installations inconsistent with the contract documents and/or construction standards.

C6 – The contractor’s mismanagement and inadequate control and coordination of work resulting in delays, inefficiency, rework, defects and cost overruns.

C7 – The contractor’s lack of sufficient manpower, equipment and materials to progress the work adequately and efficiently.

C8 – Contractor over-billings resulting from a fundamental misunderstanding as to what is allowable under the terms of the contract.  Over-billings may include unsupported costs, costs specifically identified as unallowable in the contract, and costs for non-compensable delays, inefficiency, rework and mismanagement.  Further, for Lump Sum and Guaranteed Maximum Price contracts, over-billings are frequently comprised of pay item/total costs that exceed the current contract and pay item values, unless otherwise justifiable for compensable impacts and change orders.

C9 – The contractor’s lack of understanding of its responsibilities under A111, A201, and other contract forms. Do your clients really read and understand their contracts?

C10 – The architect’s mal-administration with respect to its contractual duties such as field observations and reporting with regard to construction defects, quality, progress, and conformance of the work with the contract documents; and the evaluation of contractor change orders and pay applications.

C11 – Design/construction cost increases and schedule delays related to owner constructive interference, lack of timely decisions, changes and upgrades, and the effects of impacts related to other design/decorator and construction personnel retained by the owner.

C12 – The owner’s unwillingness or inability to pay for cost overruns associated with valid changes and upgrades, and in general, cost overruns above the owner’s budget/cost expectations even though:  1) the owner may have benefited or been enriched by such overruns, and/or 2) may have contributed to cost overruns resulting from owner caused changes, delays, acceleration and inefficiency.

C13 – The owner’s late pay, under pay, and no pay of contractors’ periodic and final pay applications. The payment process is frequently complicated when contract change order and notice provisions are either ignored or improperly implemented by the parties.

C14 – The owner’s lack of understanding of its responsibilities under A101, A111, B141, A201, and other contract forms, the consequences of which may be further exacerbated when the inexperienced owner attempts to perform the duties and obligations of the owner’s representative.

C15 – Lack of adequate documentary support for the cost of the contractor’s self-performed work.

C16 – The owner’s failure to formally communicate, particularly in writing, with the contractor during construction regarding the issues that later form the basis of the owner’s complaint against the contractor.

CONSTRUCTION CLOSEOUT ISSUES

CLO1 – Liens submitted by the contractor for excessive and unjustifiable sums, due to a lack of proper adjustment for non-compensable items.

CLO2 – With respect to defects, the owner’s failure to provide notice to the contractor of the defects and to provide the contractor an opportunity to cure the defects, the provision of which are usually described by contract warranty clauses.

CLO3 – Contract closeout, audit and final payment provisions that are ignored or inadequately implemented by the parties.

CLO4 – Contractor final pay applications, particularly for Cost Reimbursable and Guaranteed Maximum Price contracts, which are overstated and excessive because the final billings include:

1. Unallowable costs as defined contractually,

2. Unsupported costs,

3. Unjustified billings/costs in excess of current budget line item amounts,

4. Excessive/imprudent costs for contractor caused rework, mismanagement, delay and inefficiency.

CLO5 – The owner’s desire to hold the contractor to an unreasonable standard of care, or a standard of care inconsistent with residential construction practices.

CLO6 – The owner’s improper determination of the final cost of the work under GMP and cost-plus contracts.

These are real-life issues that arose on Holloway Consulting’s construction consulting and construction disputes engagements. They arose on projects with sophisticated and unsophisticated owners and developers, and on projects with sophisticated and unsophisticated designers and contractors. No group is immune from these problems.
Contact us about your construction project.

Call us at (303) 984-1941 to discuss your residential construction project.

And, the right side bar of each page here contains many related articles and posts.

The Holloway Consulting Group, LLC
Residential Construction Experts
10885 W. Beloit Pl
Lakewood, CO 80227
Denver Phone: (303) 984-1941
Fax: (303) 716-0432

Email: steve.holloway@disputesinconstruction.com
Blog: disputesinconstruction.com
Web: hcgexperts.com

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