Preventing Owner Risk in Contracts through Advocacy

Services: Owner’s Representative  
Dept: Construction Solutions 
Market: Manufacturing 

GOALS 

Our client needed partial owner representation services due to a situation in which they held all the risk in a signed contract with a contractor. The contract did not contain a finalized schedule or locked-in cost, which caused the contractor not to perform cost-effectively. The estimate increased from $2 million to $16 million with the potential to go higher, as it was being handled as a “cost of work” (which is where the contractor gets paid for what they spend).  

An undefined schedule also needed to be resolved as it was impacted by the architect and designers not meeting deadlines or following customary document control processes. The owner also required location and area changes to the project. The client had promised a product production output in late July to investors but was worried about their confidence and needed an explanation for the delay.  

SERVICES/SCOPE  

STRUCTR provided partial owner representative services to our client which included: 

• Fostering a GMP estimate between the client and contractor, which outlined the guaranteed price for scope.  

• Establishing a contract with an agreed upon schedule, including liquidated damages to the contractor for the missing schedule.  

• Overseeing the architects and designers, applying pressure for deliverables and reviews, and implementing documentation control methods for ASI’s, RFI’s, and meeting minutes.  

• Reviewing pay applications and change orders from contractors and designers to ensure that costs were all accounted for and processed.  

• Developing messaging for the client to explain the situation to the investors.  

APPROACH AND CHALLENGES 

The approach for this project included applying pressure for deliveries, establishing contracts, and shifting the risk from the client to the contractor. The challenge was having everyone involved agree on the new approach after they had already been on a different track for the project. STRUCTR needed to provide focused attention to detail and oversight as this was a complicated situation to resolve. The team worked diligently to ensure that the client received the necessary protection in new contracts and agreements in order to save them a significant amount of time and money. 

IMPACT  

Through the services provided by STRUCTR, the client saved $1.5 million in the budget and was provided with peace of mind, knowing that the contractor was being held to agreements, as the risk was shifted from the client to contractor. Additionally, the client was armed with a factual message to deliver to their board members.