CREJ

Page 6 — Development, Construction & Design — June 2018 www.crej.com TO PURCHASE TICKETS & FOR MORE INFORMATION PLEASE VISIT WWW.CO.ASID.ORG DATE: Thursday, July 12, 2018 VENUE: Denver Center for The Performing Arts, Seawell Grand Ballroom TIME: Cocktail Hour 5:00pm–6:30pm Awards Ceremony 6:30pm–9:30pm After party until 10:30pm TICKET Members $165 PRICES: Non-Members $195 Table of 10 $1950 S tudents $85 20 student tickets available on a first come basis AFTER JULY 4, 2018 Members-$265 Non-Members-$295 Ticket sales close July 9th. No tickets will be sold at the door. SPONSORED BY Celeb ating40Ye fE cellence AIN’T IT GRAND? The American Society of Interior Designers Colorado Chapter is celebrating the roaring 20th anniversary of the Crystal Awards. Please join us and our special host, CHRIS PARENTE, as we party like Gatsby, and celebrate the standout talent of those exceptional designers who are redefining excellence in interior design. TICKETS ON SALE T he construction sea- son always serves as a reminder of common issues that emerge in construction contracting. As a construction attorney, I advise clients of these top five steps to avoid later issues: 1. Remember the basic objectives. When procuring and contracting for construc- tion work, consider your fun- damental objectives. What are these objectives? You want the project you envision – the scope and the quality. You want the project done on time and you want to know what the proj- ect will cost. Assure that your construction contracting and management approach achieve these three objectives – scope, schedule and cost. The con- struction contract is the legal tool and roadmap to achieving these objectives, and it is worth the time to do it right. 2. Understand the project delivery method and pric- ing tradeoffs. There are three basic project delivery methods: design-bid-build, construction manager at risk and design build. In general, they reflect, in descending order, greater to lesser degree of risk, con- trol and responsibility that the project owner takes in meeting the project objectives outlined above. With design- b i d - b u i l d delivery, the owner sepa- rately con- tracts for design, final- izes the design with the archi- t e c t / e n g i - neer, requests bids, selects the lowest responsible and responsive bidder, and contracts with the construction contractor for the bid price. This approach typi- cally assures a competitive cost, but forces the owner to bear the risk and responsibil- ity that the design is adequate and complete vis-à-vis the contractor and to separately fight any battles over design issues with the architect. In- house expertise is critical. With construction-manager- at-risk delivery, a construction manager coordinates the bid- ding and takes responsibility for bringing in a project on budget. With design-build delivery, a program or development manager takes responsibil- ity for managing the design and construction process and satisfying the owner’s design program requirements, budget and schedule. Many projects employ hybrids of these gen- eral approaches. Construction projects also use several different pricing structures. All of these pricing structures can be implemented with any of the project deliv- ery methods. • Cost plus. The contractor is paid for its hard costs (mate- rials, labor) plus a percentage for overhead and profit. The owner takes the risk of cost overruns, but pays for what the owner buys. • Guaranteed maximum price. The contractor is paid for its hard costs plus a per- centage for overhead and profit up to a guaranteed maximum price. In its pure form, this method incentivizes the contractor to charge no less than the GMP, but gives the owner some comfort that costs will not exceed a cer- tain amount. Shared savings provisions can help incentiv- ize contractors to complete the project for less than the guar- anteed maximum price. • Fixed price. The contrac- tor is paid a certain amount regardless of the cost of the work. The contractor and the owner make a bet on how much the work will cost. The contractor takes the risk of any overruns and the owner has certainty. The contractor usually has more information, however, and may build in a comfortable margin to address risk – or take profit. Usually the degree of con- trol and risk the owner takes is inversely related to price, unless the owner negotiates an excellent contract and man- ages the project very well. However, the tradeoff may be worthwhile if the owner does not have the staff or expertise to manage the project. Think through what delivery-pricing approach is best suited to the owner’s expertise and cost- management objectives. 3. Watch out for procure- ment pitfalls. Projects that involve public funding sourc- es also will involve contract- ing and procurement require- ments that must be observed as a condition of funding. While many construction projects may be managed on behalf of private owners, even those projects may have some public involvement. Does the project use feder- al funding? Transit-oriented projects, for example, may involve federal funding. Fed- eral reimbursement may be unavailable if you have not observed federal procure- ment requirements or have not included mandatory fed- eral contract provisions. Proj- ects with public elements that are constructed on behalf of a special district or that use tax-increment financing sourc- es, such as roads and infra- structure in a commercial or residential development, for example, or are constructed on land held by a public entity, also may trigger procurement requirements. Competitive processes, nondiscrimination, and other contracting and pro- curement requirements may apply. Sometimes you can cure pro- curement missteps later, but it is easier to plan for compli- ance and put it in the contract. 4. The words matter: Get the contracts right. It seems basic: You execute a contract so that everyone knows what to do, when to do it and at what price – and they don’t conveniently forget. Construc- tion contracts tend to be long and tedious to read, and have multiple components. How- ever, if you don’t understand the contract, neither will the other parties, and neither will a court. Moreover, courts will interpret unclear contracts by Lawyer to owner: Issues in construction contracting Construction Polly B. Jessen Partner, Kaplan Kirsch Rockwell Please see Jessen, Page 19

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