Digging into Construction Extras

 In Mark's Message

Wait, did I just use the word “Extras” in the title?  Google the words “construction extras” and the results are all framed in a legal situation or case law summaries.  There must be a reason why only legal firms are talking about this in public.  It’s probably because like death, taxes and divorce, there is money to be made (by lawyers) in extras.

How do extras happen?  Well, here are a couple different types of extras…

One type is when an owner decides to change something (or a consultant on behalf of the owner modifies a design after tender).  These situations should be relatively easy to deal with in writing. The contractor needs to handle these changes the right way to avoid having a “working for extra” situation turn into a “working for nothing” outcome. Any competent legal advisor will tell you that even though “change order” has the word “order” in it, it needs a bi-lateral agreement to be truly effective.

The other main type of extra is when a contractor or a subcontractor decides that the work that is happening, or has to happen, is well beyond the scope of what was originally intended by the contract in order to complete the project the right way.  This is often the much more contentious type of extra.

So why do extras occur?  “Contractors taking advantage” might be something a prime consultant or architect might answer.  “Incomplete, inadequate, or improper design by the project team” might be the typical response from the General Contractor who won the bid. Oftentimes, “Low bid, or extreme competition” may also be a possible contributing cause.

What do these extras frequently come down to within the framework of a contract and design-bid-build tender set? The designer or owner meant one thing, and the contractor interpreted another.

One can easily picture the sides of the argument willfully stacking up against each other, and their lawyers start to count the number of $450 per hour to get a nice piece out of this situation.

The rise of alternative procurement, specifically design/build and P3, could be interpreted as a clear indicator of the construction industry’s desire to move away from the inherent scope creep that all too often occurs in the design-bid-build process.  In the case of a design/build or P3 project, everyone has the clear advantage of a close-knit group that works together to manage and control the scope of their project.  In the case of traditional design-bid-build, the scope is all too often crystallized at either side of the table (design team vs low contractor) at the tender close – a relatively short process (weeks to maybe a month or two), when compared to the actual design process, which is usually many months to a year or more.

So what’s the deal with the design-bid-build tender process anyway?  GC’s are expected to review, gather sub prices, and bid on the job, all usually within a three to five-week period! How many General Contractors reading this have uttered the words “Please let there be an extension!” By contrast, keep in mind the design itself was already completed many months prior to the GC coming into the picture, by a design team that has actually had time to go through the many design phases in order to get to the tender that is put out there for all to see.

What about the Addenda? Addenda is a tool to catch errors, gather feedback from contractors bidding the work and to make adjustments. It’s always the same often cumbersome process; addenda are issued, then have to be plugged into the giant tender set by the GC at the right location, then it has to be reviewed against what the GC is already pricing, so that he can make any necessary adjustments.  It’s no wonder most GC’s just wait for all the addenda to be done before taking a hard look at the tender in its final state.  That might often leave them with as little as four or five business days to review it all!  Not really enough time if you ask me.

GC’s are also often presented with contract clauses where they are expected to convince themselves that the design is completely valid and to take on all risks and responsibilities for the project, no matter what the potential pitfalls are!  I’m not convinced that that’s fair, given the amount of time the contractor is given to review the project.

A GC needs sub-contractors to ensure the positive outcome of a project.  In design-bid-build, the subs often submit their prices at the last minute, and the GC also has to give it a good look in order to assume the overriding risk of that sub’s work; i.e. they must ensure that the product put forth by the sub meets the exact criteria outlined in the design, and that the sub can help to meet or improve the overall schedule.  The GC oftentimes accomplishes this by binding the sub to the prime contract in an effort to make them responsible for the risk factors associated with their scope, as well as any other risk factors of the prime contract that they can tie them to.

Design clarity and understanding is important. Is the tender in clear and plain language so that contractors can make enough sense out of it to price it in a 4-5-week (more likely a 1 week) period?  Do the designers take the time during design to ensure that the plans and specs are unambiguous and understandable?

What about the design process for the design-bid-build project?  Do the designers themselves get enough of a budget to ensure a proper design, and an accurately specified specification, therefore reducing the risk of cost overruns and extras?  Do owners force too much competition and are they simply facilitating a race for the bottom by getting a low-price designer on the project, with the resultant tender package suffering as a result?  That’s then low bid upon low bid!

Now let’s take a minute to dig below the surface of all of this. Who scopes out, for example, the geotechnical investigation in a design-bid-build?

That’s really what the root of many extras is – isn’t it?  We understand steel, concrete, and finishes pretty well, can usually predict exactly how they behave, and can manufacture them the exact way we want.  What about in the case of earthworks, excavation, shoring, soil conditions, or groundwater, i.e. dirt stuff?  Someone or something else put the soil there and nobody has X-Ray vision (although there are some cool non-destructive geotechnical investigation methods out there).

Purveyors of large public infrastructure projects (I/O, TTC, MTO, etc.) use or employ geotechnical engineers to scope out the geotechnical investigation for their projects.

The GC-owner relationship is not the only place extras occur. Extras also occur in the geotechnical sub-contracting and dirt sub-contracting world too.  Extras can happen when deep foundations can’t reach bottom or are impeded by obstructions. Extras also occur when dig/replace approaches encounter unexpected soil or groundwater conditions, which always end up increasing the volume of material exported/imported, or the length of time that construction will take. Extras can also happen when the groundwater is not well defined or the soil ends up being different than expected during digging.

In the case of the geotechnical examples I’m giving you, owners and designers luckily have a range of alternative ground improvement solutions for their challenging soils. Ground improvement fortunately takes a work smart approach to challenging soil sites, making it necessary to have clean understanding and planning for variances in soils. When scoping out and identifying the best approach to complex soil challenges, it is important to note that not all ground improvement approaches are created equal, or are appropriate for all soil conditions. It’s very common in the geo world for consultants to not even be given the budget and scope to understand the differences between various proprietary design-build geotechnical techniques, particularly when it comes to which methods work for which soil conditions. It is important for project teams to consult with specialty contractors to ensure the systems they are specifying deliver the required performance.

Low-bid geotechnical with poor scope can also often result in extras, for example, when additional drilling may be necessary on a site, but wasn’t originally scoped. These are typically small in comparison with the extras that can result from an erroneous or incomplete geotechnical investigation. The low-bid geotechnical engineering firm may not always present such options during the investigation, when it may be the best time to add scope.

If the scope of a geotechnical investigation cannot be properly outlined initially, perhaps a small “extra” during the geotechnical investigation should be pushed more often by the geotechnical engineer to the owner, particularly when that’s the right thing to do to avoid much larger problems later during construction. Unless the geotechnical investigation has enough depth, quality and resolution it becomes harder to price work accurately, and a light geotech investigation can often result in extras.

What might be perceived as savings on geotechnical scope upfront during the design phase can result in much more cost in the long run.  If your geotechnical consultant, or maybe someone other than your geotechnical consultant, is telling you that more quality and quantity of geotechnical work is required on your project, it may be wise to take heed.

Whether you are an owner, a designer, an engineer, a contractor or specialist in the geotechnical construction field, I’m sure we can all point to situations where maybe low-bids didn’t work out so well in the end, particularly when you are digging below the surface.

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