Look before you leap: Confirm your risk before executing a contract on an existing structure

After the tragedy at Champlain Towers South in Surfside, Florida, many building owners are re-evaluating their maintenance procedures and the status of necessary repairs. As a result, they are reaching out to contractors and engineers throughout Florida to develop bid packages and solicit bids for necessary repairs. While these are lucrative projects for both contractors and engineers, it is important that contractors are aware of the risks associated with performing this kind of work.

The first place to start when assessing the complexity and risk of performing restorations or any work on an existing structure is with the contract documents – bid documents, specifications, plans, surveys, etc. Owners often do not want to spend much money up front when beginning their project, which can leave gaps in the information available to a contractor prior to executing an agreement. In light of recent developments, contractors should push owners to complete comprehensive pre-construction surveys. If additional investigation is not feasible, then contractors should focus on adding limiting language to their agreements.

Different owners and projects use different variations of contract templates, which further complicates and reinforces the importance of reviewing all documents before executing an agreement. For example, the American Institute of Architects (AIA) has several forms that address various types of projects that may be applicable to these situations:

• A101-2017: Standard Form of Agreement Between Owner and Contractor
• A201-2017: General Conditions of the Contract for Construction (used with the A101)
• A102-2017: Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price
• A103-2017: Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee without a Guaranteed Maximum Price
• A104-2017: Standard Abbreviated Form of Agreement Between Owner and Contractor

Section 3.7.4 of the Standard A201, which is incorporated into several documents, includes a large section on “Concealed or Unknown Conditions.” The section imposes an obligation on the contractor to promptly notify the owner if the contractor “encounters conditions at the site that are (1) subsurface or otherwise concealed physical conditions that differ materially from those indicated in the Contract Documents or (2) unknown physical conditions of an unusual nature that differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents.” While the section allows the contractor to seek additional compensation or time, the ability to recover for these circumstances is dependent on what is included in the contract documents.

This is just one example of standard language used in one type of form – and as stated, there are many different forms in use in the industry and some owners prefer to author their own unique documents. While no contract is perfect, now is the time for contractors to push to ensure they are protected in their contract documents. The complexity and risks associated with restoration work requires diligence at the negotiation stage, and putting the time in up-front is worth it to contractors to make sure you are not accepting unnecessary risk.

Reach out to one of our construction attorneys to discuss the best ways to transfer and mitigate your risk.