Construction File: The Pitfalls of Incomplete Contract Documents

In providing a price, contractors expect that the contract documents are complete and reflect the project requirements, and that any changes, errors or omissions from the documents will lead to a change order with commensurate adjustment to both the contract price and duration. As the bidding is done in a competitive environment, contractors and their subcontractors are reluctant to add allowances to their tendered price, fearing that they will not be successful as low bidder. While the design may have taken several months to complete, the contractor is often unfairly expected to verify the consultant’s drawings and specifications for deficiencies or completeness during a much shorter bidding period. To remain competitive, a contractor should be able to rely entirely on the contract documents, and that their price will reflect the scope of work outlined in the documents alone, even if the contract is loaded with onerous clauses.

Different researchers have conducted studies to determine the common causes of significant claims on contracts and the results seem to be consistent. On average, claims amounted to 30% of the construction value. Four of the major causes for claims were:

  • Inadequate site and/or subsurface investigation prior to starting the design
  • Starting design efforts too late and/or unduly limiting the cost of engineering and design
  • Calling for bids with an incomplete set of drawings
  • Endeavouring to complete the design through shop drawing review

The common feature of all these projects was hurriedly and incompletely prepared bid documents, giving rise to design changes, extra work, and quantity fluctuation during the project. Many owners may argue that such a high premium can be justified as long as the facility is available on the scheduled date. Unfortunately, experience does not support such an argument. The analysis of the reports revealed that nearly all of them suffered significant delays, notwithstanding any attempted acceleration. The average delay was 5.69 months, representing nearly a 50% overrun in the average planned duration. Had more time been spent in investigating, planning and designing these projects than they actually did, they would have saved at least 20% of the actual cost even had they paid approximately 50% more to their designers. It is safe to state that the ultimate cost of the project would be significantly lower if owners allowed more time to complete their design.

Best Practices for Complete Contract Documents:

  1. Owners need to recognize there is an implied warranty that the drawings and specifications that they provide to the contractors as part of a contract are accurate, complete and buildable and that the contractor is not responsible for the consequences of defects in the plans and specifications.
  2. The owner should not skimp on the front 10% of the project costs (architectural and engineering) at the expense of the latter 90% of the project (construction). Owners should demand that consultants provide 100% complete contract documents at the time a contract is tendered. If necessary, cash allowances should be well defined.
  3. Most contracts require the consultant to perform the first adjudication of an issue, but when the claim results from design errors and omissions in the contract documents, the consultant may be in a conflict of interest position. The result is a possible dispute between the contractor and the owner with possible litigation costs. A better approach may be for the owner to use a third party neutral to provide an independent opinion on issues that arise during construction.
  4. The use of onerous clauses to prevent a contractor from recovering costs due to incomplete contract documents is not a principled practice and may not be considered as being fair by the courts. It may therefore be either unenforceable or interpreted to the benefit of the contractor. This should be taken into consideration when drafting a contract.
  5. When consultants have been asked why incomplete documents are issued for contracts, the usual response has been that the fees are not adequate to do a complete job. Designers should be cautious that commercialism does not replace professionalism.

These are some sound fundamentals for achieving the schedule and cost objectives of a project. The most critical of the requirements is having drawings, specifications and other parts of the contract documents as close to 100% complete as possible at the time of executing a contract. If 100% is not achievable for some reason, then the contract documents must make provision for fair and equitable adjustments to the time and price in the contract as changes are issued. Otherwise, the spectre of claims and potential litigation loom on the horizon to the peril of all parties involved in the contract.

Acknowledgement: This document was prepared from information provided in ‘The Revay Report, March 2010’ – to access the complete report, go to http://www.revay.com/index.php/publications/the-revay-report/.

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August 23, 2019

BCCA Welcomes Trans Mountain Announcement Resuming Work on Pipeline Expansion Project

The BC Construction Association welcomes Wednesday’s (Aug. 21) announcement by Trans Mountain Corporation President and CEO Ian Anderson that construction work on the project will resume in communities along the route, including an immediate return to work at B.C.’s Burnaby Terminal and Westridge Marine Terminal. According to Trans Mountain, this will see 4,200 contract workers working along the route in B.C. and Alberta in the fourth quarter of 2019.
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August 20, 2019

Builders Code Ramps Up Services Across Northern Region

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July 04, 2019

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June 27, 2019

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March 19, 2019

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March 08, 2019

BC Construction Industry Introduces Worksite Conduct Standards to Improve Worker Retention

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February 25, 2019

Risk Alerts Issued for Two Provincial Construction Projects

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February 07, 2019

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January 22, 2019

British Columbia Construction Association Selected to Provide Pre-Arrival Services

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August 24, 2018

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August 02, 2018

Industry Voices - Industry Must Come Together

Premier Horgan's Community Benefits Agreement (CBA) is the most dangerous and disruptive policy to be introduced by any government into our industry in recent memory. Whether you are a union or an open-shop employer, your basic rights and freedoms as Canadians are being blatantly disregarded, as is government's obligation for fair, open and transparent procurement practises.
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July 27, 2018

Pattullo Procurement Strategy Takes BC Construction a Bridge Too Far

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July 18, 2018

Response to the Province’s Community Benefits Agreement Announcement

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June 21, 2018

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May 30, 2018

Understanding Risk British Columbia (UR+ BC) Video #URBC

The Understanding Risk British Columbia (UR+ BC) symposium, hosted April 16 & 17, 2018 in Victoria BC, marked the first time the construction industry played a leadership role in bringing together builders, designers, engineers, scientists, and policymakers to tackle the challenges of hazard mitigation and increased resilience in the industrial, commercial, and institutional built environment.
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May 29, 2018

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April 17, 2018

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April 12, 2018

UR+ BC Panelist: Jessica Shoubridge

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March 19, 2018

A Conversation with Dr. Lucy Jones

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February 20, 2018

BC Budget 2018 – What you need to know

“It’s an ambitious budget that is working hard to provide assistance to equity seeking groups, which we can all appreciate. But it’s likely to be hard on small businesses who will see increased expenses – this is concerning because employers already have a significant cost burden. “ - Chris Atchison, President, BCCA
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February 14, 2018

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December 18, 2017

"Best bid" named construction phrase of the year

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October 30, 2017

Women Build Nations

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October 03, 2017

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September 25, 2017

Deputy Minister’s Industry Infrastructure Forum (DMIIF)

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September 12, 2017

BCCA Responds to Budget Announcement

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September 07, 2017

Letter to Michael Atkinson, CCA

The BC Construction Association, as the voice for the industrial, commercial, and institutional (ICI) construction sector in British Columbia, supports CCA’s participation in the above-mentioned coalition letter opposing the federal government’s tax proposals affecting incorporated small businesses.
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