When a school district or other public educational institution commits to a significant construction project, the pressure to stay within budget and on schedule are tremendous. If your organization is limited to specific proceeds from an approved budget referendum or other fixed funding allocation, there is simply no margin for error when it comes to getting the job completed on time while containing costs. In the world of construction, time literally is money.
As the owner of the project, you have several options available to help you ensure the work goes on as expected from a financial and time management perspective. An important step that should not be overlooked is ongoing project monitoring that tracks progress, cost overruns, and needed or requested changes to the work itself. Even before a contract is signed, it’s wise to seek legal advice to review the terms and obligations for all parties.
Unfortunately, it’s almost inevitable that something will go wrong with a project. Having the ability to catch problems before they escalate into a bigger, costlier issue can be key. It’s important to make sure that all parties understand how to handle problems and disputes and that the process is clearly laid out.
To keep a construction project from falling off the rails, or at least avoiding significant overruns, here are key points during the life cycle of a job requiring focused attention:
The earlier you get good advice, the faster you can act on it. A construction monitor, whether it’s someone in your in-house construction department (if you have one) or an outside specialist, can assess whether terms like the cost of the work, deliverables related to invoices and schedules, and change orders are appropriate. Whether it’s a cost-plus-fee contract or competitive bidding situation, an experienced advocate can provide assurance in your decision-making before an agreement is signed.
In addition, there are construction-specific attorneys who can provide additional certainty and clarity when you are negotiating the terms of a contract. A lawyer would be attuned to issues such as terms for handling payments and how to address changes to the project if needed.
You may be able to negotiate certain contract terms that benefit school districts who can confer tax incentives they’re eligible for under the Inflation Reduction Act to construction firms. As a result, those savings can be given back to the school district, which could help keep the project costs down.
Often the owner receives a static PDF of the job and its timelines but has no tools to evaluate its accuracy. Specialized software exists that enables specialists to evaluate how realistic the schedule is.
Project owners are unlikely to spot potential delays hidden in a schedule. Schedule consultants exist who can examine the schedule and flag potential issues, such as missing activities or masking delay by adjusting future durations.
Change order negotiations
When the original scope of work changes, resulting in the need for new or different work, make sure your understanding of the change order process is clear. The owner has significantly more leverage when negotiating the contract than when a project is underway because you're only getting the one set of pricing compared to when bids and proposals are submitted before a contractor was selected.
But even when a change order requested by the owner comes late in the project, it’s not too late to challenge pricing. Having somebody on your team who can carefully analyze change orders for backup data as well as interrogate the assumptions that are included within it is very important.
Negotiations can be tough, but it’s important not to poison the relationship. By asking questions (and having access to data to support your claims), you stand to gain a lot more in these interactions than in being combative and disrespectful.
How Wipfli can help
The more complicated construction finances become, the more important it is to have construction specialists involved early in the process who can tell you about what all your options are and make sure your project stays on track and on budget. Wipfli’s professional team has deep experience guiding organizations involved in construction projects to support whatever challenges they may face. From contract negotiations and invoicing to scheduling and change orders, we serve as advocates on any issues that arise with your project from precontract to completion. Contact us to learn more about our support services for education organizations.
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