Extras can cause major headaches when there’s a lack of clear communication
By Mark Tigchelaar
Google the words “construction extras” and the results are 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 in extras.
How do extras happen?
One type of extra is when an owner decides to change something or a consultant – on behalf of the owner – modifies a design after tender. This type of situation 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 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 in order to complete a project the right way, the work that is happening – or has to happen – is well beyond the scope of what was originally intended by the contract. This is often the much more contentious type of extra.
Why do extras occur?
A prime consultant or architect may answer, “Contractors taking advantage.”
“Incomplete, inadequate or improper design by the project team,” might be the typical response from the general contractor. Oftentimes, “low bid or extreme competition,” may also be a possible contributing cause.
What do these extras frequently reveal within the framework of a contract and design-bid-build tender set? The designer or owner meant one thing, and the contractor interpreted another.
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 total scope of the project.
In the case of traditional design-bid-build, the scope is all too often finalized at either side of the table (design team versus low contractor) at tender close – a relatively short process (weeks to a month or two) when compared to the actual design process, which is usually many months to a year or more.
General contractors are expected to review and gather sub-contractor prices and bid on the job, all usually within a three- to five-week period. Keep in mind the design itself was already completed by a design team many months prior to the general contractor coming into the picture.
What about the addenda?
Addenda is a tool to catch errors, gather feedback from the contractors bidding on the work and allow for adjustments. It’s always the same – often cumbersome – process.
Addenda are issued and have to be plugged into the giant tender set by the general contractor at the right location. Then it has to be reviewed against what the general contractor is already pricing so that the design team can make any necessary adjustments. It’s no wonder that most general contractors wait for all of the addenda to be determined before taking a hard look at the tender in its final state. That often leaves general contractors with as little as four or five business days to review it all.
General contractors are also often presented with contract clauses which essentially require them to accept the chosen design as the best method and to take on all risks and responsibilities for the project; no matter the potential pitfalls.
A general contractor needs subcontractors to ensure the positive outcome of a project. General contractors must ensure that the product put forth by the subcontractor will meet the exact criteria outlined in the design and that the subcontractor can help to meet or improve the overall schedule. Oftentimes a general contractor accomplishes this by binding the subcontractor to the prime contract in an effort to make them responsible for the risk factors associated with their scope of the project, as well as any other risk factors of the prime contract that can be tied to them.
Design clarity and understanding are important
Is the tender in clear and plain language so that contractors can make enough sense out of it to price it in a four- or five-week (more likely a one-week) period? Do the designers take the time during the design process 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 have enough of a budget to ensure a proper design and accurate specifications – 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, which will result in the tender package suffering?
The general contractor-owner relationship is not the only place extras occur. Extras also occur in the geotechnical subcontracting and dirt subcontracting world too. Extras can happen when deep foundations can’t reach the required depth 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 required material, 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 what was expected.
For geotechnical projects, owners and designers luckily have a range of alternative ground improvement solutions for challenging soils. Ground improvement fortunately takes a work-smart approach to challenging soil sites, making it necessary to have a clear understanding and plan 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 common in the geotechnical world for consultants to not be given the budget and project scope to understand the differences between various proprietary design-build geotechnical techniques; particularly when it comes to determining which methods will work for which soil conditions. It is important for project teams to consult with specialty contractors to ensure the systems they are recommending will perform as required.
If the scope of a geotechnical investigation cannot be properly outlined, perhaps a small “extra” during the geotechnical work should be pushed 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 geotechnical investigation can often result in extras.
What might be perceived as upfront savings on geotechnical scope during the design phase can result in a much higher cost in the long run. If a geotechnical consultant advises that more geotechnical work and materials are required on a project, it may be wise to take heed. 