It’s a well-known fact that the construction industry is ripe for disputes and disagreements. The industry is full of personalities, and the amount of money spent on large projects makes each contract feel like high-stakes gambling. While it’s true that disputes may seem imminent, these tips to avoid construction disputes will help.
All of the tips listed below are executable actions that anyone in the industry can take. With a mind for avoiding disputes instead of expecting them, contractors could amaze themselves with what’s possible on the average job site.
Tips to avoid construction disputes
Disputes might be an accepted part of the construction industry, but it doesn’t have to be that way. Instead of approaching every job expecting to go 12 rounds with an opponent, there are ways that you can avoid disputes altogether.
1. Know your contract
This might seem elementary, but knowing your contract in and out is critical to avoiding disputes. And the time to know and understand it is before you sign on the dotted line.
Subcontractors often fall prey to predatory contract language. Large GCs have massive legal teams with decades of experience. It’s their job to hit one past you, and it’s your job to get your glove down. Be sure you agree with all of the timelines, scope of work, personnel involved, and processes for handling issues or claims.
You should also remember that everything is a negotiation. If the contract terms don’t agree with you, don’t sign them with the intent to adapt to them as the project proceeds. Instead, negotiate better terms that work for your business.
2. Use clear contracts
You can avoid many disputes altogether by using straightforward contracts with crystal clear scopes of work. Also, outlining who is liable for which delays and issues will ensure everyone is on the same page at the beginning of the project.
3. Set expectations from the get-go
The clearer a contractor, sub, and project owner are at the onset of a job, the smoother it will go. Setting the expectations early will ensure everyone involved is on the same page — and help avoid construction disputes in the future.
One way subcontractors can set expectations is by utilizing preliminary notices. These documents serve as a friendly introduction between your company and the project owner or GC. They also protect your lien rights and show that you’re a professional outfit and that you expect to get paid for your work.
4. Depend on reliable job costing systems
One reason disputes become such a problem is that contractors and subs often wait until they’re too large to handle before they pipe up. With effective and accurate job costing systems, you’ll be able to identify minor issues right away — many of which you can solve with a phone call.
The best way to implement a job costing solution is to use a software program designed specifically for construction. Many of these programs feature costing functions that will update the system in real-time, ensuring you’re aware if you’re slipping off track.
5. Stick to the contract
While you should stick to the contract, that’s oversimplifying the situation. You need to think on a broader scale. You have to stick to the contract, the drawings that accompany it, the schedule, the documentation, and the communication methods that you agreed to when you signed it. Going outside of any of the contract’s parameters is a sure way to start a dispute.
There are times when abiding by the contract and supporting documents to the letter isn’t practical. In those situations, you need to communicate with project management or the engineer clearly and explain the scenario. Ideally, the solution should result in a change order, which is essentially another contract to which you need to stick.
6. Employ a risk management strategy
Ben Franklin is credited with the saying, “An ounce of prevention is worth a pound of cure.” It holds true in construction.
Risk management might seem like a CYA strategy, but it can be just as effective at promoting communication as it can be for saving your skin and helping to avoid construction disputes.
When you employ risk management, you’re able to take stock of the threats to your business and the project. Most threats are of relatively low importance or low probability, while others are of high priority and high probability. When you identify high-priority risks with a high likelihood of affecting the job, other contractors, project management, staffing, or materials, you can work collaboratively on a solution before it happens.
Read questions and answers about Risk Management — answered by credit managers & other construction professionals.
7. Communicate clearly and often
Minor misunderstandings don’t have to become significant disputes. By communicating clearly and expressing concerns early on, the higher-tier contract participants are able to shift and adapt. The end result is a more collaborative project with a positive outcome.
For instance, if a subcontractor feels the contract is missing some vital information or that the specifications are way off base, they can communicate those concerns to the GC, engineer, or owner. Together, they can work toward a resolution that works for everyone and keeps the project on track.
Also, if you submit your payment application but aren’t paid within the appropriate window, you can open the lines of communication by sending a payment reminder.
8. Invest in your project managers and supervisors
No one wants to make the call to the boss about a brewing dispute that could’ve been avoided. With properly trained project managers or even supervisory staff, many of those potential disputes can find resolution long before the call is necessary.
If you’re a smaller outfit, you might not have a training department or a corporate program to follow. In those cases, take note of the most common issues a supervisor might encounter and train them on how you would prefer they handle them. And, as many assistant project managers are fresh from college, they might be aware of new solutions. Take the time to hear them out.
9. Lean on technology
You can’t control how the customer or general contractor runs their business, but you can control how you run yours. Adopting new technology to make your life easier can go a long way toward avoiding disputes.
Construction software programs can handle many of the small issues that turn into big disputes. They can standardize paperwork, ensure every document is sent to the appropriate people, provide real-time budget and schedule updates, and send and receive electronic invoices. While there is an upfront investment, allowing an automated system to take care of the minutia allows you to handle the project.
10. Document everything
There’s no way to overstate the importance of thorough documentation. From taking pictures of completed phases, jotting down dates and times of conversations, and getting signatures on every form you handle, it’s important to have a record.
Many contractors see documentation as ammunition for a dispute, and in some ways, it can be. But if the goal is avoiding the dispute in the first place, you can use documentation practices to communicate and ensure everyone’s on the same page. Sending photos along with RFIs or showing progress to a customer can yield a faster response which can then catch a small issue before it becomes a dispute. And, should the dispute brew anyway, you’ll be able to rest assured that you’re covered.
10. Make payments on time
One of the best ways to avoid disputes on construction projects is to pay your subcontractors on time. Payment delays can crush a company’s cash flow, making everything they do moving forward that much more difficult.
If you’re experiencing issues getting paid, the fastest way to come to a resolution is to file a mechanics lien. These tools are proven to be one of the most effective ways to get paid. Since they attach to the property instead of the person who owns it, the project owner can have a hard time securing financing, and the project itself will become harder to sell — two things no construction project owner wants to face.