Condo Media - September 2019 - 33

Building Blocks
WAYS TO STRUCTURE CONSTRUCTION CONTRACTS
Of all the contracts associations are likely to negotiate, construction contracts will almost certainly be among the most
costly and the most complex. There are many different ways
to structure a construction contract.
A lump-sum contract is probably the most familiar-the
association agrees to pay a specified price for the scope of
the work described in the contract.
Payments based on time and materials is an alternative,
used when the scope of the work is uncertain, Jack Carr,
P.E., RS, LEED-AP, senior vice president at Criterium Engineers, explains. "Sometimes contractors don't know what a
project will entail until they get into it," he notes. For example, a contractor will know how many cubic feet of asphalt
are required to repave a designated area. But the contractor can't know how many manholes will have settled over
time and will have to be raised during the course of the
project, and won't know until the digging begins how much
ledge buried under the surface will have to be removed.
A hybrid contract might work for this paving project,
Carr suggests, with a lump sum quoted for the overall paving, and a specified per-unit price for the manholes or basin
covers that have to be lifted, the amount of ledge that has
to be removed, or the utility lines that have to be relocated.
"This avoids negotiating separate change orders for all of
these items," which, Carr notes, "can be time-consuming
and frustrating" and won't typically produce the best price
for the association.

DESIGN-BUILD
On a large capital improvement project-adding or
substantially renovating buildings, for example-an association would typically hire an engineer to develop the
design and the specifications. A design-build contract
allows the builder to do all that preliminary work. Critics
say this approach may not produce the most competitive
price for a project. "But you can bid out a design-build
contract," Carr says, soliciting proposals from different

contractors in the same way that you would solicit lumpsum bids from them. The advantage of design-build for
some projects, he suggests: "You'd have many different
minds working for you for free who may come up with
designs you hadn't considered." Contractors who develop
the specs for a project also have more control over it, he
notes, and are able to be "more aggressive about the
pricing," Carr notes.
Combining a conventional lump-sum contract for the
building with design-build contracts for major components
is another approach some associations might want to
consider. An architect or engineer would do the specs for
the building frame and foundation but specialists might
submit design-build proposals for HVAC systems, electrical
and plumbing work. The advantage, Carr says: Specialists would likely know more about these components and
would be more on top of "state of the art" technology
than engineers, and might propose better, "more costeffective" designs as a result.

OVERSIGHT ESSENTIAL
However you structure a construction contract, someone
should be responsible for overseeing the project, Carr
emphasizes. Without that oversight, he cautions, "you're
looking for trouble." If a roadway is being paved, "you
don't have to look at every square yard of asphalt" as it is
laid, and you don't have to have a monitor on site every
minute of every day. Periodic checks of the work would be
sufficient. But you may want to have an independent testing company visit the site periodically to verify the work is
being done correctly. On that paving project, for example,
if the layers are supposed to be three inches thick, you
would want the testing firm to cut out a sample core "to
see if you're getting what you paid for." You should also
inform the contractor that you're going to be doing that
testing, Carr suggests, so "he won't be surprised when
someone starts cutting holes in the new pavement."
September 2019 CONDOMEDIA

Condo Media - September 2019

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