Why owners sometimes employ the wrong contractor

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and Why General (Main) Contractors employ the wrong subcontractors.

In my article last week; ‘Why construction projects go wrong before they even start – what should owners do?’ I discussed the importance of issuing sound bidding documentation to contractors and allowing them sufficient time to price the project.

So now you have issued good documentation to your contractors and received a number of bid prices. What happens now could jeopardise the entire project.


Tender or bid adjudication

Unfortunately just receiving prices and awarding the project to the lowest bidder isn’t good enough. The purpose of the tender adjudication is to assess the bids or tenders received to ensure they conform, the contractor can do the work and to check for other additional, hidden or extra costs.

Bids need to be checked and adjudicated properly to ensure:

1.       Is the price reasonable? Owners should query prices that seem extraordinarily lower than others or much cheaper than their estimate. A bargain price may not be a bargain when the contractor runs out of money declaring bankruptcy part way through the construction works. This will result in delays while another contractor is appointed, almost always at a much higher cost, and often means warrantees on completed work are null and void.

2.       Has the contractor excluded any work or items, or offered materials with a lower specification?

3.       Has the contractor priced all the items? Are there any arithmetic errors?

4.       Can the construction company do the work? Do they have the resources and experience? Check that no other major project commitments could distract them or take resources away from your project.

5.       Is the contractor’s schedule or program acceptable? Does their schedule meet your milestones? Can you meet the milestones that the contractor has inserted, for example; when they require information or access?

6.       Is your cash flow sufficient to meet the contractor’s requirements and schedule?

7.       Has the contractor included contractual terms and conditions which may not be acceptable?

8.       Is all the bidding documentation complete?

9.       Consider also the contractor’s safety record and their reputation for quality.

10.   Does the contractor understand the project and have they allowed for any special conditions applicable to the project?

11.   Is the contractor financially secure?

12.   Is the contractor able to provide the insurances, sureties and guarantees required?

13.   Are there any other costs that you may incur by awarding the project to the contractor? This may include additional supervision or providing additional resources.

14.   Has the contractor’s price included all taxes and duties?

15.   Is the contractor’s proposed construction methodology acceptable? Will it achieve the desired quality? Do you need to revise designs at additional cost? How will it impact your operations, other contractors, neighbours or any permit conditions?

16.   Does the contractor have a reputation for claims and legal action? This could add to costs later.

Dealing with uncertainties

Sometimes it may be necessary to request further information from the preferred contractor. It’s also useful to have a formal meeting with the contractor to ensure they fully understand the project and to allay any of the owner’s concerns.

Conclusion

It is important to select a contractor who can deliver a quality project, safely, on time and for the best price with no hidden surprises which may add to the project costs later. Selecting a contractor purely because they are cheapest can work out to be more expensive later. If in doubt employ experts to assist with adjudicating and assessing your bids.

Other similar articles by the author:

How can clients ensure the success of their projects?

What does it take to manage a construction project?

Make your construction project more successful

(Written by Paul Netscher the author of the acclaimed books ‘Successful Construction Project Management: The Practical Guide’ and ‘Building a Successful Construction Company: The Practical Guide’. Both books are available in paperback and e-book from Amazon and other retail outlets. This article includes information from a third book which will be published later this year)

© 2015 This article is not to be reproduced for commercial purposes without written permission from the author.

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