A Lawyer’s Checklist for Starting Strong

The start of construction is the culmination of significant effort on the part of the owner, designers, contractors and others.  It is an exciting—and often hectic—time.  However, in the rush to get started, important management tasks may be overlooked or subordinated by “higher priority” tasks.  The importance of completing many pre-construction tasks may not become apparent unless and until there is a legal dispute.  This article addresses several items that, when not timely and/or properly completed, tend to result in issues that are amplified (often at significant expense) in the context of a legal dispute. 

Whether you are an owner, contractor or subcontractor, following is a brief checklist that will help you start your next project on the right foot and give you a decided advantage should a dispute arise.

• Paper originals of the entire contract.  In the days and weeks leading up to contract execution, it is not uncommon that multiple electronic drafts of a contract are exchanged between the parties.  In some cases, rather than prepare and sign original paper versions of the entire contract, the parties will merely exchange PDF copies of the signature page via email.  When issues arise months (or years) later, it can be difficult to determine which of the many versions of the contract the parties intended as their final agreement.  In the context of a dispute, significant attorneys’ fees may be incurred as the parties’ lawyers argue about which electronic version of the contract was the “final” version.  These costs may be avoided if the parties prepare, exchange and retain paper originals of the final, fully executed contract.     
• Bonds on the correct forms.  If the owner-contractor contract requires payment and performance bonds, the bonds should be obtained before work begins.  In addition, if the contract specifies the form of bond, the parties should verify that the surety has provided the correct form.  Like with the contract, the parties should retain signed original paper versions of payment and performance bonds.
• Agreements with adjacent property owners.  Construction projects often impact neighboring landowners in ways that affect their property rights.  For example, a crane may swing over a neighboring parcel’s airspace.  In these circumstances, written permission should be obtained in advance.  So-called “swingway easements” provide for terms and conditions that govern the use of a construction crane over adjacent property.  Because these agreements may take time to negotiate, neighboring landowners should be approached well in advance of construction and any agreements reached should be reduced to writing.   
• Proof of insurance and additional insured status.  Nearly all construction contracts require contractors to maintain insurance and name other involved parties as additional insureds.  Before work begins, proof of insurance and additional insured status should be obtained.  This information should be compared to contractual insurance requirements to ensure that all parties have appropriate coverages and policy limits.
• Builder’s risk insurance.  All major standard form contracts (AIA, ConsensusDOCS, DBIA and EJCDC) require the owner to purchase builder’s risk insurance, which provides coverage for property during construction.  Setting aside contract requirements, because there are risks that likely would not be covered by other insurance, builder’s risk coverage provides significant protections for all parties with interests in the project.  Accordingly, if you are an owner or contractor performing work on the project, it is important for you to confirm that an appropriate builder’s risk policy has been obtained for the duration of the construction.    
• Notice to proceed.  Many contracts require a written notice to proceed issued by the owner to the contractor.  A notice to proceed authorizes the contractor to begin construction activities and establishes the start date for contractual time periods.  Because substantial completion and other critical project milestones are often calculated based on the date of issuance of a notice to proceed, if called for in the contract, the owner should send this critical document to the contractor.  Likewise, the contractor should insist on receiving the owner’s notice to proceed before starting work.
• Baseline construction schedule.  Ideally, the baseline construction schedule is completed before the work starts.  However, if the contract allows for it to be submitted after contract execution, the schedule should be completed as soon as possible (and in accordance with any contractual deadlines).  Because it represents the contractor’s original plan for completing the work, paper copies of the baseline schedule should be kept along with backup electronic versions. 

Although this list is by no means comprehensive, it does include many items that we as lawyers frequently encounter when litigating disputes.  The key point is that, in many instances, had the parties simply taken the time to perform or complete these tasks, the legal issues they created—and significant attorneys’ fees expended on them—could have been avoided.

Originally published as “OP-ED: A lawyer’s checklist for starting a project in a strong position” by the Daily Journal of Commerce on February 15, 2018.