Beginning with a sound construction contract can have a significant impact on a firm’s profit, loss, reputation and overall ability to manage a project. Risk shifting is the contracting norm, and attorneys across the country scrutinize contract clauses when deciding which client will prevail.
Agreements are made every single day. It may be tempting to use a letter or even a handshake agreement when performing construction work on a small project. However, the harsh reality is oral agreements are difficult to prove in court and letter agreements often lack essential terms to deal with nuanced issues such as insurance, dispute resolution and contract termination.
Gone are the days of filing cabinets lining the walls for a single construction project. With the digitization of documents and use of multiple computer programs, the manual process has been simplified to hard drives—and maybe a few files for record keeping.
In every industry, technological advancements are helping companies to be more efficient and save money. Construction is no exception. According to the 2016 report on the results of a global PwC survey, Industry 4.0: Building the Digital Enterprise, respondents anticipate a return on their investment in technology over the next five years. Participants in all industry sectors expect to realize a 2.9 percent increase per annum in revenue. Engineering and construction companies anticipate a revenue gain of 2.7 percent per annum. On average, companies across all sectors expect to reduce costs by 3.6 percent annually.
Insurance products used in the construction industry are always changing. To keep up with legal and practice developments in the insurance industry, the AIA undertook an extensive examination of its insurance and bonds requirements for the 2017 update to key AIA contract documents. Working with industry experts, the AIA has put together a comprehensive set of revisions to the insurance and bonding provisions included in its 2017 owner-contractor agreements. Continue »
AIA Revises Insurance and Bonds Requirements Construction Contractors Must Be Aware of 2017 Changes to AIA Contract Documents
The construction insurance industry is constantly changing and the number of available insurance products continues to grow. The result is an increasingly complex insurance market for construction project participants to navigate. In response to these developments, the American Institute of Architects (AIA) undertook an extensive examination of its insurance and bonds requirements for the 2017 update to key AIA contract documents. Working with industry experts on construction insurance, the AIA has put together a comprehensive set of revisions to the insurance and bonding provisions included in its 2017 owner-contractor agreements.
Watch Out for Bad Boy Guarantees in Commercial Real Estate Financing Construction Contractors Must Understand Common Liability Provisions in Lending Agreements
There was a time when non-recourse financing for commercial real estate projects protected borrowers against personal liability for a loan gone bad. Lenders would look solely to the underlying assets of the project to recover losses when a loan defaulted. However, as times have changed, so too have these protections.
For large businesses in the construction industry, the accounting function lies in the hands of an experienced controller or CFO. This person understands and has experience with construction accounting. Accurate financial statements are produced on a monthly basis. There are no surprises at year end or difficult conversations with the bonding company because the figures reported throughout the year have changed.
There are ways to resolve problems that arise during a construction project—such as disagreeing about items on a punch list or even one party running out of money—without litigation. Following are ways to ensure a construction project runs as smoothly as possible.
Much of the dollar volume of a construction project is spent on the purchase of materials and equipment from third-party vendors. These purchases are routinely made using purchase orders.
The choices for dispute resolution generally available to participants in construction cases include voluntary mediation, binding arbitration and litigation. Each of these tactics have pros and cons that must be addressed during the contract drafting and negotiation stage.
Every day that value is added to a business without a plan for future transition increases the owners’ financial risk. Ideally, the co-owners of every multi-owner business put in place a buy-sell agreement at the time the company is formed as part of the startup process. A buy-sell agreement protects the remaining business owners and the co-owner who leaves the business.