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Author Message Sheldon Wolfe Senior Member Username: sheldon_wolfe Post Number: 446 Registered: 01-2003 Posted on Thursday, October 28, 2010 - 05:21 pm:    In twenty-odd years (some odder than others) I have had only a couple of projects with multiple prime contracts. I'm working on one now, for which the owner wants to specify liquidated damages. Given the interdependence of the contractors, I don't see how any of them could be charged, and simply splitting the total amount doesn't work any better. Sage advice requested. Robert W. Johnson Senior Member Username: robert_w_johnson Post Number: 93 Registered: 03-2009 Posted on Thursday, October 28, 2010 - 05:59 pm:    I think every other year is an odd (versus even) one!!! Is the Owner assigning the management of the multiple contracts to anyone beyond itself? Do the procurement documents include a detailed construction schedule? If you had a such a schedule you might be able to put liquidated damages for non-conformance to that schedule. Remember liquidated damages has to be close to equal to actual damages - Owner would have to be able to prove in court that the $$ assigned were close to actual. Would think a penalty clause would be better. Actually the whole thing sounds like a make money for lawyers program!!! George A. Everding, AIA, CSI, CCS, CCCA Senior Member Username: geverding Post Number: 563 Registered: 11-2004 Posted on Thursday, October 28, 2010 - 06:03 pm:    Sheldon - A short article on liquidated damages is on its way by email. The article makes a few good points that we will all remember from CDT training: 1. Owner may not use LD as a cash cow. LD's must be based on realistic losses that would occur if the project is late. 2. Any one of the MP contractors could be entirely responsible for all of the losses due to late delivery of the facility, or several contractors could contribute proportionally to the losses. 3. A contractor who delays the project one month should probably not be charged for LD's if another contractor has delayed the project for 9 months. 4. It's better to agree to a philosophy for equitably settling damages up front, than to try to argue it out later. So on rereading the article after five years, I'd suggest this: Figure out the reasonable liquidated damages, attach that figure to each Multiple Prime Contract, then include equitable resolution language similar to what is in the article. Article: "Liquidated Damages For Delay—No Harm, No Foul" by Chris Sullivan in Sept 2005 issue of Construction Executive Magazine. George A. Everding AIA CSI CCS CCCA Ingersoll Rand Security Technologies St. Louis, MO George A. Everding, AIA, CSI, CCS, CCCA Senior Member Username: geverding Post Number: 564 Registered: 11-2004 Posted on Thursday, October 28, 2010 - 06:09 pm:    ...and I agree with Bob about the lawyers. George A. Everding AIA CSI CCS CCCA Ingersoll Rand Security Technologies St. Louis, MO Sheldon Wolfe Senior Member Username: sheldon_wolfe Post Number: 447 Registered: 01-2003 Posted on Thursday, October 28, 2010 - 06:40 pm:    What a network! Bob: I believe the general contractor will be assigned coordination responsibilities, but without holding the contracts, the owner will have to wield the stick. To make things more interesting, there were four earlier bid packs, one of which will be concurrent with, and interface with, the work of these contracts. It did not include liquidated damages. Dividing the amount of the damages doesn't really work, as one contractor (or the work of the previous bid pack) could be the cause of others' claims. The article suggests a solution, which now seems obvious. As George notes, each contract then carries the full amount of the liquidated damages, but the weasel words allow the owner to collect it only from the responsible contractor. After suitable discussion amongst all the attorneys and a pound of flesh, of course. Mark Gilligan SE, Senior Member Username: mark_gilligan Post Number: 323 Registered: 10-2007 Posted on Thursday, October 28, 2010 - 08:47 pm:    Suggest that the Owner might want to consider an Integrated Project Delivery contract structure and not worry about liquidated damages. You can either create the conditions for sucess or to try to limit your contractual risk. Which do you think will be more sucessful? If I were in your shoes I would be asking the Owner how he and his attorney want to structure the Liquidated Damages. Sheldon Wolfe Senior Member Username: sheldon_wolfe Post Number: 448 Registered: 01-2003 Posted on Thursday, October 28, 2010 - 10:16 pm:    This is a state project, which must follow statutes. There has been some movement away from straight low-bid process recently, but until the agencies change their requirements, we work with what they give us. I'm not a big fan of fancy names; for private sector projects we've been doing something similar to integrated project delivery for some time. Having owner, designers, and contractor working together from the beginning is a benefit for all. Just yesterday I had a very productive discussion with a contractor, resolving a number of issues that came up during construction. The same things would have been a battle under the hard bid process. Lynn Javoroski CSI CCS LEED® AP SCIP Affiliate Senior Member Username: lynn_javoroski Post Number: 1138 Registered: 07-2002 Posted on Friday, October 29, 2010 - 10:19 am:    While working for a government agency that requested LD on projects, I successfully argued for its antithesis; and that worked well, too. The incentive clause we used set the amount at about 1/2 the LD amount. As stated by Robert and George, these amounts must be carefully established and documented. The construction schedule must also be carefully determined and proper allowances made for delays beyond the contractor's control. The one time (in 2 years) that the clauses were activated, it was for an incentive amount. The project was finished well, and about 1 week early, making the owner about $10k happier. Wayne Yancey Senior Member Username: wayne_yancey Post Number: 370 Registered: 01-2008 Posted on Friday, October 29, 2010 - 10:44 am:    However liquidated damages are described or incentives are described, we are specifiers, not lawyers. Supplementary conditions are not our resposnibility. Have the clients lawyer provide the wording for this scenario and share the result if it is not intellectual property. I seldom of ever see the general conditions of the contract for our private work, therefore have no idea of it's format, article numbers and names. Need to know seems to be in place. Makes it difficult to write some Division 01 sections. General Conditions may be at odds with our A/C contract but I am low man on this totem pole. Motives for not sharing information are unclear. Reasons for using liguidated damages without incentives are widely known. Sheldon Wolfe Senior Member Username: sheldon_wolfe Post Number: 449 Registered: 01-2003 Posted on Friday, October 29, 2010 - 11:11 am:    We may not be lawyers, but many lawyers are not familiar with construction, and produce a lot of legalspeak that doesn't make sense. When that happens, I discuss those things I see as problems with the owner, but what they do is their decision. Anyway, I was feeling good about this last night. However, the example used in the article involved two almost unrelated contracts; in my project, general, mechanical, and electrical contracts are hopelessly intertwined, and each of them likely will have ample reason to blame the others for their delay. Robert W. Johnson Senior Member Username: robert_w_johnson Post Number: 94 Registered: 03-2009 Posted on Friday, October 29, 2010 - 12:48 pm:    Oh yeah - it would be a classic battle!! It would be a very detailed battle going over everyone's participation in every phase of the project - "you delayed me when you didn't _______" - " no you delayed me when you ______" - etc, etc. I still maintain your only chance of do this would be in reference to a detailed schedule including each contractor's responsibilities at each phase of the construction. Someone would have to create that schedule before you bid the work. I would bet that some of the bids would include exceptions to the schedule. It is even more fun since you already have one contractor under contract. Still think the only ones who will win are the lawyers! Robert W. Johnson Senior Member Username: robert_w_johnson Post Number: 95 Registered: 03-2009 Posted on Friday, October 29, 2010 - 01:12 pm:    Another way to think about it is what would a general contractor with single prime contract with liquidated damages do with subcontractors? He would require compliance with a detailed construction schedule with liquidated damages for non-compliance. That of course is the advantage of a single prime contract - one point of responsibility for the Owner. Instead of the General Contractor having to manage, coordinate, negotiate, and fight with the subs over scheduling, the Owner now gets to do it, although with just a limited number of contracts. General Contractors do that everyday on every project - I only did it for 3 years because of that daily hassle - not my cup of tea. An Owner will have a lot of fun doing it when there are liquidated damages ($$$) involved. (Unregistered Guest) Unregistered guest Posted on Friday, October 29, 2010 - 11:54 am:    Sheldon, Duly noted about lawyerspeak but I will not transfer the risk to my frim over language that the layman needs a translator for. Intent of the requirement is there even though may be cleveraly disguised. Wayne Yancey Senior Member Username: wayne_yancey Post Number: 372 Registered: 01-2008 Posted on Friday, October 29, 2010 - 02:30 pm:    Sorry, I keep popping up as unregistered guest if I do not complete the Username and password boxes with each post. George A. Everding, AIA, CSI, CCS, CCCA Senior Member Username: geverding Post Number: 565 Registered: 11-2004 Posted on Friday, October 29, 2010 - 02:32 pm:    MasterSpec in their Summary Multiple Contracts section (in the 01 1x xx's) has a reference to a "Project Coordinator". Although I have never seen a project with this position, I suspect it is an entity hired by or on staff of the owner and charged with, among other things, the responsibility of coordinating that "highly detailed schedule". Bob's point that SOMEBODY needs to coordinate the various activities is often lost on many owners, who think that using CMa, multiple prime contracts, and other delivery methods will somehow save time or money. The traditional Division 01 activities all still need to occur - they don't go away just because the delivery method isn't so-called traditional design-bid-build. I'm without MasterSpec in my new job, Sheldon, and my recollection's dim about what specifically is in it, but you might check out that section I mentioned. I think the section and the evaluations had some good information about the "Project Coordinator" role, and how it relates to scheduling, etc. George A. Everding AIA CSI CCS CCCA Ingersoll Rand Security Technologies St. Louis, MO Sheldon Wolfe Senior Member Username: sheldon_wolfe Post Number: 450 Registered: 01-2003 Posted on Friday, October 29, 2010 - 04:46 pm:    Many things are lost on many owners - and then somehow are seen as the architect's responsibility! In this case, we had much of what is needed already in place. The previous contractor was told that the general contractor would dictate their delivery and installation schedule. The prime contractor for this bid pack is responsible for developing and maintaining an overall schedule in conjunction with the mechanical, electrical, and earlier contractors. The general contractor has no contract with the other contractors, though, but the owner can use that schedule to keep contractors on schedule and, if necessary, deal with any delay claims that may arise. The owner's attorney is taking care of the liquidated damages, but we haven't seen them yet. Even though the conditions are the owner's responsibility, I like to know as much as possible about what to expect. Lane Beougher Junior Member Username: lbeougher Post Number: 2 Registered: 04-2006 Posted on Tuesday, November 02, 2010 - 05:43 pm:    I thought Ohio was the last state in the Union that performed construction under Nineteenth Century laws. Ours was written in 1877, and it is staunchley defended by the MEP trades. Every attempt to bring us into the 20th Century has been resisted. You start talking about IPD and anything but low bid and they realize you really are from a different planet. I sent a copy directly by email, but our documents are available at http://ohio.gov/sao. Click on "Standard Requirements" under "Publications" in the right side menu. Our LDs are specified in our Contract Form and further discussed in Article 8 of our General Conditions. Since you mentioned this is for a multiple-prime project, that is the version of our GC. Take a look at paragraph 8.7 on page 41. We began calling them Statutory Delay Forfeiture a few years ago but they are what they are. Traditionally, we try to start and finish all contracts at the same time. This has caused us problems when one bad contractor is delaying the others. We’ve recently taken the approach of not writing a change order for extending the time of the offending party. This approach seems to have a better result. We also have a third party beneficiary clause to try fend off claims against us for the acts of a separate contractor, but that has not been tested in our courts. I placed an entry in the index to help our users find it. I hope this helps. Lane Beougher Member Username: lbeougher Post Number: 3 Registered: 04-2006 Posted on Tuesday, November 02, 2010 - 05:51 pm:    In 1993, our cotracts were revised to what we call a "Lead Contractor" model. We, as the public owner, delegate through the contract and conditions, a portion of our responsibility to coordinate and manage the multiple contractors on the project. This has been in place for a long time, and seems to work fairly well. The Lead is not always the General Trades Contractor. On a large electrical project, the EC was the Lead. One of the problems this caused is schedule manipulation by the Lead. This led us to requiring a Schedule Consultant on projects over 1/2 million dollars. This is carried in an allowance under the Lead Contractor. After a while it becomes a bit like Rube Goldberg drew the org chart. My questions is, why would anyone build this way if they didn't have to? Lane Beougher Intermediate Member Username: lbeougher Post Number: 4 Registered: 04-2006 Posted on Tuesday, November 02, 2010 - 05:57 pm:    By the way, our Standard Requirements are under "Documents" not Publications. We're revising the Web site and I'm getting the labels mixed up. If you look at Article 4 in our GC, you can see the process we've developed for creating, approving, and updating the schedule. For larger projects we do use a CM as Advisor occasionally. In 2008, we appointed a construction reform panel. Their report is on the Web site as well as The SAO Manual, which has our process in non-contract language. That may be easier to read.