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Avoiding disputes and litigation in the course of a significant construction project is a sensible goal, given the costs in terms of both money and time. But sometimes it cannot be avoided. The reality is that there are many competing interests with a stake in the construction of a new capital project — from the public and owners to lenders, contractors, and architects. The backdrop for all these players is an increasingly complex regulatory environment with new laws proliferating and the number of lawsuits skyrocketing.
Even a perfectly cooperative effort, made in good faith on behalf of all parties, can be thrown into chaos by such classic construction obstacles as bad weather, problems procuring materials, on-site accidents, or other events. Your organization must be prepared to defend its interests and coherently present its point of view to attorneys, a professional mediator, a judge, and even the media. It only makes sense to formulate a strategy to manage construction litigation risk so that when a dispute does arise, your chances of coming out on top — and collecting — are improved.
What Will You Say When They Ask What Happened?
You can improve you chances of obtaining a favorable settlement, an acceptable compromise through mediation, or a jury win by considering the following questions throughout a construction project:
- Have the appropriate legislators, city council members, zoning boards, and community boards been made aware of and given their approval for my project?
- Have I documented every phase of the project from my vantagepoint?
- Did we arrive at a projected overall budget and a schedule for paying the contractors?
- Is there an easily understandable way of quantifying the impact of delays on our business?
- Do my subordinates understand the specifications of the project?
- Does my team frequently compare the original plans with the actual performance to date?
- Do I understand the liquidated-damages clause of my contract?
- Have I included audit rights in the contract to enable me to control cost?
- Have I left profit and overhead undefined on change orders?
- How are pre-construction costs being segregated from project costs?
- Are general-conditions costs fully defined?
- Have I selected the most appropriate contract type (cost plus, GMP, etc)?
- Does my team understand all the provisions — especially the scheduling provisions — in the contract?
- Are any mid-stream changes in the project specifications reflected in the contract?
- Do I have enough insurance to cover all phases of the construction project?
- Has the contracting company been an on-site presence or has it let the subcontractors manage themselves?
- Is the project using appropriate scheduling and accounting software?
- Are we fairly paying our contractor for the work performed to date?
- Have I brought any problems I have had to the attention of the contractor?
Who's Looking Out for You?
Our FACS Construction Consulting practice has enormous experience analyzing large-scale construction projects and helping our clients triumph in complicated disputes. Using a phased investigative process, we unearth the facts about what exactly went wrong and how things veered off course, compare this performance against the original construction plans and contract specifications, and assist in assigning liability to the appropriate party.
Schedule and Issue Analysis
In our experience, due to the number of different players involved in a construction project and the pinpoint timing that is needed to make sure that each of their tasks is completed in the right order, we have found that many disputes are rooted in scheduling problems. Our scheduling analysis service is a product that evaluates the planned sequence of construction, determines the actual sequence of construction, identifies the critical issues and their impact, and assists in assigning responsibility for the delay as well as in capturing and quantifying the costs of the delay.
Calculating Damages
Estimating the total damages stemming from a construction dispute, including loss of profit, economic loss, lost efficiency, labor and materials escalation, extra work, and extended job and home office overhead, is an important part of our service. After all, most of our clients are not in the construction business, yet face adversaries who know their small part of the construction industry very well. Since our consultants have assisted clients in similar situations many times, we know the full financial impact of delays, shoddy workmanship, and new buildings not compliant with local codes — and know how to present these monetary damages in a way that makes sense to the layperson.
Alternative Dispute Resolution
An amicable settlement is always preferable to protracted litigation. In fact, construction litigation is getting so prevalent these days that the courts are strongly encouraging parties to take the route of professional mediation. We can help you navigate the negotiated settlement process at any time during the project, and our consultants have experience helping construction clients use various dispute-resolution forums, such as mediation and arbitration.
Litigation Support
In the unlikely event that your construction dispute goes to trial, our construction practice consultants can help in many different ways. From serving as expert witnesses on the schedule and cost impacts, to assisting with document discovery, and providing the legal team with the technical understanding necessary to effectively present your case, we can support you throughout the litigation process, as we have for clients hundreds of times.
Real Estate Integrity Services
Preventing and detecting fraud perpetrated through fraudulent charges, fictitious vendors, “ghost” employees, cost overruns and other forms of corruption is vital for the construction and real estate development sector. Our sister company, Kroll, provides fraud and cost-abuse protection for all phases of real estate development, construction, and renovation projects.
If you have any questions or would like additional information, please contact us.
Kroll, a subsidiary of Marsh & McLennan Companies, offers services that complement Risk Consulting's. Learn about Kroll's
construction and real estate capabilities.
If you are seeking information about insurance and related services, please visit marsh.com.
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