Construction Law Today : Construction Lawyer & Attorney : Joshua Glazov : Design Build Contracts, Construction Bankruptcy

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No. 1: Identifying the Work

Every construction contract is about building something: the "Work". You can have a construction contract without many of the other nine things on this top ten list, but you can't have one without the Work. That's why identifying the Work tops the list at No.1.

The Work is what the owner pays the prime contractor for, the prime contractor pays their subcontractors for, subcontractors pay their sub-subcontractors for, etc., etc. It's the most important thing one side wants out of the contract. When the contract doesn't identify the Work very well, controversy abounds. At best those controversies stress relationships among the those involved in the project. At worst, as Sir Topham Hatt says, they cause "confusion and delay!" And confusion and delay often lead to claims and disputes.

Traditional Work Identification and Its Problems

Your average construction contract does a fair job of identifying the Work. By fair I mean about "C+". The average contract usually identifies the Work in one of these two ways:

• General Verbal Description: The contract includes a general verbal description of the end product: an office building, a runway, a movie theater, a refinery, a bridge, a power plant. Maybe it adds a little more detail: square footage, dimensions, strength, production capacity, and the like. But there's no detailed specifications and no drawings or other graphics
  The general verbal description's virtues: it's fast, easy, and cheap. But it doesn't tell you much about what the Work includes and what it doesn't. So it's fertile soil for disappointed expectations and disputes, especially when costs start going up or when something that someone expects to be included in the Work isn't included
• Design Document Reference: The "legal" documents (the ones lawyers prepare) refer to "design" documents that design professionals prepare (e.g., drawings, specifications, project manual) by some identifying data (e.g., alpha-numeric code, revision numbers, revision dates). Combined, the legal documents and the design documents together compose the "Contract"
  This is a big improvement over the general verbal description. But design document reference has drawbacks too:
  • Are the references from the legal documents to the design documents correct? Design documents get revised so often that it's easy to refer to a superseded document or leave one out, especially when you're preparing the Contract in haste. And it seems like we prepare contracts in haste more often than we don't
  • If you want to look at the design documents, you first have to find them. Often they're separated from the legal documents. So you have to go hunt them down. That's tedious and time consuming. And you're usually doing it at the most inopportune time when you really need a quick answer. It's like having one glove and searching for the other in the airport departure gate as the agent gives the last call to board your flight.
    You may have to ask lawyers and design professionals to help you find the design document you want. Their help means spending their time. And spending their time means spending your money
  • Design documents are often scattered in fragments, like shards of broken glass. Assembling them in the right sequence and ensuring you have the right pieces in the right place is no mean feat.
  • Once you find the design documents you're looking for, you're forced to toggle between the references in the legal documents and your stack of design documents, if for no reason other than to audit one against the other. Doing that long enough will make you dizzy
  • And even after you've located and audited your design documents, there's still that nagging doubt: do I really have the right documents? Do I really have all of them? Am I sure this was the current edition when we signed? It wasn't superseded before we signed the Contract, or after we signed that Change Order five Change Orders ago?

Why Not Keep Legal and Design Documents Together?

A few of the reasons few keep the legal documents and design documents together:

• Design documents are voluminous, often hundreds of 24" x 36" mylars. Packaging 8.5" x 11" (or worse, 8.5" x 14") legal documents together with design documents is ungainly and unwieldy
• Circulating such large stacks of documents is a logistical challenge. They're a burden to package and expensive to ship because they're so heavy
• They consumed a lot of storage space. Who wants to pay rent for stacks of paper?

Until recently these were all very good reasons. Keeping legal documents and design documents together was too impractical, too burdensome, and too expensive. And the legacy of those reason is what I suspect keeps many from changing course. But software innovations of the last ten years have changed that. They make keeping legal and design documents together practical, easy, and cheap. They also add extra benefits not available before.

One Contract In One File

So how do you keep legal and design documents together and reap extra benefits? Use Adobe Acrobat. Here's how:

1. Your lead design professional prepares a .pdf file that includes all of the design documents by printing or converting the original CADD files into .pdfs (not scanning them as an image into a .pdf file)
2. Your lawyer prepares a .pdf file that includes all of the the legal documents by printing or converting the original Microsoft Word files into .pdfs (not scanning them as an image into a .pdf file). The legal documents file have "stubs" that refer to, and accept insertion of, the design documents. Here's two examples of the stubs I'm talking about:
   • Language in the main agreement like: "the Work is identified in the Drawings and Specifications attached as Exhibit 1.1.2 to this Agreement", and
   • An exhibit cover page with space behind it ready to accept insertion of the design document .pdf file behind that cover page
     Open up this scaled down sample contract and look at the parts inside the blue bubbles to see these kinds of stubs in action
3. Your lead design professional e-mails the design document .pdf file to your lawyer
4. Your lawyer then inserts the design document .pdf file into the legal document .pdf file behind the exhibit cover page I mentioned above. The result is a single .pdf file that has both the legal documents and the design documents: the "Contract File"
5. Your lawyer circulates the Contract File one last time among the (a) principals (owner, prime contractor, subcontractor, sub-subcontractor, as the case may be) and (b) the lead design professional so everyone can confirm that the Contract File includes all the documents that should be there, and none of the documents that shouldn't
6. After everyone confirms, your lawyer circulates a final signing edition of the Contract File for each principal to sign
7. Each principal signs the Contract File's signature page. Then they each scan their respective signature pages and e-mail them back to your lawyer
8. Your lawyer then deletes the blank signature page from the Contract File and inserts the scans of each principal's signature page where the blank signature page formerly was
9. Last, your lawyer circulates the Contract File that includes (a) all of the legal documents, (b) all of the design documents, and (c) each principal's signature, to everyone involved

The result: a Contract File that looks like this sample. You now have an authoritative duplicate of the entire Contract that you can open-up and refer by clicking on just one .pdf file icon. The other principals enjoy this too. No more looking for the other glove. No more sorting shards of shattered glass.

And one more thing about preparing Contract Files. You don't have to use a lawyer. But you should. If you ask, I'll suggest you to hire me. But really you can hire any lawyer, as, long as (a) they're properly licensed, (b) they're qualified, and (c) you like the way they represent you.

Extra Benefits

Putting all the documents that compose the Contract into a single .pdf file delivers extra benefits too:

• It's easy to save the Contract File on your company's network, in an e-room, on a cloud, on a DVD-R, or some other electronic medium. You reduce clutter and save shelf space
• It's easier to find the Contract File when you need it later. Stored electronically, you can find it by just browsing file names or searching for data you populated into the Contract File's document profile. Plus, stored electronically, you'll back-up the Contract File. So there's less chance you'll lose it in a fire, a move, or in one of those records department black holes
• Because the Contract File is digitally converted from other file formats instead of being scanned into a .pdf file as a graphic image like a photograph, you'll be able to word search in the Contract using Adobe Acrobat search function (hit Control+F while viewing the Contract in Acrobat). Need to find a term dealing with a specific topic quickly? Searching the Contract File for a specific word on your topic sure beats scanning hundred of pages trying to find what you're looking for and possibly missing it the first few times through the Contract. Try this out by opening up the sample and searching through it
• The Contract will have better visual quality. It will be more legible. No more reading a copy of a copy that was copied off of a fax
• You can use Acrobat Bookmarks to speed navigation through the Contract (see illustration to the right). Open the sample and click the bookmarks. Notice how fast you can jump from the front page to confirm each party signed on the signature page, and then jump to the start of the design documents. No more turning page after page after page. It may seem trivial on a contract the size of the sample, but imagine how much bookmarks will help on a contract that's hundreds of pages long with ten or more exhibits
• You can share the Contract quickly, easily, and cheaply. Just attach it to an e-mail and send it to an auditor, a title insurance company, or someone in the field
• This approach promotes using digital instead of manual signatures. Maybe one day predictions will come true and people really will embrace digital signatures. If that day ever arrives, you'll be ready. And if it doesn't, at least you'll look cutting-edge

Limits and Drawbacks

The one Contract File approach isn't perfect and it doesn't work everywhere:

• It doesn't apply very well, at least initially, to design/build contracts, EPC contracts, fast-track contracts, and some construction management agreements. The reason: when you initially sign those kinds of contracts, the design documents are only in their preliminary stages, or there's no design documents at all. So there's few, if any, design documents to put into the Contract. But you can use the Contract File technique later. Usually one side must approve a design before later design phases or before building begins. You can attach the then-current design document to the approval certificate or a contract amendment that comes later to identify the Work
• Contract Files are usually very large, often more than 50MB. That's because the graphics in design documents make big data files, even after using Acrobat features that reduce file size. Some of your e-mail recipients may not be able to receive such large files attached to your e-mails. So you may need to compress the Contract File in a Zip file, upload the Contract file to an e-room or file sharing site like Google Documents, or use a large file transmission service like YouSendIt

Conclusion

With software like like Adobe Acrobat you can save all the documents that compose a construction contract - legal documents and design documents - together in one convenient place. It's fast and makes you, your company, and your project team efficient by improving your ability to navigate the Contract, find select terms, and share it with others. It costs little money because it uses software you probably already have and saves you money by freeing up time and file space for other things.

Coming Next

Next up in this top ten list: No. 2: the Price.