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Construction industry continues improving at slow rate, P.2

11/14/2012 | Construction Blog, Real Estate Blog

In our previous post, we began speaking about the slow improvement of the construction industry in the Philadelphia area. While the pace isn’t as fast as some in the industry would hope, it is still on an overall upward trend. With this increase comes the need for more awareness of the importance of careful construction contract negotiation.

Addressing every aspect of construction contract negotiation is more than we can do here, so we’ll just offer some of the more important ones. First of all, it is important to detail the scope of the work being undertaken. This is perhaps the most important aspect of the contract, since it specifies what will actually be cone, what the finished product should look like and what it should do. Owners need to be careful to convey their wishes clearly and with sufficient detail so that contractors know exactly what is expected of them.

Pricing is also an important thing to think carefully about prior to the negotiation process. Some arrangements will be more favorable to the contractor, some to the owner, and others basically even-handed. It is important to realize the advantages and potential disadvantages of each arrangement when going to the negotiation table.

Business owners are also well advised obtain a retention, which withholds a certain some from the contractor’s compensation until everything is completed. These provisions keep the contractor motivated to complete the job.

Other important matters to address are: how disputes will be settled; indemnity; change/differing site condition claims; and insurance. Contractors should also know their lender’s requirements before selecting a contractor. Using a contractor recommended by the lender can allow business owners to leverage that relationship to obtain an optimally honest and responsible performance.

These are only some of the issues that need to be addressed in effective contract negotiation. Working with an experienced attorney through this process will help ensure the best possible outcome.

Source: Philadelphia Business Journal, “Construction industry slowly rebounding,” Natalie Kostelni, November 2, 2012