LAW: The Contractor's Side

By: Cordell Parvin

In my June 1997 column I wrote on the hazards of attempting to prove increased costs by the "total cost" approach (see Total Cost Method of Calculating Damages, p 12). I stated that many claims I see are based on the impact of many changes, differing site conditions, delays and disruptions. It is very difficult, if not impossible to quantify accurately the impact of each event. In those cases contractors have little choice and most use some form of the "total cost" approach to prove their damages.

In other cases, contractors use the "total cost" approach because they lack proper documentation. Too often I am told: "We didn't document events very well on this project." (Presumably, the documentation on less troubled projects is better.) This column will be the first of several to discuss proper documentation. I believe that construction contract disputes are 1% law and 99% facts. The legal principles applicable to a construction case are typically quite basic and uncomplicated. Determination of both entitlement of damages and their measure is established by applying those few legal principles to the facts. It is the assembly and proof of facts that is so critical.

For this reason, documentation should not be taken lightly, or relegated to lower echelon personnel. It must be used to "define, detect, predict and act." Specifically, it can "define" the work to be performed, the crews to be utilized and their anticipated productivity. Once construction begins documentation should "detect" when there is a problem. After analysis, management should be able to "predict" the outcome if changes are not made and then "act" to solve the problem.

Documentation is one of the most cost-effective functions a contractor can undertake. However, there are several impediments to developing and maintaining effective documentation systems. To be sure, documentation is inherently unexciting at best. I have never met a project superintendent who decided on a career in construction so that he could document what happened each day on a project. The purpose of documentation is to provide written evidence of where work is being performed, productivity, equipment and crews, field conditions, administrative decisions, incurred costs, quality control, and the myriad activities associated with fulfilling contractual responsibilities and enforcing contractual rights.

Tasks included in documentation

The process of documentation, including its evaluation and improvement, may be better understood if it is subdivided into a number of subtasks. A proposed division is as follows:

1. Recognition, collection and recordation
2. Reporting, distribution and transmission
3. Initial utilization
4. Storage, and
5. Retrieval.

Recognition, collection and recordation is the most vital step in the entire process. Without it, the other steps are moot. It requires that field superintendents and/or project engineers evaluate all real-time events, selecting those that appear to be of future value, and committing them to a permanent record. Several contractors have reported to me that their field personnel do not adequately evaluate the real-time events until after they have experienced a major claim on one of their projects. It is a shame to pay the costs for an undocumented claim to ensure better documentation in the future. For that reason, we are frequently asked by contractors to conduct workshops for project personnel on documentation and to use "real world" examples to demonstrate the importance of documentation.

Reporting, distribution and transmission is a matter of communicating the documents or information to another party. Modern software is available to help with the reporting, distribution and transmission. I know of contractors who are customizing their software to meet their own particular needs. If field records are computerized at the outset, the cost of organizing them at a later point is eliminated.

Initial utilization of field documentation is important. Contractor management must know what is going on in the field so that adjustments can be made. It is similar to football coaches reviewing real true photographs of plays during a game and then making adjustments to their plan. That which is not reviewed may be routed directly to storage. Storage typically involves filing the information so that it can be retrieved at a later point. Once again, storage by use of computer software makes retrieval at a later date an easier task. In my next column, I will discuss the requisites of a good documentation system.