Foundations for Construction Success

CATEGORY: Authored Articles
CLIENT TYPE: Private Education
AUTHOR: Heather DeBlanc
PUBLICATION: National Business Officers Association (NBOA)’s Net Assets Magazine
DATE: Dec 04, 2019

Many independent school campuses are constantly in a state of flux, with projects ranging from ground-up construction to modernization and renovation. Across the nation, schools are building everything from robotics labs and film studios to full commercial kitchens and mixed-use outdoor space, often to enhance collaborative learning, meet technological needs and improve energy efficiency.

I recently visited new facilities at three independent schools to discover what it takes to complete a successful construction project fit for the future. Advanced planning, solid contract documents, a collaborative project team and constant communication are key ingredients of smooth construction.

Here are seven tips gleaned from my experience:

1. Assemble a Top-Notch Team

An ideal team includes an architect/engineer, construction manager and contractor. Each should be licensed to perform their respective services. The school should request qualifications, competency and experience on similar projects and check all references.

Schools should, at a minimum, obtain and review the following information to determine whether a contractor is qualified:

  • Construction history
  • Contractor license number and any revocations or suspensions in the last five years
  • Contractor’s personnel and organizational chart
  • Relevant experience and references over the last five years
  • Financial data to determine financial stability and assess risk of dissolution or bankruptcy
  • Bonding capacity and insurance coverage information
  • Litigation regarding contractor’s construction projects for the last five years

Requests for proposals should contain language stating the school is under no obligation to award the contract to any proposer and that no contractual relationship exists until the school accepts the bid and the parties execute a written contract.

“I think the make-it-or-break-it thing for these projects is having the right team,” said Matt Riddle, facilities manager at Marlborough School, which recently doubled the size of its campus. “Every day there is some decision that comes up that has to be made and the relationship the school has with its team makes a big difference.”

2. Plan Early for Safety, Impacts, Efficiency and Design Standards

Planning contributed to project success at each school I visited. Depending on the location of your school’s project, you will likely have to meet requirements for permits, zoning and ordinances. Identify these requirements early and develop a plan for compliance.

Some states may have statutory requirements for the design and construction of schools. For example, schools in California must be designed and constructed in compliance with the Private Schools Building Safety Act of 1986.

The Archer School for Girls, which recently completed a new building connected to a historic building, underwent four years of planning meetings, obtaining permits and satisfying the community requirements before moving forward. One of Archer’s many requirements was to use a vibration monitor tool that would text the school’s construction manager, Jeff Searock, if vibrations exceeded a specified threshold and threatened to crack the building.

“If you are open to listening to the community around you, I think that helps,” said Marlborough School’s Riddle. “People would bring up points that I wasn’t thinking about.” When neighbors expressed concerns about increased traffic, it was the contractor who recommended implementing a ridesharing program, based on previous experience, Riddle explained.

3. Begin with Strong, Defensible Contracts

Every school undergoing construction should understand the Spearin Doctrine. This landmark decision by the U.S. Supreme Court found that when an owner provides information, plans and specifications to a contractor, the owner “impliedly warrants” that information. What does this mean for schools? When a school provides a contractor with information, plans and specifications, the school is responsible for that information and, if there are any errors or omissions, the contractor will look to the school to recover damages. Therefore, a school should carefully negotiate contract provisions with the architect.

Consider these key provisions when developing an architect contract:

  • Indemnification: Indemnity is a duty by one party to make good any loss, damage or liability incurred by another party. Many states have statutory limitations on the level of indemnity that an architect may provide to an owner. A school engaging an architect should seek the maximum level of protection.
  • Insurance: Require the architect and any of its subcontractor design professionals to have professional liability insurance.
  • Ownership of plans and specifications: Address ownership and use of the plans and specifications prepared for the project, including after expiration or termination of the agreement. The school should maintain the right to use the plans and specifications to complete the project.
  • Scope of work: The contract should detail the scope of work to avoid an architect claiming that something is an “additional service.” The architect agreement often downplays the architect’s role during construction, but an architect is usually active in certifying payment applications, approving change orders, attending job site meetings, issuing a certificate of substantial completion and assisting with close-out procedures. These obligations should be noted as included in the scope.
  • Timing of architect actions: An architect’s course of construction duties will likely interact with a contractor’s payment and performance obligations. Ensure consistency among contracts. For example, if an architect has 14 days to respond to submittals per the architect agreement, the construction agreement should not require a response within seven days.

Schools should allow time for a legal review of all project contracts before executing them. This process ensures reduced potential liability to the school when a dispute arises and also engages the parties before the project so that each understands its duties and responsibilities. Schools should coordinate the responsibilities of the contractor, architect and construction manager in the contract documents to avoid overlapping or conflicting duties, confusion on the job site and delays to the project.

Even a nonlinear process can work if parameters are clear. In its project to build a new middle school, Brentwood School applied for and received approvals for grading and then foundation work while working with a contractor. Simultaneously, the school was finalizing permits with the city for other areas. Because the contractor, construction manager and school all understood their respective roles, the project remained on schedule.

“We decided to work in parallel,” explained Victor Pesiri, director of facilities. “We were nearly halfway through the project schedule before we had all our approvals in place, which made it really challenging, but helped us stick to our project completion date.”

Consider these key provisions when developing a construction contract:

Schools typically enter into one of two types of contracts:

  • Stipulated sum (also known as “fixed price” or “lump sum”): The contractor performs the work at a fixed price and must estimate hours, materials and costs upfront. The contractor submits invoices to the school based on the percentage of work completed as compared against the fixed price. In this case, the contractor bears the risk. In other words, if the contractor’s actual costs are less than estimated, the contractor makes a larger fee on the project; but if the actual costs are more, the contractor could lose money or have an unprofitable project. For the school, a stipulated sum contract can provide some certainty and reduced administrative costs. However, if the project is large or complex, a contractor is more likely to quote a high fixed price because it will take on more risk.
  • Cost of the work plus a fee with a guaranteed maximum price (GMP): The contractor submits invoices for the actual cost of the work and obtains a set percentage of the actual cost as a fee. The GMP is the “not-to-exceed” amount to which parties agree. The school will receive invoices with back-up showing actual costs, which will require a school representative or construction manager to analyze these invoices. While the administrative burden may be greater, this type of structure can result in savings to the school. With this contract structure, the parties also may agree to share in savings.

Consider also these provisions:

  • Payment: Some states have prompt pay laws. Ensure timely payment in line with statutory requirements to keep the project moving and make sure to include reasons for which payment may be withheld.
  • Change orders: Change orders modify existing contract scope, usually by increasing the contract price and, sometimes, the contract time. Detailed change order provisions ensure the project moves forward when unexpected changes arise.
  • Indemnification: Shift the burden of risks to the party that is best able to control or manage them.
  • Termination: Detail the reasons a party may terminate the contract for cause and what happens in the event of a termination for cause or for convenience.
  • Dispute resolution: Mediation before arbitration or litigation allows the parties to settle on mutually acceptable terms.
The new “black box” theater at Archer required structural work more extensive than originally anticipated. “This change was made during the heart of construction, so we really had to work with the contractor to make this work,” said Jane Davis, chief financial officer. Strong relationships resulted in a timely and space-appropriate fix. Archer’s theater teacher worked directly with the architects and construction manager on the vision for this new theater space.

4. Obtain Insurance

Schools should generally require the following insurance policies:

  • Errors and omissions and professional liability: Covers errors and omissions claims against design professionals.
  • Commercial general liability (“CGL”): Covers claims for property damages, personal injury (including libel, slander or defamation) and advertising injury.
  • Commercial automobile liability: Covers property damage and bodily injury caused by contractor’s motor vehicles driven onto the project site or campus.
  • Workers’ compensation: Covers injuries sustained by workers and must provide coverage required by state law.
  • Builder’s risk: Covers the materials, fixtures or equipment (whether installed or not) during the course of construction. Sometimes the school obtains this coverage.

Contract documents should require the contractor to maintain its insurance throughout the project and pay all premiums, deductibles and self-insured retentions, especially to the extent claims arise from the negligence of the contractor or its subcontractors. The documents should also make clear that the contractor’s insurance is primary and that the CGL and auto policies name the school as an additional insured. Schools should consult with their broker to determine appropriate coverage for the project.

5. Communicate To Avoid Disputes

Disputes can delay and drive up project costs. At all three schools, communication was the key to minimize disputes and keep projects running on schedule.

“I was constantly putting out fires [and mediating] those little tiffs that come up between the architect and the contractor,” said Riddle of Marlborough School. “They are working together every day for so long that it’s almost inevitable they will eventually [quarrel].”

At Archer, Janet Lyon, director of operations, met weekly with the project’s construction manager and project engineer. She also sent an email to school staff every Friday with updates on progress and upcoming steps.

“We tried to answer the questions before they were asked,” she said. “The entire faculty and staff would get an email saying ‘Expect noise on the second floor, east wing on Monday.’ We liked to include fun photos too, since the construction was blocked off and you could not see it.”

Brentwood School took 11 years to begin construction on its middle school building, but the time spent discussing the project with the community paid off.

“The school has worked since 2006 with our neighbors and have designed a project that they can support and approve,” said Pesiri. “Here we are near the end of the project, and we’re still all friends.”

6. Keep Accurate Records

On any construction project, it is important for the school, architect, construction manager, and the contractor and its subcontractors to maintain organized and accurate records relating to the project and the contract documents. This may help prevent or reduce disputes on the project. If disputes do arise, the records may facilitate and expedite a resolution. The contracts serve as a roadmap for the team.

The school or its construction manager should maintain a full and accurate accounting of:

  • The current contract sum, including approved change orders, adjustments to contract sum or contract time, and all supporting documentation, including the school’s board or other authority’s approval
  • Pay applications and payments made to the contractor, including any withholdings
  • Damage or destruction to property of the school or third parties, including a description of the damage or destruction, the date it occurred, the property owner and the actual or estimated amount of damage.

Photographs and video documentation are key. Photographs with date-stamped pictures provide evidence of the time frame. Both photos and videos of construction progress can not only help when something goes wrong but also tell a story of the exciting historical transformation at your campus.

7. Take Care with Project Close-Out

Schools should review their contract and construction documents to ensure proper close-out. Consider the following:

Has the school received:

  • All required releases and waivers
  • Warranties
  • Up-to-date record drawings and as-built drawings
  • Operation and instruction manuals
  • Necessary keys and other access instruments to enter the premises

Has the school:

  • Released all non-disputed retention proceeds to the contractor as required by state law
  • Recorded a notice of completion, depending on state law. There may be circumstances in which the school may not wish to record a notice of completion, if legally permissible, such as when work is stalled or postponed.

Schools should always ensure the contract documents and close-out procedures meet applicable state law.

At close-out, Marlborough discovered that the chlorine distribution machine installed in its new pool did not operate correctly. Because the school had secured proper warranties and maintained a good relationship with the contractor, the issue was easily resolved.

The contractor “just came in and replaced it; it was all under warranty,” said Riddle. “It could have been a big deal, but there was never an argument. I think it just goes back to keeping everybody cool during the project.”
Reflecting on Brentwood’s project, Mr. Pesiri said, “I think our biggest accomplishment was getting this project done on time.”

It was no small feat, considering the five-story $73-million middle school building includes a 100,000 square foot garage as well as the latest technology in the performing arts theater, classrooms, music and art rooms.

As I concluded my visit at Archer, I noticed a series of beautiful wooden benches in an outside corridor. Inspirational quotes chosen by school seniors were engraved on the seats, including one from Eleanor Roosevelt: “The future belongs to those who believe in the beauty of their dreams.” Archer had salvaged the wood from a tree trunk that had to come out during construction. Nestled between the historical building and new facility, the benches are a reminder for students to remember history while looking toward the future. With planning, monitoring, care and communication, school construction projects can themselves be a story to remember fondly, while resulting in improved facilities for the next generation of leaders. 

This article written by Heather DeBlanc was featured in NBOA’s Net Assets Magazine – November/December 2019 issue.