Errors, Omissions, Extras and Changes - Who Pays?
During my recent estimating seminar, one of the contractors became very upset when we discussed errors and omissions on blueprints.
"Those architects and engineers are educated professionals, and they are paid good money for designing and drawing the blueprints. They should be responsible for any mistakes!" he said.
My response was very short and simple: They also write the specs and cover their butts with "the contractor shall question any error or omission before he bids or furnish the most expensive solution" language. If you can't stand the heat, stay out of the kitchen.
That may sound unfair until you analyze the whole situation:
Review, Review, ReviewIn my experience, the most repeated mistake by trade contractors is the failure to review the entire set of plans and specifications.
There is no excuse such as, "It was on the wrong page or in the wrong place." A note on the electrical page for the plumber or HVAC contractor to furnish or install something is very improper, but very legal and binding. How long would it have taken for you to review that page before you bid? Likewise with items listed to be furnished or installed in a different section of the specs.
This responsibility for accuracy, completeness and code compliance does not end with the estimate. If you are awarded the contract, it passes on to your jobsite supervisors. Naturally, your estimating team needs to pass on everything they encountered to assure your supervisors are fully aware of any potential problems.
A "hand-off" or "kick-off" meeting with the estimating and construction teams also should establish a tentative job schedule with "man-days" needs for each task. This will help catch any errors or omissions, and provide ample lead time for jobsite deliveries and precertification training.
All addenda should be noted on the jobsite drawings and in the specs, along with the alternates or negotiated changes that were accepted. Submittals and necessary paperwork should be delegated at this meeting to specific people to be completed by specific dates to ensure nothing gets overlooked. I highly recommend that your jobsite foreman review and approve all shop drawings and catalog cuts.
Document EverythingWith all of this in place, you will still have to deal with extras and change orders. Most of these changes occur because the owner wants something different from the original concept.
Above all else, this is where jobsite documentation is crucial. Making changes or doing extra work without properly signed documentation is called charity. You donated it!
I've heard that same old worn-out excuse for a half century - that your foreman does not want to ruin his rapport with your customer by insisting on a signed work order. Just think about how silly that is. Does your foreman think that this customer, who is in a responsible position with the authority to request thousands of dollars of extra work from your crews, would be upset if asked to sign that request? Wake up and smell the roses!
You may use your own extra work order forms or your customers'. Most importantly, if you are working time and material or cost plus, you need to have your time and materials slip approved and signed every day to avoid any disagreement later.
You also need to explain to jobsite supervisors how fast your cash flow happens with signed work orders vs. the costly delays, wasted office time and possibility of never getting paid for that extra work.
When there is a request for pricing a change (RFP) issued, you need to give it your immediate attention. Our policy was always to assign that responsibility to the jobsite foreman if it were a verbal request. When the request came on paper, it was then the responsibility of our estimator to respond immediately.
Either of those two individuals may get help from the other, but the responsibility to get it done remained as assigned. Delaying these RFPs can justify you paying for liquidated damages if the project is not completed on schedule.
When you are on a project with weekly progress meetings and the minutes of the meeting are sent out, you can accept those minutes as an authorized change order. You also need to carefully read those minutes to be certain your customer does not try to pull a fast one by claiming your agreement to perform that extra work at no cost to them.
When you receive a written work order, be sure to request a written change that is processed immediately and included in that month's pay request. Do not wait until the end of a project to settle change orders and receive the ever-so-critical cash flow. If you did that work this month, you deserve to be paid on this month's draw.
Much of this extra work involves so little extra cost that you should consider "horse trading." There are enough situations on every project where each side can make a deal and settle the costs at the jobsite without wasting a lot of office time and paperwork. This horse trading creates better cooperation between the different trades as well as with your customer.
Do not think that horse trading will eliminate the need for signed work orders. Human beings have convenient memories. They remember what they did for you but seem to forget what you did for them over the length of the project. What's documented and signed doesn't get forgotten.
As you deal with all of these errors, omissions, extras and changes, keep in mind the critical importance of future relationships. We call this "repeats and referrals." You do not want to ruin your reputation fighting over monies that are owed to you and would have been paid with proper and timely documentation.