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Planning Ahead for Additional Compensation

April 28, 2011
money for additional services for construction administration

Does your designer contract have provisions in it for additional compensation in the event the construction project takes longer than the parties anticipate?  If you use the AIA 201 (2007) general conditions for the Contractor, it may.  The AIA provisions include:

 

 § 1.1.2 THE CONTRACT

The Contract Documents form the Contract for Construction. The Contract represents the entire and integrated agreement between the parties hereto and supersedes prior negotiations, representations or agreements, either written or oral. The Contract may be amended or modified only by a Modification. The Contract Documents shall not be construed to create a contractual relationship of any kind (1) between the Contractor and the Architect or the Architect’s consultants, (2) between the Owner and a Subcontractor or a Sub-subcontractor, (3) between the Owner and the Architect or the Architect’s consultants or (4) between any persons or entities other than the Owner and the Contractor. The Architect shall, however, be entitled to performance and enforcement of obligations under the Contract intended to facilitate performance of the Architect’s duties.

The language that I bolded is very important language.  It may provide a mechanism to recoup additional service fees for extended construction administration services.  Note, however, that I said “may.”

If your fees are based on a set number of construction days, what happens if the project gets extended?  Do you simply go without pay for extra months of CA services?  Do you re-negotiate with the Owner at that time?   You should consider this issue in advance to avoid disputes later on. 

Best practice?  A clause in the Owner-Designer contract that states that additional services compensation will kick in after a certain date,  at a set value per month.  

If you wait until the issue comes up during the final phase of construction, you have much less bargaining power.  You also run the risk of the Owner claiming errors and omissions against you when you present a bill for extra services.  Deal with the issue up front, in much the same way that unit prices for rock overages are provided for upfront in the contractor’s contract. 

Do you have experience with getting additional compensation after construction delays?  What worked best for your company?  Share below. 

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 Photo (c) Freefoto.com via Creative Commons license.

 

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9 Comments
  1. I like the idea of of a “standby” fee that kicks in after a certain period of delays. This issue comes up frequently with my marketing agency’s clients — where we’re building a custom website and the client-approval process stretches out over months.

    Our new policy is that if client-side delays exceed 30% of the project schedule, the client will be removed from our active Production schedule, and the project will be subject to further delays once they come back with their signoffs. Or, if they want to keep their spot in the schedule, we will start billing for the balance of the project (which is normally not due until completion). http://www.coalmarch.com/client-bill-of-rights.php

    • Thanks, Karl, for your comments. How is the new system working for your company? I like that it is in the “bill of rights”– good marketing terminology. (Then again, I’d expect nothing less from a good marketing person).

      Melissa

      • We just started, so I don’t have specific results to report yet. But my sense is that everyone will be happier — clients will know exactly what to expect. And if someone doesn’t like the guidelines, they don’t have to hire us.

  2. Let me know how customers receive it in the next few months- would be an interesting case study. Might even have to have you write a guest post for me! (let me know if you would be interested).

  3. P. Barrow permalink

    This is good advice to get compensation from blood-sucking owners.

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