About a month ago, I read an article discussing the value of disputes in the construction industry. The article provided figures and trends regarding the average dollar value of disputes, but the part of the article that stuck with me was a brief mention of the primary reason behind construction disputes—ambiguities in the contract documents. This got me thinking once again about the dispute stories I’ve heard over the years from construction companies.
Project Documents are Key
I remember listening to a roundtable discussion at an industry meeting and hearing one contractor describe how he lost nearly a million dollars because of one single change order. While working on a job, a problem came up that required a sizeable change order, as is so often the case. He let the owner know about the issue and sent over the change order request, which was signed. He remembered having the signed change order in hand along with the documentation to back up the additional charges. But somewhere between his office desk and the filing cabinet, the additional documentation was lost. Because he couldn’t produce the signed change order, he couldn’t collect on the full value of the work completed.
Document Management and Construction Software
Another contractor at this same roundtable told a similar story, but with a happier ending. After hearing about the nearly seven figure loss, he told the group that he also had a close call. He had a signed change order representing a similar dollar value, but rather than filing it in a filing cabinet, he scanned it and attached it to the job in his construction management software. When the cost of the change order was disputed, he was able to easily access it and other supporting documentation to prove the charges were legitimate.
What you Need to Succeed
I think most contractors would agree that disputes are inevitable. One key difference between the companies that come out of a dispute successfully and those that do not is documentation. There are numerous document management systems available, but those that are created for the construction industry provide an added benefit. Not only do construction specific document management systems give you control over project documents such as change orders and submittals, they allow you to easily attach emails, photos, and other related documents to the appropriate job. And as we’ve seen, these 'related documents' can be imperative to winning disputes.
What are you using to manage your project documents and mitigate the risks of dispute?