Dietmar Scheel, P.E.Principal Construction Manager / Contracts Specialist

General Philosophy and Approach

Know Your Role!

Writing an Effective Letter Administering the

Engineer’s Contract

The Games People Play

Risk Identification/Mitigation during the

Construction Process

Proactive Handling of Variations and Claims

Appreciating Cultural Differences

Final “Pearls of Wisdom?”

Team Approach

Fairness

The “feeling out” process

Communication

Meetings

Developing a Contract Administration Manual

During planning and design, the Engineer is mostly the “master of his own destiny” on greenfield projects; less so on rehabilitation projects

During construction, the Engineer ceases to be the master of his own destiny. He should be measured as to the quality of his level of effort, versus a defined scope

Remember that a good Engineer will add value well beyond his cost.

Beware of false economies

Technology transfer

View the definition of “Engineer” or “Employer” as your job description!

Rule #1: READ, RE-READ, KNOW, QUOTE AND DO THE CONTRACT!!!

Rule #2: Repeat Rule #1, again, and again

Engineers like to fix things. Resist the temptation when it’s someone else’s job to do so

As a contracts engineer, impress this philosophy on others

The police officer analogy

Letters Covering Unsatisfactory Performance / Conformance

Step 1 – Statement of the problem

Step 2 – Quote the Contract

Step 3 – ASK how the Contractor intends to rectify the matter

Append documentation

A summary letter may be needed that references multiple references

Sound General Practices for Letter Writing:

Number the letters

Reference all applicable letters

Include references to specific clauses in the text

Keep the letter brief to the extent practicable

Don’t mix subject matters

Keep your emotions in check

The need for proper documentation

Document management systems

Interfaces (between technical disciplines, contractors)

Early identification of issues

Contracts staff should be intimately familiar with technical problems and construction issues

regular visits to construction work

vetting correspondence)

Seek “win/win” scenarios

Timeliness in handling issues

Be forthright on extra work

Attitude and Prevention People, the contract, and the processes are imperfect Claims can happen to anyone Claims are part of business today “Think positive” Report early; follow up “Team tackle” Settle quickly Create a “win-win”

Track all changes

“Dumb as a fox!”

Know when technical issues cease being technical issues

Major equipment suppliers

Contractual savvy is not dictated by contractor size

RFIs and RFCs

Construction schedules

Numerous causes

Delays...most costly

Changed conditions

Third party

Changes

Underbid Job

Weather

Site access

“Acts of God”

Interference

Late equipment deliveries

Strikes

Errors and omissions

Errors and Omissions

Means and Methods

Over or Under Specifying Work

Black Box Designs

Low Cost Estimates

Illegal Designs( codes, permits, safety)

Errors and Omissions

Means and Methods

Over or Under Specifying Work

Black Box Designs

Low Cost Estimates

Illegal Designs( codes, permits, safety)

1. Is it true?2. What does the contract say?3. Is it reasonable?

Time is money?

No variation orders!

Is it really an obligation, or just a guideline?

Bid period assumptions

Perceptions of assumed risk

February 2016

Dietmar Scheel, P.E.Principal Construction Manager / Contracts Specialist

Claims are natural. The designers could not have anticipated everything.

Disputes are natural. Just ask your wife.

The most time consuming (yet most essential) step in claim analysis is collecting the facts.

Remember that the ultimate judge in a dispute is most likely a person less technically adept than you (a jury member, a judge, an arbitrator).

Too many technical details in a dispute tend work in favor of the Contractor. This is because he is not expected to be an expert in technical details, the Engineer is. Thus, the Engineer is often viewed as being at fault if things get messed up and the matter is deeply technical.

When a problem arises, let the contractual people know immediately. Otherwise your own may be handicapped when a claim develops later.

The steps in the analyzing a claim are: collecting facts, reviewing history, reviewing ALL relevant contractual requirements, analyzing all information; and making a recommendation. The more thorough a job done on the first steps makes the remaining steps much easier; the conclusion reached will be that much more obvious. Facts reduce bias.

The Contract requires you to be unbiased, even though the Employer is ultimately paying your paycheck. Bias has legal implications.

If one defines a Contractor as someone who wishes to be paid twice for the same thing; then one should define an Employer as someone who does not want to pay for something the first time around.

The required level of quality is the specified quality.

Business buzzwords such as “Total Quality” don’t apply when the work is being done by the lowest bidder.

Engineering projects are like cars. Both must suit the intended purpose and be safe. On the other hand, projects range from stripped down models (Daihatsu) to deluxe models (Mercedes).

An Engineer enforcing a Contract he is not fully familiar with is like a police officer unfamiliar with the laws he’s supposed to enforce. It just doesn’t work.

Everyone does “horse trading” on a construction project. Be careful with it, “deals” fall apart when real money becomes involved.

Contracts are never perfect since they are put together by imperfect beings. Report any flaws to management so they can resolve them (often there are cost implications with these). Also look for any discrepancies between the specs, drawings and pay items and report them to management.

“The devil is in the details.” Designers tend to get the big things right, but deadlines preempt doing a good job on the little things (finishing work, miscellaneous metalwork, minor electro-mechanical work, etc.)

Watch out for interfaces between structures or engineering disciplines. Sometimes it seems that designers don’t talk to each other.

Remember when it is no longer a technical meeting. (Beware of those with contractual savvy when they show up even if they keep their mouths shut. Involve your own contractual people when this happens.)

“Loose lips sink ships” (a World War II saying about those who cannot keep their mouths shut in front of the wrong people.) Let internal discussions remain internal.

Stopping the work is NOT a right the Engineer has; for most Contracts only the Employer can do it. The Engineer has other rights under the Contract, such as removal or non-payment for defective work.

“Watch out for what you ask for, you may actually receive it.” After something is reviewed you already begin to take ownership of its contents. (e.g., unneeded tender appendices may become the basis for a claim later.)

Time is of the essence of any Contract. Treat it as such.

React quickly to correspondence. Failing to review shop drawings or substitute materials in a reasonable amount of time could result in a delay claim. Sometimes failure to react quickly could be construed as a tacit approval of a proposal.

Schedule float does not belong to you. Treat it as if it belongs to someone else. Get out of the Contractor’s way so he get on with his job.

Anticipate what is coming. Construction superintendents can’t always do this since they are usually too busy “killing today’s snakes.”

Don’t always count on the expertise of your home office. They are not on site and thus not aware of all of the details you have. Also, they are less likely to be appreciative of the need for timeliness on an issue. Use your head.

If it is important, put it in writing (non-compliance notice, site instruction, letter).

If you can’t put it in writing, maybe you shouldn’t say it either.

A well worded question is often more powerful than providing wise advise.

Don’t be prescriptive when you are not supposed to. Ask a question. (e.g. “Sub-Clause X says Y, how does the Contractor intend to do this?”)

Don’t be prescriptive when you don’t have to. Ask a question. Don’t stymie the Contractor’s creativity; he is paid to be an expert.

Before you “hammer” the Contractor, remind him of his obligations.

It is not your job to dictate how something is done, it is your job though to make sure it gets done.

Step 1 of administering a contract is to read what your authority is as described in the conditions of contract. View it as a job description around which all other duties revolve. Your role varies depending on the type of contract your working on.

On a FIDIC contract, only the “Engineer” and “Engineer’s Representative” truly have any authority. The rest must “tow the line.”

Don’t order instructions which may result in extra costs without consulting the Employer (through the “Engineer”) first. Wouldn’t you be upset if someone spent your money without your consent?

Rule 1: Make sure subs and suppliers follow contractual lines of communication.

Rule 2: Now that you’ve already violated Rule 1, be doubly sure to follow Rule 1 when you see a dispute coming.

Don’t let yourself get caught in the middle of a fight that is not yours.

Contractors tend to be much more rigid in enforcing subcontracted work than we would. Let him do his job.

The Contractor is paid to coordinate his subs and suppliers, not us.

Remember that on a FIDIC contract, only the “Engineer” and “Engineer’s Representative” truly have any authority. The rest of us must “tow the line.”

Rebuke ye not in public!

A subordinate that is over-ruled in front of the Contractor is a less effective subordinate. The Contractor may wonder why he should listen to the subordinate in the first place. Allow the subordinate to revise his stance before the Contractor himself.

Let your subordinates know your “ground rules” in advance whenever possible.

Be careful of internal memos written to file; they are subject to discovery by lawyers at a later date. They may prove to be an embarrassment to the entire organization and to the author. Correspondence files should largely contain only official correspondence.

A divided Engineer is a conquered Engineer (and Employer).

A proper documentation system is not one that satisfies your need to retrieve information later, it is one that is “user friendly to others.”

The records you maintain will be useful much later for technical purposes, educational purposes, claims purposes, and future project expansion purposes.

Don’t wait until the end of the project to prepare record drawings. You’ll forget plenty by then. Also, most projects run out of budget at some point and it may not be possible to prepare them later. Besides, who says you even have a tomorrow.

The most important items for claims defense are facts.

Facts are precious, diligently collect them. Opinions are cheap, everybody has at least one. Unsubstantiated opinions are particularly worthless.

Facts you collect but can’t retrieve at a future date are essentially worthless. Establish a database that even a twit can figure out well after you’re gone.

A fact you deem worthless may be quite useful. (e.g. the items in the foreground of a picture may be worthless but something in the background may be quite useful.)

Sometimes it is more important to record progress not being made than it is to record progress being made (e.g. broken piece of key equipment, inactivity on critical path work, etc).

If it is important … record it, put it in writing, take a picture of it, etc.

Stop continuous verbal repetition to the Contractor, put it in writing. (e.g. non-compliance notice, site instruction, letter).

If a picture is worth a thousand words, then what’s a videotape worth?

Remember that on international projects, English is not the first language for most people. This makes it even more important to put matters in writing.

Appreciate the fact that the person you are talking to may not know English as well as you. If your English isn’t good either, miscommunication is very likely.

Watch your emotions.

If you write a letter while you’re emotional, put it to a side for a day and review it in the morning. You’ll be glad you didn’t send it as is.

Words Have Meaning:

Use the word “approved” with great caution. The word itself implies that the person giving approval is the ultimately responsible for the item being approved. (See prior sayings on knowing your role.)

The word “approved” should be used on items of Permanent Works or other special cases as stated in the Contract.

The word “approved” should never be used in giving consent to normal Temporary Works, people, subcontractors, method statements, schedules, or any means or methods unless otherwise prescribed by the Contract. Words such as “without exception” or “no objection” are better choices for such cases.

The proper word to use are the words used by the Contract (even if they stink).

Be careful in using the words like “instruct” or “direct”. (See prior sayings on knowing your role.)

0.2m mathematically equals 200mm, but it also equals any number between 150mm and 249mm.

Punctuation has meaning too. A simple thing such as a comma can entirely change the meaning of a sentence.

Solicit the opinions of others. Use them as a “sounding board.” “Iron sharpens iron.”

Seek “win, win” situations.

Safety is NOT the contractual responsibility of the Engineer. If you think it is, are you willing to pay the bills of an injured person? The Contractor is being paid to ensure safety. The Engineer may have a moral responsibility though. The Engineer has contractual powers regarding his own safety; when strategically used, these powers can improve the safety of all.

“Put your money where your mouth is.” When changing the work, think whether or not you would make the change if your own money was on the line.

Treat the client’s money as if it were your own. Don’t throw it away.

You have no right to lay claim to float on a construction schedule.

If you wait to the last minute to review something prepared by the Contractor and then find something wrong with it, the delay may be for your own account.

Endeavor to respond to all submissions within two weeks.

The proverbial “sword cuts two ways,” it has two edges. If ye shall nit-pick, ye shall expect to be nit-picked.

Remember that the Engineer and the Contractor are both “in the same boat.” They can look good together or they can look bad together.

Work on your relationships. A successful partnering arrangement is better than a successful adversarial relationship.

-End-

Questions?

Questions?