Finance Bd. Told Construction Deadlines Will Increase Project Costs

By John Voket

Citing substantial contractor-related delays in occupying the new high school addition during a November 22 meeting, Board of Finance member Joe Kearney introduced stipulations he said could be considered for any future capital building project, with the idea that it might help the town enforce construction deadlines.

However, officials from the Public Building and Sire Commission and the town’s Public Works Department who have seen such clauses in contracts say the town should consider such stipulations very carefully, because they automatically increase the cost of projects by anywhere from five to 50 percent.

At its meeting, the finance board discussed why such a contractual clause — which could affect fines on a per day basis for any occupancy deadline overruns — might be important to have in addition to calling a performance bond or imposing damages action against a contractor.

Mr Kearney said he borrowed proposed legal language from contracts his company negotiates when engaged in time-sensitive construction jobs, primarily at large airports. He said the clause could be available for consideration in any building contracts, and be exercised at the discretion of the Board of Selectmen, which is empowered to enter into town construction and building contracts.

Finance Chairman John Kortze suggested his board pick up the discussion after inviting the Public Building and Site Commission chairman to provide some further insight. First Selectman Pat Llodra, who was on hand at the finance meeting, suggested the town attorney should also be involved.

Finance Vice Chair James Gaston, who is an attorney, confirmed that it may not best serve the town to include a blanket deadline penalty policy in every building contract.

Public Works Director Fred Hurley agreed with Mr Gaston, saying that in the most extreme cases he believes incorporating such a clause — which would have to be stipulated in the bid solicitation — might drive up the cost of a project as much as 50 percent.

“If you want to mandate a deadline for [project] completion, you’re going to have to pay for that,” Mr Hurley said.

Public Building and Site Chairman Robert Mitchell, who handles such contracts routinely in his commercial architecture company, said that an extreme markup of 50 percent would only apply to projects with very short time line requirements.

But generally, he said, even small projects with hard deadlines being set by the owner generate the need for dedicated staff at the contractors’ level to spend extra time tracking every occurrence where things like weather — even delays caused by the owner — interfere with a vendor’s ability to deliver a project on time.

“It becomes a paper nightmare,” Mr Mitchell said. “And I’ve never heard of a project where it was enforced.”

Mr Mitchell said while the language in such a clause might be good enough to initiate legal action to enforce it, or try to collect, but it becomes incumbent on the owner — in this case the town — to prove any delays were the sole fault of the contractor.

“So that means the contractor has to engage extra resources to maintain that paper trail,” Mr Mitchell said, warning that such added administration always incorporates copious documentation whenever the owner fails to meet deadlines.

“It also locks the town into deliverables,” he said. “And even in the most obvious cases when the contractor causes the delays, it still ends up in court — which drives up the owner’s costs further.”

In the case of the current high school project delays, Mr Mitchell said having such a clause would be almost impossible to collect on, because the consequential financial damages would be difficult to trace.

In the case of the Morganti Group, Mr Mitchell said delays are related to the project’s management, “so you can’t attribute the delays to the [subcontractors].”

And while he has heard some have rushed to blame town officials who originally approved the high school contract with its project manager, the town does not have the infrastructure or personnel to create and administer a large scale contract with hard deadlines.

Mr Mitchell said there are even extra costs associated with preparing a bid, because the town would have to hire a contractor to walk through the proposed project to try and fix logical time lines for each phase or component.

“And it might be hard to find a contractor to do that, because they would [subsequently] be prevented from bidding on the project,” Mr Mitchell said.

Instead, he recommended creating a stipulation under which the town could legally bring in another contractor if a project falls significantly behind schedule, and then “back-charge the original contractor for the work.”

“Even if you are able to provide a reasonable schedule, with flexibility built in,” Mr Mitchell said, “it would add five percent to the bottom line just to track the paperwork.”

Ultimately, the board of finance agreed to consider Mr Kearney’s ideas, and said they would plan a future meeting to discuss ideas about future capital project contracts with both Mr Mitchell and the town attorney.