Tips for Avoiding Claims

March 23, 2009
Use these words of advice, adapted from Handbook of Maintenance Management (2nd Edition) by Joel D. Levitt, to make contracting a smooth process

1. Define the work to be contracted. The better the definition in the early stages, the better the job will go. Avoid loose specifications (on materials and work to be done).

2. Along with No. 1, communicate your ideas to the vendor. Discuss the quality of materials needed, and timing.

3. Negotiate and award the contract. On larger jobs, check out finances, credit, insurance, and staff. Visit other jobs to evaluate quality, and call references. Don’t lose track of the contract documents – keep a fair and complete set.

4. Avoid lowball bids. Negotiate a schedule of extras. A common ploy is to lowball the bid to get the job, and then flood the company with small extras. Protect yourself with clauses like “all extras not included in the original price have to be agreed to in writing prior to the commencement of the work.”

5. Spell out deduction clauses in the contract. Spell out what you’ll charge back, and when you’ll charge it. Examples: debris removal, clean-up, inadequate crew size (in fixed-input contracts), and missing firm-completion dates.

6. Negotiate cancellation clauses. You need to spell out how and why you can cancel the contract; otherwise, you may find yourself with a mechanic’s lien over an inadequate job if you didn’t pay the final payment.

7. On ongoing service bids, avoid a contract term that’s too short or too long. If the term is too short, then the contractor will chart excessively for mobilization costs. If the term is too long, then you might be stuck with a barely adequate vendor, and no easy way to improve the situation.

8. Be as specific as possible about responsibilities, who supplies what, where to unload, and site rules (safety, user contact, clean-up, security, keys, etc.). There should be statements about how the site is to be left at the end of each work day. Who‘s responsible for locking up, barricades, traffic management, cleaning, and debris removal? The agreement should also name the person responsible for municipal per-mits and plans.

9. Inspect the vendor’s insurance policies. Have an agreement about what happens when/if the vendor damages your property (or, worse yet, damages a neighbor’s property). Require an up-to-date certificate of insurance that covers general liability, casualty (property damage), workers’ com-pensation, and auto liability. The smallest contractors/vendors (sole proprietors) don’t need workers’ comp (check with your attorney or insurance professional).

10. Define performance and what a good job looks like. Add clauses like “all work is expected to be done in a professional manner. All work will be in compliance with applicable city building codes.”

11. Prepare the area to be worked on. If necessary, isolate the area so contractors have no reason to wander around. Increases in theft levels sometimes correspond with increased contractor presence in buildings.

12. Be clear regarding when payments will be made and the amount of each payment. Avoid sloppy record-keeping and re quire paid receipts to prove that subcontrac-tors and material vendors have been paid. Get a release of all liens forms signed before the last payment. If you don’t, you could still be hit with liens from unpaid subs. Consult with your legal department about lien laws in your state, and be sure you’re covered.

13. Resolve disputes promptly. Avoid endless delay in reso-lution of disputes, or you’ll end up in court.

14. Evaluate each contractor on a regular basis for quality, service, cost, and fulfillment of contract terms. Write up a short narrative to put into the file about how the job went.

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