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ConstructionPro Week, Volume: 2 - Issue: 19 - 05/10/2013

Should Contractors Be Allowed to Offer Early Completion?

By Bruce Jervis

 

When contractors start moving the project completion date forward, problems can arise. Sometimes a contractor will inform the project owner of an intention to complete the work prior to the contractual deadline, laying the groundwork for a potential claim for owner interference with scheduled early completion. Other times, a contractor will use early completion as an inducement for contract award. That was the case in a recent federal construction dispute.

 

In a technical proposal on a design-build project, the contractor offered a shorter performance period as a “project betterment” for the government. The contractor then stated an even earlier date as its “goal” for completion of the work. The government accepted the proposal. The contract award referenced the schedule established in the contractor’s technical proposal. Later, in the context of a dispute over liquidated damages, the parties could not agree which date was the original contract completion deadline.

 

Early completion of a project can reduce an owner’s expenditure for financing, monitoring, and administration. Early occupancy can be helpful in a number of ways. But is it wise to allow contractors to tinker with an owner’s initial completion deadline? Can this be more troublesome than it is useful? I welcome your comments.

 

COMMENTS

Early completion becomes a problem for owners in a lease situation where a new lease rent commences at Certificate of Occupancy. It puts owners at risk for paying rent on 2 spaces at the same time if the GC completes the project before the current lease end date.
Posted by: Nick - Friday, May 10, 2013 10:09 AM


Sure it might be an advantage to the owner an early occupancy, but the contractor must request the owner approval first.

Owners should have a Business Plan, and in some cases an early completion date might create some problems with cash management, equipment delivery, etc.
Posted by: Jorge L. LOPEZ - Friday, May 10, 2013 10:12 AM


Any contract that has liquidated damages in the specifications, should by law, also have a stated bonus for early completion. This is already the law in many states, like NY, that deal with public work such as schools, etc. The results are a faster turnover of projects, increased incentives and profit for the contractor and a lower price for the owner.

What's not to like about it?
Posted by: J. Sheedy - Friday, May 10, 2013 10:55 AM


The benefits of early completion should be reviewed on a win-win basis. If there is a win for the contractor there should be a win for the owner. It is reasonable to assume that an unexpected early completion by the Contractor represents a dislocation of the owner's activities that may even cost money to the owner. It is further compounded with the possible monetary incentive for the contrator for an ealry delivery. The scenario posted is simple to resolve in my mind if the Contract for Construction was properly amended with a Change Order modifying the completion date to an ealier date. If so, the ealier date is the contractual completion date which becomes the date against which liquidated damages are calculated.
Posted by: José A. Moreno-Rivera - Friday, May 10, 2013 11:45 AM


Ithink the goal of the project it's A significant impact in determining the timetable for any project.Some of the projects intended to time without considering the costs - achieving the best design so astonishingly out of the project - to reduce cost without regard to the time

All of these factors affect the time program for the project and can be controlled if you modify the target during implementation if the study and identify the risks typically in the initial study phase of the project
Posted by: Awad Mohamed - Friday, May 10, 2013 3:46 PM


Could you please provide the case name and/or citation of the the revelant federal case?
Posted by: Tristan Robinson - Friday, May 10, 2013 7:18 PM


If the offer of early completion is during the bid proposal then the liquidated damages should be based from the proposed completion date which will be part of the final project contract.

If the offer of early completion is during the course of the on-going project, there is no need to amend the contract. Both parties will be benefited as they shorten both of their overhead costs. It will be just a project's leeway if the project slipped on the early completion date.
Posted by: J.Lawas - Saturday, May 11, 2013 12:55 AM


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Posted by: lazike - Sunday, May 12, 2013 8:40 AM


In my opinion, early completion will benefit all parties involved, the project owner, the surety company, if bonded and the financing company, if financed. All parties involved should just ensure that all the specifications in the scope of work are met and passed the inspection of the engineers and architects involved with the project. In other words, the project is done right.
Posted by: Cecilia A. Anas - Sunday, May 12, 2013 6:37 PM


I appreciate the articles and discussion Construction Pro Network is publishing. All the comments are great and interesting. I agree if liquidated damages are specified in the construction documents an early finish bonus should be offered as well. However, two important issues come to mind, as someone else mentioned delivery schedules is one and another is that it may be more difficult for the Project Manager to control the quality of workmanship due to the contractor trying to hurry and finish early.
Posted by: Herman Lawson - Monday, May 13, 2013 8:53 AM


We see this a lot in Federal Government work. We rarely agree to it. In our situation, which is clearly not the same as a commercial situation where leases, and other considerations may complicate the issue, early completion is usually desirable.

However, in my experience early completion schedules aren't all that well thought out. In most cases they require concessions on equipment and material specifications to meet delivery schedules, which are generally less than desireable. Contractor's that offer this as an inducement to get a contract award need to clearly define the conditions of early completion for that to even be considered. All parties need to understand what the expectations are in order to achieve "early completion". That is the only way this could possibly be evaluated as a betterment. They also need to submit a schedule that shows how early completion will be achieved. Many times early completion can only be achieved through relaxation of QC oversight, expidited turnaound of submissions and RFI's and additional premium time hours expended by the owners oversight team to accommodate the Contractor's aggressive schedule. All of these things have additional costs not funded by the contract. One also needs to take a close look at the Contractor's safety record. Quite frequently Contractors that routinely offer up early completion as an inducement for contract award on closer scrutiny have unacceptable safety records.

Our normal response is we want to see a project schedule that accounts for the execution period in our RFP. If the Contractor can complete the work early he earns a bonus in that he pockets the field overhead for the unused contract duration. His field overhead for the entire execution period should be in his price and he will be paid the full contract amount if he completes early. If he finishes late liquidated damages apply to the extent that damages have occurred.
Posted by: Lee Garrett - Tuesday, May 14, 2013 7:02 AM


I concurr with LG. We had the exact conditions on an FAA "Partnered" project back in 97-98'. It was a 24 month contract completed in 16 months. A "unique" teaming achieved by "Partnering" with the GC able to demoblize months early and pocketing the savings.

A prime owners issue if they are not able to take immediate occupancy (due to a pre-existing lease) is the shortening of their benefical occupancy and yet the equipment warranty period has begun.
Posted by: J Vitale - Friday, May 17, 2013 10:57 AM










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