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Construction Management Basics


Historically, college and university owners had a limited role in managing their campus projects. Usually an inspector or clerk of the works was assigned to monitor and inspect the work and to serve as a liaison between the contractor and the campus. However, as campus projects became more complicated and challenging, colleges and universities realized that a more professional campus manager was necessary.

In the 1970s, many large general contractors and architectural/engineering firms recognized the growing need for professional construction managers (CMs) and began offering construction management services. Since that time, the market for construction management services has experienced continued growth and demand. Many colleges and universities have turned to outside construction management firms to augment their campus facilities’ staff. Others, usually those with a steady or large workload of projects, have established their own construction management departments.

Definition of Construction Management

The Construction Management Association of America defines construction management as follows: “Construction management is a professional management practice consisting of an array of services applied to construction projects and programs through the planning, design, construction and post construction phases for the purpose of achieving project objectives including the management of quality, cost, time and scope.“1

Construction management is a discipline and management system specifically created to promote the successful execution of capital projects for owners. These projects can be highly complex. Few owners maintain the staff resources necessary to pay close, continuing attention to every detail, yet these details can “make or break” a project. A professional CM can augment the owner’s staff with preplanning, design, construction, engineering, and management expertise that can ensure the best possible project outcome no matter what type of project delivery method is used.

Agency construction management is a professional service that can be applied to all delivery systems where the CM acts as the owner’s principal agent in the management of a construction project or program, where the CM is responsible to the owner for managing the planning, design, construction, and postconstruction phases, or portions thereof. The CM represents the interests of the project in dealings with other construction professionals, and with other private and public entities, and has the following duties:

  • Determine optimum use of available funds.
  • Control the scope of the work.
  • Schedule the project.
  • Determine optimum use of design and construction firms’ skills and talents.
  • Avoid delays, changes, and disputes.
  • Enhance project design and construction quality.
  • Determine optimum flexibility in contracting and procurement.

Comprehensive management of every stage of the project, beginning with the original concept and project definition, yields the greatest possible benefit to owners from construction management.

Most large institutions have established construction management departments that deliver services similar to those of outside construction management firms. In addition, a trend toward in-house construction management has developed among smaller schools that recognize that funding a construction management staff has a favorable payback in terms of project cost avoidance and/or cost containment.

Institutions should consider outside construction management firms if they undertake an unusually large and/or complex project, lack the resources to establish their own construction management department, or have significant variability in their construction workload. The process for selecting a CM is covered later in this chapter. The remainder of this chapter will focus on the role of a college or university’s staff in managing contracts and construction projects. The key personnel are defined as follows:

Construction manager: Contractually referred to as the owner’s representative, this individual has primary day-to-day project management responsibilities during construction. In some cases the CM is also responsible for the design phase of the project and thus has responsibilities throughout the project life cycle. In other cases, the CM works for an organization or unit specifically charged with the management of contract construction work.

Construction contract administrator: This individual, usually the construction management department head or facilities director, has administrative responsibilities over the entire construction program.

Architect/engineer: This is the design consultant responsible for preparing plans and specifications and interpreting these documents during construction.

The profiles and duties of these positions vary among institutions. For example, at smaller schools one person may perform the roles of both the CM and construction contract administrator. At other institutions, the architect/engineer may serve as the owner’s representative, with a more active role in managing day-to-day construction activities.

In fact, the American Institute of Architects (AIA) standard construction contract documents identify the architect as the owner’s representative. If institutions choose to shift these responsibilities to their own CM, they must be careful where to draw the lines of authority. Because the architect/engineer is performing a professional service requiring a license based on years of schooling and professional practice, the CM should seek direction from the architect/engineer on all design clarifications or interpretations. The seal on the drawings and specifications places a duty on the architect/engineer that should not be breached by the CM or construction contract administrator.

The Construction Manager

In an organization in which a project manager retains primary responsibility for the design phase of the project and a separate individual serves as the CM, the roles of project manager and CM need to be clearly defined and delineated. The client and the architect/engineer must understand the respective roles and expertise of both the project manager and CM to establish an effective working relationship with each.

The project manager and the CM manage two discrete phases of the project. The baton of project management should pass to construction management somewhere between bid opening and contract award. This transition should not be viewed as a complete handoff of project responsibilities, but rather as an exchange of primary and secondary management roles.

The CM should be involved during the design phase to help influence the construction phase that is to follow. The project manager should be involved during construction to monitor progress toward the established program and design objectives, and to assess the quality of the design. The degree to which the project manager remains involved during construction will vary from institution to institution, but simplicity is preferred. Focusing the client and architect/engineer on one project manager, instead of two, during construction will yield a more efficient project management process.

CMs should be empowered with a broad range of project responsibilities. Empowering these individuals with the authority to act and make project decisions for the institution not only will give them ownership of the project but also will ensure that project decisions are timely and conclusive. Perhaps nothing threatens the progress of a campus construction project more than having to wait for bureaucratic or committee-based decisions.

To enhance their effectiveness in managing the project, CMs should be the central contact point for all project communications during the construction phase. All communications between the contractor and architect/engineer should pass through the CM. Just as important, any communications from the campus client, future occupants, or other involved campus departments also should flow through the CM.

CMs should be given responsibilities and authority that position them as equal peers and partners with the project managers of contractors and architect/engineer firms. If these powers are weakened or restricted, owners will become bystanders while the contractors and architect/engineers manage the project on their own terms. An effective way to establish the authority of CMs is to make them the first level of approval on contractor and architect/engineer billings during construction.

The CM’s responsibilities should be broad and should cover all aspects of construction contract administration, including the following:

  • Review of contract documents during the design phase
  • Negotiations, where applicable, with the contractor during the contract award phase
  • Management of the project budget
  • Management of the project schedule
  • Inspection of the work for adherence to the contract
  • Liaison between the architect/engineer, contractor, campus client, and other campus departments
  • First-line negotiator of contract disputes

Institutions will have different policies governing the extent of authority delegated to the CM. However, establishing the authority of CMs to make decisions in the field, within established limits, will enhance their effectiveness in meeting the project goals and objectives.

Selecting a Construction Manager


The selection of a CM to provide professional services is very similar to the selection of an architect or engineer to provide design services. The basic steps are as follows:

  • Publish and advertise a request for qualifications (RFQ).
  • Conduct a presubmittal conference (optional).
  • Receive responses to the RFQ.
  • Evaluate responses.
  • Short-list firms for interview.
  • Interview firms.
  • Rank firms.
  • Tentatively select a firm.
  • Negotiate fees.

The Request for Qualifications

Because construction management is a professional service, the university should prepare an RFQ. The main difference between an RFQ and an RFP (request for proposals) is the fee. In most states, the process for  selecting professional services is based on qualifications only. Once a firm is selected, then a fee is negotiated. If fee negotiations are not successful, then the university declares an impasse in negotiations and begins negotiations with the next-ranked firm.

In preparing the RFQ, the university should be clear and articulate about the services required from the CM, the specifics of the project, the business environment in which the work is being conducted, and other critical factors needed for success. Sample documents are attached in the appendix as models for your use and consideration. Rather than just copy a document that the university has used in the past, the project manager or contracting officer should be thoughtful about the information being requested, and make sure that the information is helpful in determining the best firm to provide construction management services.  If the institution has any auditing requirements, these should be included in the RFQ.

Once the RFQ is prepared, the institution should have an outreach and publication strategy to solicit interest. Sending the RFQ to or notifying a list of interested construction management firms should be a part of the outreach efforts, along with publication in local newspapers or state journals of contracting opportunities.

Presubmittal Conference

On larger projects, it is recommended that the university conduct a presubmittal conference. This conference may be mandatory or not. This is an opportunity for the university to share in more detail specific characteristics about the project, describe more fully the scope of services, and answer any questions that interested firms may have. Any substantive changes to the RFQ or answers that would benefit all parties should be published in an addendum.

There are advantages and disadvantages to making a preproposal conference mandatory or not mandatory.

Nonmandatory Preproposal Conference

Advantages Disadvantages
No meeting preparation Not knowing if firms are interested
Not able to issue an addendum to a set group of firms
Time required to educate firms on how to complete RFQ
No opportunity to receive feedback from interested firms

Mandatory Preproposal Conference

Advantages Disadvantages
Identification of interested firms Meeting preparation
List of firms to issue addendum to
Opportunity to educate firms on project
Opportunity to explain project
Opportunity to receive feedback from interested firms

If a mandatory conference is held, one or more firms may not attend and may request that another meeting be scheduled. This is at the sole option of the university. If another meeting is scheduled, it should be published and noted that interested firms need attend only one of the meetings, not both.

Preproposal Conference Agenda

The meeting does not need to be a long one. This should be viewed as an opportunity for both the university and interested construction management firms to learn more about each other. A typical agenda might include the following:

  • Introduce the university’s team.
  • If this is a mandatory meeting, record attendance with a sign-in sheet.
  • Provide a project description.
  • Briefly describe construction management services.
  • Highlight key components of the RFQ.
  • Review the timeline.
  • Allow time for questions and answers.

A cutoff date for questions at least one week before RFQ responses are due is highly recommended. This allows the university to answer any substantive questions or make any changes to the RFQ with an addendum. Once this cutoff date has passed, do not continue to answer questions, as it may provide an unfair advantage to one firm over another.  Any meeting notes/minutes from the preproposal conference should be distributed to all attendees.

Suggested Timeline

The timeline for publication of the RFQ may be dictated by local statute. Depending on the availability of resources, the following is a suggested timeline for an RFQ:

Week 1: Advertisement

Week 2: Advertisement

Week 2: Preproposal conference

Week 3: Cutoff date to receive questions

Week 3: Issue addendum if required

Week 4: Receive RFQ responses

Week 5: Evaluate responses and short list

Week 6: Inform short-listed firms about interview dates

Week 7: Interview firms

Week 7: Rank firms

The timeline can be shortened or lengthened. However, preparing an RFQ, responding to an RFQ, preparing for an interview, and presenting is typically a considerable expense for all parties.

Receiving RFQ Responses

The advertised due date and time for response to an RFQ should be strictly adhered to. Responses should be date and time stamped, and late responses should not be accepted.

Evaluating RFQ Responses

A small committee should be convened to review and evaluate the responses to the RFQ. The number of committee members should be thought of ahead of time so that the correct number of copies of RFQ responses can be asked for from interested firms. In addition, asking for an electronic version of the RFQ response will give the university greater latitude in making additional copies and electronic archiving.

The committee should evaluate the responses based on an objective scale of criteria. Firms should be evaluated on firm experience, experience of staff, availability of staff, and specific criteria related to the project. Each member of the evaluation committee should prepare a preliminary ranking of the firms.

Short-listing Firms for Interview

Upon completion of individual evaluation of the RFQ responses, a meeting of the evaluation committee should be convened to prepare a formal ranking of the firms. A matrix should be prepared listing each committee member and his or her preliminary ranking. A discussion may be required to finalize rankings, and a decision made as to how many firms to interview.

Interviewing Firms

Upon completion of the evaluation of RFQ responses, finalization of the rankings, and determination of the number of firms to be interviewed, two sets of notifications should be prepared and sent.

The first set of notifications should be to the firms that are selected to be interviewed. Notification by telephone with a follow-up by letter is appropriate. The letter should indicate the time, location, length of time, number of university participants, and format of the interview. The number (not the names) of university participants at the interview is needed to allow the interviewing firm the opportunity to bring the proper number of handouts, among other things.

The second set of notifications should be sent to firms that were not selected to be interviewed, thanking them for their interest and response. Preparing an RFQ response costs firms time and money, and a thank-you letter acknowledges this effort.

Interviewing and Making Final Ranking of Firms

The interviews should be managed consistently. Interviews should start and end on time, and questions asked of each firm should be consistent throughout the entire interview process. This may mean that a firm’s formal presentation may need to be cut off to allow for questions and answers, or that its time may be up.

Upon completion of all interviews, the evaluation committee prepares a final ranking of firms. Depending on institutional requirements, the ranking is finalized and firms are notified.

Tentatively Selecting a Firm and Negotiating Fees

Upon finalization of firm rankings, fee negotiations begin with the top-ranked firm. Upon the successful negotiation of fees, final award and execution of the contract proceeds in accordance with the university’s standard process. To minimize the opportunity for conflicts or protracted negotiations over contract language, it is advised that the RFQ include a copy of the university’s contract, and that the RFQ state that the university’s contract terms and conditions are not negotiable. If the contract is published in the RFQ, negotiations are then restricted to scope and fee.

If negotiations are not successful or an impasse is reached, then the institution proceeds with negotiations with the next-ranked firm.



Your institution’s ability to deliver projects on schedule is highly dependent on your team.The architect and the general contractor are key team members who will determine your success.

In many jurisdictions, state law will dictate your ability to prequalify general contractors. Prequalification of general contractors can enable an institution to establish a qualified and experienced pool of contractors to bid on projects. Prequalification is not limited to any one form of project delivery.It can be used with traditional design-bid-build projects, design-build, CM at-risk, and other project delivery methods.

Prequalification is different from embedding experience requirements in the actual project bid documents. If an institution is going to require certain experience factors along with a bid, most contractors would like to know if they are going to be qualified to bid. Preparing a bid takes time and money.The cost to prepare a bid can be anywhere from a few thousand dollars to as much as $50,000 or more. Telling a team that it does not meet the experience criteria after its bid has been prepared and submitted will likely result in poor relationships with the construction community and most likely lead to delays caused by protests.

Prequalification typically involves three sets of criteria: mandatory contractual requirements, firm experience, and the experience of individual staff assigned to the project.


In general, the process for prequalification is similar to that of publicly bidding a project.

  • Prepare the prequalification document.
  • If this is the first time, check with the local construction industry to see if the criteria are attainable.
  • Advertise for prequalification (the same as bidding).
  • Conduct a mandatory presubmittal meeting.
  • Issue any required addenda as necessary.
  • Receive prequalification submittals.
  • Evaluate the submittals.
  • Interview the teams.
  • Score the outcomes.
  • Notify submitters of their determination as either “prequalified” or “not prequalified.”
  • Allow the protest period to elapse.
  • Establish the pool of prequalified contractors to bi.d

A mandatory presubmittal meeting is recommended.This is the time to explain the prequalification process; help contractors through the process; and obtain the names, phone numbers, and addresses of those who will receive addenda.This process should be treated as a bid process. Key and relevant information needs to be made available to all interested parties.

Forms of Prequalification

There are generally two forms of prequalification, pass/fail and point accumulation, and three sets of criteria: mandatory contractual requirements, firm experience, and the experience of individual staff assigned to the project.


The pass/fail process is designed to be simple and easy to evaluate. Prequalification criteria are formulated as yes or no questions.

For example:

A Class B General Contractor license is required on this project. Does your firm possess a current and active Class B License?

Yes No

If yes, please provide your license number.

This example illustrates several key elements of prequalification:

  • Objective criteria
  • Verifiable information
  • Ease of completion
  • Ease of evaluation

During periods of high employment in construction, the institution should use a simple form of prequalification. Extensive amounts of paperwork and perceived bureaucracy can drive away the construction community’s interest.

Criteria can be developed to meet specific contractual requirements and past project experience.

Contractual Requirements
  • Valid general contractor license
  • Ability to meet required insurance limits
  • Ability to meet bonding requirements
  • Safety experience modification rate (EMR, a published rating by insurance companies)
  • Other requirements of the contract or general conditions
Past Project Experience of the Firm

This section can ask for the firm’s previous experience in building a specific type of project, such as a research laboratory, classroom buildings, or student housing. The typical criterion is a minimum of three comparable past projects in the past 5 to 10 years. The burden of proof is on the general contractor, who is responding to demonstrate that a project he or she is proposing is comparable (e.g., occupied building during construction, limited site access).

Past Project Experience of Proposed Staff

This section allows the institution to ask about staff experience. Criteria can be established for the proposed key project staff: project executive, project manager, construction superintendent, and so on. Typical requirements include a minimum of one or two comparable projects completed within the past 5 to 10 years. Again, the burden of proof is on the general contractor responding that project experience is comparable to the institution’s requirements.

Point Accumulation

With the same criteria as in the pass/fail model, a point accumulation process can be used to screen for more experienced firms. A pass/fail metric can be transformed into 5 points for “yes” and 0 points for “no.” Greater firm and staff experience can be rewarded with a metric such as the following:

Past experience with classroom renovations:

1–3 past classroom projects (or comparable projects): 3–5 points

4–5 past classroom projects (or comparable projects): 6–9 points

6-plus past classroom projects (or comparable projects): 10 points

This allows the institution to identify construction firms that have the depth of experience and staff skills to execute construction on campus. If a point accumulation process is to be used, the total number of points needs to be identified, as well as the minimum number of points required to move forward. For example, if a total of 100 points is possible, then a minimum threshold of 80 points must be obtained to prequalify and bid.

Lessons Learned

Contractor prequalification is both a highly technical process and an art form. The technical components are dictated by the institution’s contractual requirements and the need to have experienced contractors performing work on campus. The “art” is to make sure that the criteria being asked for are attainable by competent, experienced, and reputable construction firms. If you are attempting to use prequalification for the first time, you may want to check with a few local contractors to see if the criteria can be met.

During periods of high employment in construction, excessive bureaucracy may drive away good contractors who otherwise might be interested in bidding work. During periods of high employment, a pass/fail process for prequalification and only minimal requirements should be used.

During periods of low employment in construction, a point accumulation process may be required to ensure that experienced and capable contractors are working on campus.

Other lessons learned include the following:

  • Make sure that the information requested is objective.
  • Be certain that the information provided can be verified through a third party.
  • Interview the proposed team/staff; make sure that they are real.
  • Tailor firm and staff qualifications to meet specific project criteria (e.g., research laboratories instead of science laboratories).
  • Define criteria for a comparable project (e.g., limited site access, limited construction staging, occupied building).
  • Provide an appeal process that ends at an administrative executive, not at the chancellor, president, or board.
  • Include the scoring sheet with the prequalification document and advise the general contractors to go through the evaluation criteria themselves before attempting to submit.
  • Do not attempt to prequalify subcontractors.
  • Address any changes to the criteria after the publication of the prequalification through the formal issuance of an addendum.
  • Be deliberate in the use of language: “prequalified” or “not prequalified.”


Prequalification may appear to be an added burden to an already overworked staff. However, investing the time and resources in establishing a pool of qualified, experienced contractors to bid on projects can enhance the ability to deliver projects on time and on budget.It is time and effort well spent.



To avoid costly time delays and change orders, all construction permits required by the institution should be obtained prior to the start of construction. Changes in the work during construction caused by permitting jurisdictions will likely result in time delays and added costs.

In some cases, permitting authorities may allow deferred approvals for specific parts or systems of a project. The fire sprinkler system is often a system for which approval is deferred until the fire sprinkler contractor is onsite and is able to coordinate the sprinkler layout with other overhead construction, such as lighting and mechanical ducts.

In the event that the permitting agency allows deferred approvals, the specific parts of the project or building systems that are being deferred need to be clearly identified, conveyed to the general contractor as part of the bid documents, and monitored during the construction phase for timely submittal and issuance of the permit.

Likewise, permits that the owner must obtain need to be monitored and managed to avoid delays to the general contractor. Examples of permits that are outside the direct control of the general contractor are electrical power provided by the utility agency, water and sewer connections provided by the municipality, easements and curb cuts into the public right-of-way, and other ancillary permits outside of the construction site. In more complex urban environments, a matrix of responsibilities for permits may need to be developed to track and monitor the status of required permits.

Procurement and Bidding


The bidding of construction projects is highly regulated for public institutions. Board policies, state laws, bidding limits (dollar thresholds), and other statutory requirements dictate how construction projects are bid. Lack of attention to these details can lead to delays, protests, and litigation. Please check board policies and local governing law when putting construction contracts out to bid.

Because private institutions generally have greater latitude in the bidding of projects and are far less constrained. this subchapter is written from the perspective of a public institution.

The general steps in placing a project out to bid are

  • Prequalification (optional)
  • Advertisement
  • Prebid conference
  • Issuance of addendum
  • Receipt of bids
  • Award to lowest responsible bidder


The process of prequalifying contractors to bid on projects is discussed in a separate subchapter.


Local laws typically specify the frequency, timing, and location for publishing notices of bid opportunities. In general, projects that meet specific dollar thresholds are required to be publicly bid. The advertisement of bid opportunities begins this process.

Advertisement usually involves the advertisement of the opportunity to bid in a local newspaper or journal of general circulation. Typical requirements involve advertisement twice in the weeks preceding a prebid conference. The time between the first advertisement and the second advertisement may be specific by law, and is typically one week.


October 1: Advertisement

October 8: Advertisement

October 9: Prebid conference

Prebid Conference

The purpose of a prebid conference is to educate and inform bidders about the project requirements and bidding procedures. A prebid conference may be mandatory or nonmandatory. This is an opportunity to educate bidders on how to complete bid forms and other requirements specific to the institution. If bidders are able to submit complete and accurate bid forms, the potential for bid protests will likely be reduced, avoiding costly time delays.

A prebid conference is also an opportunity for the institution to obtain feedback from the contracting community. The institution should be alert for feedback on market conditions, the quality of the bid documents, and other factors that could be problematic. Changes can be made to bid dates if there are other projects bidding on the same day/time, corrections made to drawings or specifications, or other changes to hold or increase bidder interest or to obtain quality bids.

The prebid conference is typically led by the contracting officer for the institution. A mandatory meeting is recommended to provide the school with the affirmation that a bid pool exists for the project and provide the institution with a specific list of bidders to issue any required addenda. A typical agenda for the meeting might include the following:

  • Welcome and introductions
  • Meeting agenda
  • Sign-in
  • Project overview
  • Bidding requirements
  • Bid due date/time/location
  • Questions

It is not necessary to answer questions in the meeting. In many cases, the question should be “taken under consideration” and responded to through the issuance of a formal addenda.

If the prebid meeting is mandatory, a formal sign-in sheet with the individual’s name, name of the company, address, phone number, e-mail, and fax number should be required. At the end of the meeting, a receipt should be given to attendees so that they have a record of their attendance. This also keeps attendees from leaving before the end of the meeting.

Issuance of Addendum

Bidding is a very formal process. Any material changes to the bid (e.g., change in bid date, time, or location) or information that may be of value to all bidders (e.g., answering a bidder’s question regarding the drawings or specifications) should be issued in the form of an addendum. Changes should be numbered sequentially, and the addendum should be issued in a manner that receipt can be verified and acknowledged on the bid form. The latest date an addendum may be issued is usually two to three days prior to the bid.

Receipt of Bids

The receipt of bids should be a highly scripted process. All bids should be time stamped the moment they are received. Any late bids should be time stamped and immediately returned to the bidder, unopened.

When opening bids, the contracting officer should open bids and read the required information, which typically includes the following:

  • Name of bidder
  • Acknowledgment of issued addenda
  • Bid price
  • Bid price for any bid alternates
  • Acknowledgment of any other forms required at bidding (e.g., bid bond, noncollusion affidavit, subcontractor listing)

The individual opening the bid should do so without any outward display of emotion or gasps, audible sighs, and so on. In addition, there should be no pronouncement as to who the low bidder is upon conclusion of the bid opening. All bids should be taken under advisement so that all bid paperwork can be reviewed for completeness separate from the place where bids were received and opened.

In some states, the list of subcontractors is required to be included with the bid to minimize the contractor’s opportunity to “shop” subcontractor bids after the bids are opened. Whether this is a statutory requirement or not, it is recommended that a subcontractor listing be required to reduce this practice.

Bid Protests

During periods of high unemployment, it is not unusual to receive multiple bid protests from bidders. If a bid is protested, the institution should immediately obtain the involvement of legal counsel and proceed with due diligence and timeliness. Court precedence will govern many situations, but legal counsel can advise on the merits of a protest.

Determination of Apparent Lowest Responsible Bidder

After the bid opening, the paperwork for each bidder should be reviewed in detail for completeness. Any required due diligence (e.g., verification of bid bond, contractor license) should be performed. Only after all bid forms are reviewed for completeness and due diligence efforts are conducted should an announcement be made of the apparent lowest responsible bidder.

If bids are found to be incomplete or faulty, the bidder should be notified immediately. For public institutions, there are no “cure” periods for bids. They must be submitted accurately and be complete. If bids are not accurate and complete, there is typically no choice but to determine the bid incomplete and nonresponsive.

In the event a bidder wishes to withdraw a bid, the bidder may do so if he or she can demonstrate that a clerical error was made. The burden of proof is on the bidder to demonstrate that a clerical mistake was made. If the institution is satisfied that a mistake was made, the bidder should be allowed to withdraw his or her bid, and his or her bid bond should be released.

Bid bonds are typically required with the submittal of bids. There are many reasons that a bid bond is required, including ensuring that a bid is a serious, bona fide bid and provides compensation to an owner in the event that the low bidder fails to honor his or her bid.

Once the determination is made of the bid results and the apparent lowest responsible bidder, then the bid protest period starts, usually lasting three to seven days. Within this period, any bidder may protest the bid results for myriad reasons. Bid protests need to be reviewed carefully and completely, sometimes with legal counsel.

Upon the resolution of any bid protests and the determination of the lowest responsible bidder, the institution may then proceed with the award of the construction contract in accordance with board policy or local statute.

GMP Negotiation


A guaranteed maximum price (GMP) contract is not typically an option for public institutions. However, private institutions have greater latitude in procurement, contractor selection, and contract negotiation.

A GMP contract is generally a contract in which a contractor “guarantees” the price of construction to the owner. To do this, a general contractor will include a contingency in his or her contract price. The amount of the contingency is influenced by the status of the construction documents, including quality and completeness. It is safe to assume that the earlier in the design process a GMP is desired, the larger the contingency.

In negotiating a GMP contract, the institution should have at least one if not two independent cost estimates completed and reconciled. These independent cost estimates will give the institution a baseline from which to negotiate. Depending on when a GMP price is requested (e.g., at the completion of schematic design, completion of design development, or 50 percent completion of construction documents), subcontractors may or may not be involved. If the institution is requesting a GMP in the early phases of design, then the negotiations will likely be made on a cost/sq. ft. basis and the size of the contingency. If a GMP is requested during the construction documents phase or when construction documents are completed, negotiations may involve subcontractor pricing and contingency.

In a GMP, the management of the contingency is critical. This is the mechanism that the contractor is using to manage risk. As such, the use of the contingency within the GMP is mostly at the discretion of the general contractor. Specific controls need to be in place to ensure that costs are appropriate, fair, and reasonable. The use of the contingency should be “open book” and available for inspection by the institution.

As an added management tool, there is typically a shared savings clause in a GMP contract. This provides an incentive for the general contractor to preserve the contingency, rather than use it during construction. A typical shared savings clause is a 50/50 split between the general contractor and the institution. In other words, if funds are left in the contingency within the GMP at the end of the project, they are split 50/50 between the general contractor and the institution.

Regardless of the contingency fund within the GMP, the institution should still hold a contingency in its total project budget.

Contracts and Administration


Owner’s Responsibilities

During the life cycle of a project, the majority of the CM’s time is spent in construction contract administration. The CM’s duties are many and varied, but the major areas of contract administration are as follows:

  • Payment process
  • Inspection and testing
  • Shop drawings and submittals
  • Change orders
  • Project closeout
Preconstruction Meeting

Before work begins, a preconstruction meeting is held with all principal parties involved with the project. Scheduled and conducted by the owner, this meeting allows the contractor, architect/engineer, subcontractors, project manager, and CM to meet one another. It also provides an opportunity to establish team and partnering relationships.

At the preconstruction meeting, the lines of communication are established, and administrative procedures, such as shop drawing submittals and payment procedures, are reviewed. Other topics include project access, use of premises, special scheduling requirements, protection of property, and any other significant items that merit discussion.  Special rules of the institution should also be covered, including “no smoking,” “no radios,” sexual harassment, etc. While these rules should be included in the contract specifications (including consequences in the event that these rules are not adhered to), it is important to go over them again with the contractor.

For some institutions, Occupational Safety and Health Administration (OSHA) training is required for all construction staff. Construction superintendents may be required to have OSHA 30-hour training, while all other construction staff may be required to have OSHA 10-hour training. These requirements should be reviewed and any onsite training coordinated, scheduled, and documented. Other special certifications for workers should be discussed (e.g., lead, asbestos), and agreements should be reached on who from the institution is to sign hazardous materials manifests.

The contractor should bring the initial draft of the project schedule to the meeting and be prepared to discuss the critical items on the schedule. The architect/engineer should encourage and answer any design questions. The owner should ask the contractor if any potential change orders were discovered during bid preparation. It is best to discuss these potentially adversarial topics before work begins and while teamwork is at its high point.

The meeting should follow a formal agenda that comprehensively addresses the interface between the institution and the contractor. Furthermore, a detailed written record of the preconstruction conference should be made and distributed. This documentation will serve as a valuable guide for the contractor on how the project will be administered and how the coordination and interface will take place.

Payment Process

A construction contract is often viewed as a one-way document binding the contractor to explicit duties and responsibilities. However, the contract also places duties and responsibilities on the owner. The most significant of these contractual duties—and the one most often cited for owner’s breach of contract—is the owner’s responsibility to make timely payments to the contractor for services rendered.

The most common basis for issuing payments to the contractor is the schedule of values. This document breaks down the contractor’s contract price into incremental and identifiable work items. The work items are given values. The general contractor’s overhead and profit should be listed separately or as a percentage so that these figures can easily be calculated and to minimize front-loading of payments. The general contractor’s performance bond, payment bond, and insurance costs are commonly listed as their own line item and payment is typically requested in the first payment application.

The CM should review and approve the schedule of values to ensure proper detail and valuation of the breakdown. In particular, the CM should watch out for contractors who “front load” to improve their project cash flow. A contractor front loads a schedule of values by overvaluing activities performed early in the project and undervaluing activities performed late in the project. If “successful,” the contractor collects more money from the owner than earned during the early phases of the project.

Contractors use the schedule of values on a periodic basis, usually monthly, to prepare and submit their pay requests. They assess the work completed or the work remaining with respect to the total amount of work required. This fraction is then applied to the total cost to derive a partial billing amount for that line item. This procedure is repeated for all line items on the schedule of values. The sum of these partial billings makes up the contractor’s monthly billing request.

In addition to the schedule of values, the contractor will bill for any change orders that have been approved and completed. Change orders often are listed as a separate line item, as it is unadvisable to modify the original schedule of values after it has been approved and put into use. It also is common in the industry to reimburse a contractor for materials received and stored onsite but not yet installed. This provides an incentive for the contractor to secure critical deliveries early and avoid a risk to the schedule. Reimbursement for the value of stored materials ranges from 50 to 90 percent.

Finally, most contracts require that the contractor be reimbursed for only 90 to 95 percent of the determined value of the work completed for the period. The remainder, known as retainage, is held by the owner as security and protection against the contractor’s potential breach of contract, failure to remedy defective work, failure to complete the project in a timely manner, assessment of liquidated damages, settlement of liens, or any other damage to the owner caused by the contractor’s failure to perform the contract.

Retainage can represent significant funds and cause cash flow problems for the contractor and subcontractors. A common trend has been to withhold 10 percent retainage until the project is 50 percent complete, at which time the retainage is dropped to 5 percent.

The CM should be given the authority to approve the contractor’s pay requests. This enhances the CM’s position with the contractor and clearly demonstrates the control the CM has over the construction process. However, as mentioned earlier, the owner has a contractual duty to pay the contractor adequately and on time. CMs should be coached, trained, and supported in carrying out those responsibilities in an ethical and professional manner.

Contract Award

The subchapter on procurement and bidding reviews the process for bidding and/or negotiating a construction contract. Once the successful bidder is selected, the owner prepares the contract to be executed and signed by the owner’s contracting officer and the contractor’s authorized representative.

A construction contract usually is referred to and envisioned as a singular entity or document. However, the construction contract is composed of several documents that are tied together and referenced under the agreement. It is the agreement that both parties sign and that bind them to the terms, conditions, and obligations detailed in several documents.

Bidding Requirements

Bidding requirements include the advertisement or invitation to bidders, instructions and information for bidders, the bid form, and bid bond requirements. The bid bond expires at the time a contract is signed, but practices vary among owners as to whether the remaining bid-related documents become part of the formal contract. If the information governing the preparation and submittal of the bid is included in the contract, it may strengthen the owner’s position in contract disputes.

Contract Forms

The contract forms consist of the agreement, performance bond, payment bond, and insurance certificates. With these forms, the owner, contractor, and surety and insurance carrier commit themselves to the duties and responsibilities specified in the contract.

Contract Conditions

These documents describe the conditions or terms under which the contractor will construct the project. General conditions and supplementary or special conditions are included. Items covered include building permits, payment terms, accessing requirements, safety and protection, architect/engineer and subcontractor responsibilities, change order process, dispute resolution procedures, and schedule requirements.


Specifications for a university construction project usually are organized in a standard format developed by the Construction Specifications Institute. The primary purpose of the specifications is to describe, in detail, the quality of the project components.


The drawings usually are organized by design discipline into the following categories: architectural, civil, structural, mechanical, piping and plumbing, electrical, and controls. Whereas the specifications describe a quality level for the building components, the drawings generally show quantity and arrangement of those components.


As with all significant design and construction projects, changes to the contract documents are inevitable. These changes will take one of two forms: addenda or change orders. Addenda are changes to the contract documents during the bidding phase; change orders are changes made during the construction phase. Addenda and change orders can modify any one of the previously mentioned contract documents, with drawings and specifications most commonly changed.

With the exception of the bond and insurance certificates provided by the contractor, the owner gives the contractor the set of documents listed previously to be signed and returned. Often, the same set of documents used to bid the project will serve as the construction set of documents. In other cases, the designer incorporates changes made by addenda into a clean set of documents for construction.

Before returning the contract agreement to the owner, the contractor secures the bonding, insurance, and, if applicable, construction permits required under the terms of the contract. The contractor returns these certificates with the signed agreement to the owner. The owner, in turn, reviews these documents for contract compliance, cosigns the agreement, and issues a “Notice to Proceed.”

The Notice to Proceed, which is sent by certified mail, marks the beginning of the construction period. Because the owner may lack the protection of the contractor’s bond and insurance, the owner should not permit the contractor to work on the project site until the Notice to Proceed is issued. Contracts usually require the contractor to commence work within a specified time after the Notice to Proceed is issued.

The process of formalizing the contract can take weeks or months. In cases where the bidding and award of the contract do not need to follow public statutes, several terms of the contract are negotiable. The negotiations usually will represent a minor portion of the entire scope of work. A common industry practice in these cases is for the owner to issue a Letter of Intent of Award of Contract. The letter of intent is signed by both contracting parties and states their intent to enter into a contract at a later date. The letter is binding on both parties and authorizes the contractor to proceed with construction pending finalization of the formal contract.

In order to minimize any lengthy delays due to contract negotiations, or attempts at contract negotiation, it is always good practice for the institution to include language in its bid documents that “changes to the contract will not be allowed.”

Inspection and Testing

Inspection for quality assurance and adherence to the contract is at the core of the CM’s responsibilities. Although their position has evolved over the years and broadened into more managerial and administrative functions, CMs are augmented by special inspectors and testing laboratories for specific types of inspections. In addition, some states require certifications and reporting relationships to public agencies. It should be noted that CMs are the advocates of the institution during the construction phase of a project.

The CM is usually the owner’s first and last defense to ensure that the contract documents are being followed. It is imperative the CM spend sufficient time each day observing the status of construction.

Contractually, the CM should have the authority to reject work that does not conform to the contract requirements. The contractor then is obligated to modify, improve, or remove the work until compliance is attained. Because construction is a step-by-step process that builds on previous work, reviewing the work on a daily basis is essential.

As the industry becomes more sophisticated, testing services and inspection agencies are becoming more specialized. Typical project testing and inspection services include concrete testing; structural testing; weld inspection; heating, ventilation, and air conditioning testing and balancing; asbestos sampling and clean air monitoring; nondestructive testing; materials testing; and much more. Reports from these testing agencies should be sent regularly in a timely manner and reviewed by the CM.

It is common for the contractor to furnish many of these necessary testing services. However, to avoid any potential or perceived conflicts of interest, it is best practice to have the institution contract for testing and inspection services.  The contractor often is the best person to handle the timing and coordination of the testing services. An alternate approach is for the testing and inspection services to be under contract with the owner. This arrangement avoids conflicts of interest between the testing agency and the contractor.

Shop Drawings and Submittals

The drawings and specifications prepared by the architect/engineer do not contain sufficient detail for the fabrication and installation of many construction products. In fact, requiring the architect/engineer to produce drawings to this level of detail is not practical. Therefore, the industry relies on manufacturers and suppliers to provide the detailed drawings and specifications for their own product. These detailed drawings and specifications are known as shop drawings and include fabrication and erection drawings, catalog cuts, wiring and control drawings, performance and test data, and samples.

Shop drawings supplement, enlarge, and clarify the contract documents and must be submitted to and approved by the architect/engineer. The architect/engineer indicates in the contract documents which materials and products require submittals from the general contractor. The architect/engineer includes a general product description and often a product name (or names) and model numbers that satisfy the requirements and intent of the design.

Commonly, especially on public owner projects, the term “or equal” follows the list of acceptable manufacturers. This term expresses the owner’s willingness to use products by suppliers not listed if these products meet the specifications. On the positive side, “or equal” clauses eliminate any real or perceived discrimination by the architect/engineer or owner against specific manufacturers. Also, the field of competition is broadened by using this clause, and costs are driven down. On the downside, “or equal” clauses are at the root of many contract disputes.

General contractors and subcontractors often rely on the low bid of a perceived “or equal” product in preparing their project bid. Later, if the architect/engineer rejects this product for not meeting the specifications, the general contractor must pay the additional funds for the higher priced complying product. The desire to avoid these disputes has created a trend to require contractors to submit “or equal” products for the architect/engineer’s approval during the bidding phase. Although this requires extra effort and time from the architect/engineer and can cause a longer bidding period, this practice will virtually eliminate disputes based on the rejection of products.

Whether a product is from a recommended supplier or an “equal” supplier, the process of submitting shop drawings is the same. The supplier submits the shop drawings to the subcontractor and ultimately to the general contractor. Both the subcontractor and general contractor check the shop drawings against the contract drawings and specifications. Once the general contractor is satisfied that the shop drawings meet the contract requirements, the drawings are forwarded to the architect/engineer, who again reviews them against the contract and design requirements.

For years, the standard industry practice was for the architect/engineer to stamp the drawings as “approved,” “approved as noted,” or “rejected.” However, in today’s litigious society, architect/engineers have begun using terms such as “reviewed,” “examined,” “no exceptions taken,” and “accepted” to distance themselves from the legal burden of approving the shop drawing. Despite the range of terms used, the practice is basically the same. The architect/engineer returns the shop drawings to the contractor, who in turn returns them to the supplier for either approval to order or resubmittal.

Even with an approved shop drawing, contractors may find themselves with an installed product that does not meet the contract requirements. When the CM rejects the noncomplying product, the contractor will argue that the architect/engineer failed to reject the submittal, and therefore the architect/engineer, not the contractor, should be held responsible. An example would be a mechanical device that meets the performance requirements of the contract but has a 50-horsepower motor instead of the specified 25-horsepower motor. The increased horsepower requirements lead to a costly change order to modify the secondary electrical distribution. The contractor argues that the architect/engineer approved the additional horsepower motor and was in the best position to assess the impact on the power distribution system. The architect/engineer’s position is that the contractor must meet all of the contract requirements, and that the architect/engineer approved the performance criteria, not the details, of the product.

The courts generally recognize that shop drawings are not contract documents and, as such, do not amend, modify, or expand the contractual obligations of either party. The architect/engineer’s approval does not relieve the contractor of any shop drawing errors or omissions or exempt the contractor from fully complying with the contract requirements.

In this example, the contractor is responsible for meeting both the performance requirements and power requirements specified in the contract. Without this legal doctrine, unscrupulous contractors could use the shop drawing process as a means of modifying and manipulating the contract requirements in their favor.

Timely submission and review of shop drawings are paramount to meeting a demanding construction schedule. Material delivery problems are a leading cause of project delays. Because orders are not placed until the shop drawings are approved, the supplier, contractor, and architect/engineer must give the shop drawing submittal process special attention in the early phase of the project. The CM must monitor progress closely and ensure that both the contractor and the architect/engineer turn around the shop drawings as quickly as possible. A schedule saver for campus projects with only a summer construction window is to award the contract in late winter or early spring and require the submission of shop drawings by a date well in advance of the commencement of onsite construction.

The advantages of a well-defined communications system with the CM at the center were discussed earlier. Shop drawings represent the one exception to this rule. Because shop drawing turnaround time may have a significant impact on the schedule, it serves the owner well to expedite the process by allowing the submittals to flow directly between the contractor and architect/engineer. However, a copy of the transmittal letter, without the actual shop drawings, should be sent to the CMs so that they are informed of the progress of the shop drawing schedule. Once the shop drawings are approved, the CM should be sent a copy for the master project file and a copy for the field file. The CM will use the field copy to verify that what is actually delivered and installed complies with the approved shop drawing.

Change Orders

Change orders represent the contractual mechanism for altering the terms and conditions of a construction contract. They are used to document agreement between the owner and contractor on additions, deletions, and modifications to the scope of work. They include a description of the change as well as any modifications to the contract price and/or schedule.

Traditionally, change orders have carried negative connotations, because the greater the number of change orders on a project, the greater the risk of exceeding budget. However, without a means to alter the contract, many owners would be unhappy with a facility that does not function correctly or does not meet their needs. In designing a project, there is no opportunity to “test run” the design or “work the bugs out” of a prototype. Consequently, adjustments have to be made during construction, and change orders provide an indispensable method for making those adjustments.

Given the industry’s reliance on change orders, construction contracts give the owner the contractual right to direct the contractor to perform the change order work unless the work represents a cardinal change. A cardinal change is defined as a change order that materially alters the fundamental character of the project and is not within the general scope of the contract.

Campus facilities administrators are often tempted, by the convenience of an on-campus contractor, to issue change orders for work at other locations on the campus. These out-of-scope change order requests are cardinal changes and within the contractor’s right to refuse. However, often the contractor is willing to perform the work. Change orders written against a contract to perform work outside the scope of a project represent sloppy management practices. These types of changes lead to excessive potentially serious issues concerning the liability of the architect/engineer and the bonding company.

Consequently, cardinal change orders should be considered only in emergency situations.

Change orders usually fall into one of the following categories:

  • Design errors or omissions
  • Unforeseen concealed conditions
  • Deviations from contract unit-price quantities or allowances
  • Circumstances beyond the contractor’s control
  • Changes in owner’s requirements after contract award

Most change order requests are originated by the contractor within a time limit specified in the contract general conditions. The contractor’s change order request should be submitted to the CM and should include an itemized breakdown of labor and material costs, overhead, and profit and a request for additional time if necessary.

Many change orders require a design modification before the contractor preparesng the change order request. In these cases the architect/engineer revises the originally issued drawings, prepares a supplementary sketch, and/or provides written modifications to the technical specifications. These revisions then become the basis on which the contractor prices the change.

Change order administration is one of the most important responsibilities of the CM. Because change orders are negotiated items, the owner lacks the benefit and protection of competitively priced work. Overvalued change orders reflect poorly on the CM’s abilities as a steward of the project funds. Undervalued change orders lead to poor relations with contractors, who may feel penalized for circumstances that were not of their own making.

The goal of the owner’s representative should be to achieve fair pricing for the direct cost of the change and allow the contractor a reasonable markup for profit and overhead. A recommended approach to achieving fair pricing is for either the CM or the architect/engineer to prepare an independent estimate of the change. This estimate, when compared with the contractor’s estimate, should fall in the range of plus or minus 10 percent of the contractor’s estimate. If it falls outside those limits, the contractor and CM should discuss and negotiate the differences until an agreement is reached. If an agreement on the pricing cannot be reached, then the owner and contractor should consider an alternative approach to valuing the change order.

Change order pricing can take one of three basic forms: lump sum, unit price, or time and materials. The lump-sum method is often the preferred approach, because the final cost of the change is negotiated and agreed on, usually before the work commences. The unit-price method often is the fairest, because it represents an agreement on the unit cost of the work without the contractor bearing the risk for an unknown quantity of work. The time-and-materials method eliminates the risks associated with forward pricing a change order but provides the owner with little protection against productivity concerns. However, this risk can be mitigated with a fixed maximum cost connected to the time-and-materials change order.

Each method has its advantages and disadvantages, and the type of project, urgency, and scope of change governs which method is employed. However, the majority of change orders related to campus projects should follow the lump-sum method.

The institution should have an established procedure for administration of change orders. A change order request form should be completed for each change order and should include a description of the work; the reason for the change; the estimated cost of the change; the actual change to the contract amount; additional noncontractor fees associated with the change; and the impact, if any, on the project schedule. The change order request is the internal document on which the signatures required for approval are secured.

Once the change order request form is completed, the owner’s contracting authority or designee issues a written formal change order that addresses the scope of the change, the cost, and time. The change order, when signed by both the contractor and the owner, formally amends the contract.

Project Communications, Documentation, and Reporting

Project communications and reporting are vital elements in the administration of a construction contract. It is imperative that a well-defined system of communication be established when the project begins. Positioning the CM in the center of all communications will guarantee institutional control of the construction project. The CM, as the primary liaison between the design consultant and the general contractor, should serve as the point through which all communications flow among the contractor, architect/engineer, and campus client. The CM also serves as the institution’s contact person during the construction phase and spends a considerable amount of time keeping interested campus groups and individuals informed of construction activities.

CMs must communicate with a considerable number of people. Depending on the type and size of the project, CMs may find themselves responsible for communicating with and/or reporting to the following:

  • Campus clients
  • Campus administration
  • Facilities operations
  • Parking and transportation operations
  • Environmental health and safety officials
  • Campus police and security
  • Telecommunications office
  • Disabled students access office
  • Local governmental authorities
  • Utility providers

In addition to these groups, CMs have an ongoing need to communicate with design consultants and general contractors, as well as their subconsultants, subcontractors, and suppliers. The following review covers the various means of communicating, reporting, and documenting project issues.

Project Coordination Meetings

Project coordination meetings should be scheduled at regular intervals throughout the project. Attended by the architect/engineer, general contractor, subcontractors, and other involved parties, discussions should center on progress to date, upcoming activities, design modifications and/or clarifications, change orders, coordination, and related issues. Detailed minutes from these meetings can provide a basis of understanding among the project participants and serve as an effective means of documenting project issues and progress. When reviewed in a series, project coordination minutes provide chronological documentation of the project.

One key strategic decision is who will be the author of the meeting notes/minutes. Having a clear and concise record of project progress and issues is important in the event a dispute arises later in the project.  It is recommended that someone who represents the Institution be the author (architect, project manager, construction manager). The author should not be the contractor.

Project Correspondence

Letters and memorandums are an effective means of communicating project issues and creating a reliable paper trail. Without adequate documentation, the owner is vulnerable to subsequent disputes and litigation. Consequently, CMs should not rely on oral communication of significant contractual issues. If the issue is important, it should be documented in writing.

Oral Communications

Although the written word may be best for documentation purposes, oral conversations represent the most common and effective form of communication. Whether face to face or by telephone, interactive discussion allows each party to continue the discussion as needed to fully understand the issue or problem. Studies have shown that body gestures and voice intonations provide as much or more communication as the words themselves. Written communications, on the other hand, are subject to the reader’s interpretation of both the content and the manner in which it was written. In addition to misunderstanding the message, readers may also read sarcasm, insincerity, anger, and other unintended emotions into the letter. Oral communication should be encouraged on a project to keep relationships positive and productive. However, it is advisable to document the essence of a conversation with the use of telephone logs, daily job logs, and memorandums.

Daily Job Log

Perhaps the most powerful tool for documenting project activities is the CM’s daily job log. The job log is essentially a diary of daily activities on the project. It can serve as an invaluable tool in reconstructing previous project occurrences. The CM should report in the log any significant job site observations, inspections, irregularities, problems, and oral directives in meaningful detail. A consistent recording of the date, time, and weather conditions is recommended. From a litigation point of view, the courts have favored bound book logs where all entries are in pen, with no erasures.

Photographic Reporting

Photographic reporting is an indispensable tool to complement the daily job log. CMs should take regular, comprehensive photographs of activities throughout the construction phase. Cameras that automatically record date and times on the exposure are preferred to those requiring manual dating. The photographs should be cataloged through an established procedure and should become part of the permanent record of the project. Videotaping is gaining popularity for documentation, as it allows for oral comments along with the video. It is an excellent tool for documenting preexisting conditions that later may be at the core of a property damage dispute.

Internal Reporting

For institutions that have a significant number of construction projects each year, a computer-based information and reporting system is a must. Information on, for example, project activities, percentage completed, scheduled completion, and budget status should be updated and reported periodically to administration and other interested parties.

Other Reports

Several other reports may be beneficial throughout the course of the project. Requiring consultants to document their site visit observations is recommended. The owner should require formal reports from all testing and inspection services conducted for the project. Finally, all accidents, injuries, property damage, safety violations, and hazardous materials encountered should be reported and documented. Maintaining strong control over communications and carefully documenting project events will make the other contract administration responsibilities easier to manage. Proper documentation is especially critical for protecting the institution’s interest against contractor claims and disputes. Court judgments often are influenced by the party with the best documentation.

Insurance, Surety, and Safety Management


Construction contracts specify bonding and insurance requirements for the project. Bonds ensure good faith in the submission of bids, execution of the contract, and performance of the work. Insurance policies protect the institution from potential liability from acts committed by the contractor. Although some degree of variability exists within the industry, there are some general requirements for bonding and insurance.

Bid Bond

Bidding documents for college and university projects generally require contractors to submit bid security with their bid proposals. This bid security usually consists of a bid bond issued by the contractor’s surety. However, bid security also may be in the form of cash, a cashier’s check, or an irrevocable letter of credit. The bid bond serves as a guarantee to the owner that the successful low bidder will enter into a contract.

The value of the bid bond usually is stated as a percentage of the contractor’s bid price, with 5 percent being the common requirement. If the low bidder fails to enter into a contract, the owner may seize the bid bond for the difference in the price between the low bidder and the second low bidder, up to the 5 percent limit of the bond.

Performance and Payment Bonds

Performance and payment bonds are furnished by the contractor at the time the contract is executed. The performance bond guarantees that the surety will fulfill the obligations of the contract should the contractor default, whereas the payment bond ensures that workers, subcontractors, and suppliers will be paid for their work in connection with the project. Performance and payment bonds are most commonly valued at 100 percent of the contract amount.

If contractors fail to meet their contractual obligations or fail to make payments in connection with the project, the owner will turn to the surety to fulfill the contractor’s obligations.

Builders’ Risk Insurance

Builders’ risk insurance is the industry standard property insurance covering the project itself from perils such as fire, smoke, collapse, vandalism, water, and freezing. It is common for either the owner or the contractor to furnish this insurance. However, many contractors prefer to furnish builders’ risk to ensure that they are properly covered. Either way, the contract should clearly specify who furnishes the policy.

Comprehensive General Liability

Comprehensive general liability insurance—the primary liability coverage for the project—encompasses three forms of liability exposures: public liability, contingent liability, and completed operations liability. Public liability insurance protects the contractor against the legal liability to third persons for bodily harm and property damage. Contingent liability protects the contractor from liability arising out of acts and negligence on the part of the subcontractors. Completed operations insurance protects against liability exposure on completed projects.

Owner-Contracted Insurance Policy

Instead of relying on a general contractor or an architecture/engineering firm to maintain insurance policies, some institutions have provided their own wrap-up insurance coverage through owner-contracted insurance policies, often referred to as OCIPs. An OCIP program typically covers all parties involved in the design and construction on a project, and provides all of the insurance coverages identified above, except for a bid bond and workers’ compensation. OCIP programs are typically formed by a consortium of institutions. The value of an OCIP program is that the insurance costs can be less than those obtained by individual architects, engineers, and general contractors, and there is a higher degree of certainty that insurance coverage will exist after the completion of the project. Insurance coverage after the completion of the project, often referred to as “tail coverage,” is especially important when latent defects emerge.

Other Insurance Policies

In addition to builders’ risk and comprehensive general liability, the contractor will be responsible for carrying workers’ compensation and automobile insurance. If the project is a design-build project, the contractor should be required to furnish a professional liability policy to cover negligent design errors and omissions. Although it is not usually required by the contract, many contractors carry contractual liability insurance to cover the liability that they assume with indemnification and “hold harmless” clauses.

The owner must ensure that all required bonds and insurance policies are completed and submitted properly and are maintained in effect throughout the term of the project. The CM should not allow any work to be performed on the project site unless these bonds and insurance policies are in full effect.


Job site safety within the construction fence should be the sole responsibility of the general contractor. There needs to be a single point of accountability for safety within a construction site, and that needs to remain with the general contractor. In executing the construction contract with the institution, the general contractor has agreed to indemnify and hold harmless the institution, and is liable for any job site injury. This responsibility and liability should not be diluted by the CM or another campus department. All visitors to the construction site need to comply with the general contractor’s safety requirements, which may include a hard hat, safety vest, proper eye protection, appropriate clothing and shoes, and a waiver of liability. The general contractor has the right to not allow visitors to the construction site who do not comply with safety requirements.

At the same time, we are all responsible for job site safety. Any hazards or unsafe working conditions should be immediately reported to the general contractor’s staff. Regular observation and safety audits may be performed by the CM or the institution’s safety department and shared with the general contractor. However, these audits are advisory and should not be directives.



This subchapter will focus on the administrative and contractual procedures involved in completing a project.

The term substantial completion refers to the time when the project is sufficiently completed and ready for its intended purpose. The term final completion refers to the time when the contractor has completed all of the contract requirements, including the completion of all punch list items, the submittal of as-built drawings, warranties, extra stock, operations and maintenance manuals, and other contractual requirements.

Given the critical importance of achieving the use of the project consistent with the academic calendar, it is common for an institution to occupy the project through substantial completion. Final closeout of all project and contract details usually takes several weeks or months.

When the owner chooses to occupy a facility or part of a facility that is substantially completed, a certificate of substantial completion is issued to the contractor. If the institution does not have a form in the contract for substantial completion, then at a minimum, a change order should be issued informing the general contractor that parts of the project are being occupied. The certificate of substantial completion or change order documenting occupancy should be clear about what parts of the project are being occupied, the condition of the space being occupied, if the warranty period is starting, who is paying utilities, and so on. If punch list work remains, a copy of the current status of the punch list should be attached, with any other relevant documentation.

Prior to issuing a certificate of substantial completion, a thorough inspection of the work should be performed by all parties, including the architect/engineer, the CM, campus departments, and user departments. Deficiencies in the work should be clearly documented in the form of a punch list including photographs or video, and these deficiencies are referenced in the certificate of substantial completion. Once the project is substantially completed and the certificate is issued, the owner accepts responsibility for operating, maintaining, and insuring the facility.

The closeout process for a project should be highly disciplined and follow a consistent checklist.  See the reference section for a link to view a sample closeout checklist. Experience has shown that closeout can be a very lengthy process, largely because the CM or project manager who has lived through the trials and tribulations of the project is tired and worn out. Larger institutions have a closeout specialist who focuses solely on the closeout process and is not burdened by months of arguing, cajoling, and negotiating with the general contractor.

Of critical importance is the receipt of As-Built Drawings and Operations & Maintenance Manuals. All of the required close-ut documents should be clearly identified in the contract specifications, including the number of copies, format for As-Built drawings (e.g., SutoCad and layering system), etc.

Upon the completion of all punch list items, the contractor requests the CM to conduct a final inspection. Depending on the extent of the punch list, the architect/engineer may also inspect the work for compliance with the contract requirements. Upon determination that all of the work is completed, including all contractual requirements, a certificate of final completion is issued stating that the work is completed in accordance with the contract documents. This final certificate is usually a document that is recorded publicly at the public recorder’s office. The purpose of a public declaration is to inform the construction community that may have supplied labor or materials to the project that all work has been satisfactorily completed. With this declaration, any remaining retainage held by the institution is released within statutory guidelines, typically 30 to 45 days.

Upon the issuance/recording of a certificate of final completion, the general contractor invoices the owner for the balance of the contract, including any retainage being held. It is critical that the institution be completely satisfied with the completion of the project before the certificate of final completion is issued. Once the certificate of final completion is issued, the institution can no longer hold onto monies owed to the general contractor. Issuance of final payment is generally regarded as a waiver by the owner of any and all claims against the contractor except those arising out of warranty. Acceptance of final payment by the contractor generally represents a waiver by the contractor of all claims against the owner.

For new construction, the normal warranty period is 12 months. As a proactive measure to ensure that completed construction is in order, the institution should schedule a 10-month or 11-month warranty walk-through of the project to identify and correct any remaining warranty issues. A technique to keep some of the major subcontractors (e.g., mechanical, fire alarm systems, electrical, elevator) engaged through the warranty period is to sign these subcontractors to an extended service agreement.

Claims and Disputes


Construction contracts typically include procedures for addressing claims and disputes. These procedures define the process for submitting a claim, including acceptable formats and timing. A clearly defined process for requesting and receiving a change order benefits both contractual parties. The contract language should encourage parties to address claims and disputes at the earliest possible stage. In addition, contract language typically requires general contractors to notify the institution of a potential cost issue within a specific period of days (e.g., three to five days) of its discovery; otherwise it becomes “time barred.”

To avoid jeopardizing the project schedule, the contract should require a contractor to proceed with disputed work while outlining remedies for subsequent settlement of the dispute. Contract provisions should encourage the settlement of claims as directly and quickly as possible. Disagreements over time and money do not get better with age or avoidance. The CM and contractor’s superintendent or project manager should be empowered to resolve as many disputes or disagreements as possible. If an agreement cannot be reached at that level, the disagreement should be quickly moved up to the next level of administration for review, assistance, or intervention.

Beyond this level, the institution may have a formal administrative review procedure in which the contracting officer and/or other high-level administrators review the claim with the objective of reaching a reasonable and fair resolution. The administrative review will represent the institution’s final position on the claim. Further challenge by the contractor will require the parties to move to other methods of dispute resolution, such as arbitration or litigation. Because these methods can be both costly and risky, the disputing parties should strive for compromises during the administrative review.

Because of the high cost of litigating construction disputes, owners and contractors are increasingly turning to alternative dispute resolution techniques. Binding arbitration is the most common alternative forum for settling disputes and is the method prescribed by the AIA in its standard contract documents. The process, governed by the rules set forth by the American Arbitration Association, has the advantage of industry professionals sitting in judgment of the dispute. Arbitration also is less costly and quicker than litigation.

Mediation, another alternative dispute resolution technique, involves an independent third party helping to guide the owner and contractor in negotiating their differences. Mediators are not empowered to make judgments or determinations regarding the claim. Instead, they help articulate the respective positions of the parties, pointing out strengths and weaknesses in their positions. This process is effective when the primary obstacle to settlement is the adversarial, emotional, and combative relationship of the disputing parties.

The industry is utilizing other alternative dispute resolution techniques for claim resolution, such as mini-trials and dispute review boards. Fortunately, the industry is currently focusing its efforts on claim avoidance techniques. One of the most popular claim avoidance techniques is partnering.

Construction is a highly volatile business. There are many situations outside the direct control of the general contractor or his or her subcontractors. Unfortunately, claims and disputes are unavoidable. However, with proper planning, due diligence during the design phase, and a modest investment of resources early in the process (before construction) in peer reviews, constructability reviews, and others will reduce the potential for claims and change orders.

Other Considerations


Preconstruction Phase

CMs often are not included in the design process. As a result of this exclusion, CMs are denied critical insights on how the design was developed. These insights may prove valuable later in managing change orders, meeting special scheduling requirements, restricting access, and commissioning the facility.

It is also important to note that when CMs are not included in design meetings, they cannot bring their construction expertise to bear on the project. Owners may be doing themselves a disservice if they are not utilizing their CM’s extensive practical construction experience to influence the quality of the plans and specifications.

Construction management firms have been extremely successful in marketing their design phase services as an essential means of reducing project costs. During the design phase, the construction management consultant uses his or her construction experience to influence the development of the design. Viewed as a member and equal partner on the design team, the construction management consultant brings a check-and-balance element to the team that is otherwise composed only of design professionals.

In-house CMs can provide the same design phase services that are being marketed by outside construction management firms. Although lacking some of the sophisticated systems that outside CMs have, the in-house CM more than offsets this by bringing specific institutional knowledge and experience to the process. The campus environment is unique, and outside construction management firms usually underestimate what is involved in managing a campus construction project.

Plan and Specifications Review

As construction documents are developed, the CM should be viewed by the rest of the design team as the customer for those documents. In other words, the design team must “sell” their documents to the CM. Consequently, CMs should not accept or “buy” construction documents until the documents meet their requirements for a successful construction effort.

Defining the CM in this way is perhaps atypical, as the end user of the facility usually is considered the customer. However, modern conceptions of management—particularly total quality management—recognize that any service provider has multiple customers, both internal and external. One could ask, “If the design team cannot meet the requirements of the construction manager during the design phase, how likely is it the construction manager can meet the requirements of the actual end user during the construction phase?”

Because the training and interests of CMs are in field construction, it initially may be difficult to convince CMs to stay in the office to review design drawings while “more important” things are going on in the field. However, the CM’s involvement during the design phase will pay huge dividends in time and effort saved during construction. Identifying design errors and omissions through rigorous document review will avoid wasted dollars and days during construction.

It is a well-known concept in design and construction that as time passes, the ability to influence the final scope and cost of the project diminishes. CMs must recognize that their greatest influence over the project occurs during the design phase, not construction.

Value Engineering and Constructability Analysis

Value engineering is a process aimed at reducing construction costs without sacrificing project function, quality, or reliability. CMs, because of their construction expertise, are ideal candidates for providing input on the designer’s choice of materials and equipment. CMs’ knowledge of construction equipment and materials cost, as well as life cycle performance, enables them to make informed recommendations on reducing construction costs.

During the design phase, CMs can also offer constructability analyses. In these analyses, CMs review the design to determine how the project will be constructed. CMs then offer cost-effective suggestions on how the site should be accessed, storage and laydown requirements, types of hoisting equipment that the site can accommodate, disposal of excavated materials, and related concerns. Failure to consider these constructability issues can add significant cost to the project.

Schedule and Budget

The CM is held responsible for bringing the construction phase of the project in on schedule and within budget. With this responsibility must come the authority to influence these parameters. At the very least, CMs should have the authority to reject schedules or budgets they feel are doomed to failure.

Too often, design delays steal valuable time from the construction schedule. In these cases, CMs should stand their ground and demand the time needed to complete a quality project. It is better to adjust the completion date during the design phase than to commit to a contract with an unrealistic completion date.

As with the schedule, CMs should be involved in establishing the project budget. CMs must be familiar with the budget as well as the estimates used to build the budget and see that items are properly budgeted. CMs will be more committed to meeting the schedule and budget goals of the project if they have personal involvement in setting those goals.

Budget Management

Construction cost overruns are a problem where costly change orders have driven the total cost of the project beyond the original approved budget. These cost overruns are embarrassing and reflect poorly on the institution’s ability to manage its financial resources. At the heart of most project budget overruns is a lack of institutional procedures and controls.

The construction estimate represents the largest single component of the total project budget. However, there are several nonconstruction costs that make up the total budget, and it is equally important that these items be identified and adequately budgeted. The CM should have a comprehensive list of project costs, thereby reducing the risks of any one cost item being overlooked or underbudgeted.

Even with a well-defined and fully funded budget, cost overruns are still a significant risk if the institution lacks control measures. The most effective control measure is to prohibit, discourage, or limit elective changes requested by the end user. One control measure to discourage discretionary owner-driven design changes during construction is to require budget augmentation for a new scope of work. The project and/or construction contingency is not for discretionary owner changes. The contingency is for addressing unknown or differing field conditions, problems with the construction documents, and other normal issues that arise with construction.

A common industry practice is to include a contingency in the project budget. This contingency, normally ranging from 5 to 10 percent of the total budget, represents a budgeted allowance for unforeseen but expected cost overruns and underruns of all the other budgeted costs. On budget items that are overrun, most commonly the construction contract amount, the contingency is used to cover the overrun. On items that are overestimated, such as advertising costs, the balance is credited to the contingency.  For renovation projects in older buildings, a recommended contingency is 20 percent, and it could go higher depending upon the age, condition, and presence of hazardous materials. The more “homework” that can be done ahead of time, the lower the risk. Testing for hazardous materials ahead of time (asbestos, lead, polychlorinated biphenyls in living areas) can help identify areas of risk and proactively develop plans to mitigate these risks.

CMs’ budget management responsibilities begin during the design phase because they can exert the greatest influence over the final project cost at that time. The contingency is one of the first line items that users and architect/engineers want to sacrifice when the scope outpaces the budget. If the CM allows the contingency to be set artificially low during the design phase, then the odds of maintaining the project on budget decrease.

Again, setting an institutional policy regarding the amount of contingency prevents tampering with this budget-protecting item. The institution should have a programmed contingency curve that is driven by the construction contract amount and that ranges from a minimum of 10 percent for a small contract to 5 percent on a multimillion-dollar contract. Furthermore, the contingency should not be compromised if bids come in over budget. Contingency should be viewed as no less a fixed cost than the contract amount itself. Finally, even with a well-defined contingency policy, it is prudent to budget a contingency higher than normal on projects that carry greater risks, such as renovations and those requiring extensive subsurface excavations.

After a comprehensive project budget is developed, the CM’s budget management responsibilities focus on contingency management. Change orders to the construction contract have the greatest impact on the contingency, and the CM should have a management tool for tracking these contingency expenditures. Credits and debits to the contingency from other budgeted expenses also should be reported on a timely basis. Early recognition of potential contingency overruns enables the CM and administration to take more effective action, such as limiting elective changes, reducing the scope of the contract, or securing additional funds.

Time Management

One of the most underestimated aspects of a design-and-construction project is the amount of time required from project initiation to final completion. It is all too common, particularly on smaller and/or renovation projects, for campus clients to approach their projects with unrealistic expectations and a critical completion date driven by the academic calendar. Campus facilities managers must learn how to handle these schedule crises, which are tied to the realities of funding cycles, research grants, academically driven dates, and other pressures unique to a college campus.

Fortunately, there are tools and techniques available that increase the likelihood that a project can be completed on a demanding schedule. These tools include the use of project schedules, schedule incentive clauses, and alternatives to the bid.

Project Schedules

Although the level of sophistication varies among contractors, every prudent contractor uses a project schedule to manage time. The most common types of schedules are bar charts, S-curves, and critical path methods.

Bar Charts

The bar chart is the most common type of schedule used for campus projects. Its simplicity and ease of understanding have made it the industry standard since the days of the industrial revolution. On a typical bar chart, construction activities are plotted on the vertical axis and the allotted project time is plotted on the horizontal axis.


An S-curve chart shows the cumulative progress of a project, defined in terms of a resource such as work hours or dollars expended, as measured against time. Although lacking the discrete activities of the bar chart, the S-curve illustrates actual project schedule performance as measured against planned performance. The S-curve illustrates whether a project is ahead of or behind the planned schedule and the trend for future progress.

Critical Path Method

The critical path method is the most powerful scheduling tool available. Whether based on the arrow diagram method or the precedent diagram method, the critical path method provides an immediate focus on those activities most critical to the successful completion of the project. The sequence of these activities is known as the critical path, and completing these activities in the order and within the duration scheduled will ensure timely project completion.

As the most powerful scheduling tool, and with the dramatic increase of computer use in the industry, the critical path method of scheduling probably will become more widespread for campus construction projects. Nonetheless, the bar chart, when coupled with an S-curve report, provides a powerful time management tool for smaller projects.

Schedule Incentive Clauses

Even with the scheduling techniques and technology available, the contractor often lacks the motivation to use these management tools. Schedule incentive clauses can provide a monetary incentive for timely project completion. The most common incentive clauses assess monetary damages on the contractor for delayed project completion.

One type of contractual incentive is an actual damage clause. Under the actual damage clause, the contractor is responsible for reimbursing the owner for all damages actually incurred as a result of a delayed completion. Damages of this nature could include the consequential cost of housing students in temporary facilities, lost bookstore revenue, and increased administrative costs in managing a delayed project. However, actual damages can be difficult to collect because of disputes with the contractor as to whether the university really was damaged and to what extent. It is particularly difficult to determine the damages incurred when a classroom or auditorium is not ready for the first day of classes. It also should be noted that most construction firms dislike actual damage clauses because they impose an open-ended risk.

A liquidated damage clause may be used in lieu of an open-ended actual damage clause. The term liquidated merely signifies the precise amount of daily damages that has been established by contractual agreement. An advantage of the liquidated damage clause is the avoidance of future litigation between the owner and contractor over the valuation of damages.

Contractors generally prefer a liquidated damage clause because it reduces the likelihood of disputes with the owner over monetary damages if the project is delayed. However, setting a “daily damages” amount may backfire on the owner if an unscrupulous contractor bids the project, figuring in the daily damages and “planning for” a late completion date. Even after figuring in the damages, these contractors may be able to underbid the competition, because they do not have to meet the challenging deadline.

Liquidated damage clauses generally are enforced only up to the date of substantial completion and beneficial occupancy, and not to the date of final completion. To keep the monetary threat of liquidated damages, some institutions have broadened their contract language to include liquidated damages up to the issuance of a certificate of substantial completion, and another set of liquidated damages between substantial completion and final completion. Having two sets of liquidated damages and separate timelines avoids slow progress on completion of the punch list and all other closeout requirements.

Across the industry, liquidated damages typically range from a few hundred to several thousand dollars per calendar day. The amount set for liquidated damages is legally enforceable provided it is a reasonable forecast of the actual damages the owner would be expected to suffer in the event of a late completion. In court cases in which the amount has been proven to be arbitrary, excessive, or unreasonable, the courts have found that the damages constituted a penalty and thus have ruled the liquidated damage clause unenforceable. Therefore, it is important to validate the prescribed liquidated damages by developing and documenting a sound and fair basis for the determination of damages. In lieu of a calculated basis for liquidated damages, some courts have allowed public owners to use a schedule of damages based on the contract size. The theory behind this decision is that public owners have difficulty placing monetary value on non-revenue-generating public facilities.

Finally, in several cases, the courts have ruled that the owner need not actually realize damages upon the late completion of a project in order to collect liquidated damages. Merely a reasonable anticipation of damages at the time of bidding is necessary to mutually bind the contracting parties. Similarly, if the owner suffers real damages for delay in excess of the prescribed damages, the owner is limited to the liquidated damages only.

The final type of incentive clause is known as a bonus/penalty clause. Although the terms liquidated damage clause and bonus/penalty clause sometimes are used interchangeably, there is a definite legal distinction between the two. Two of the major differences are as follows:

  • A bonus/penalty clause does not have to be a reasonable projection of damages (or benefit) realized by the owner for late (or early) completion. The amounts in a bonus/penalty may be arbitrary and without basis.
  • If a penalty is stated, then an offsetting bonus must be specified as well. However, the two amounts need not be identical.

Many state-supported institutions have difficulty justifying the payment of bonuses on state-funded projects. However, these institutions may be open to offering bonuses on a project for a revenue-generating auxiliary facility, where an early completion date could yield returns in excess of the bonus.

There is a major pitfall in using bonus/penalty clauses. Many contractors have argued successfully that they were denied the opportunity to earn their bonus because of delayed decisions or actions, including change orders, on the part of the owner. Bonus/penalty projects can be documentation nightmares for the CM when every decision or change order generates a corresponding request for a time extension. Thus, the use of bonus/penalty clauses should be limited to special cases with extremely well-structured specifications.

Schedule Management

Schedules, like any management tool, are good only to the extent that they are used. Regardless of what type of schedule is used or the existence of a schedule incentive clause, the CM should manage project time by monitoring the schedule and requiring the contractor to periodically update it.

Early detection and reaction are the keys to meeting a project schedule, and the CM should require the contractor to take immediate action to compensate for delayed activities. This may involve adding more workers, working overtime, and expediting critical deliveries. Falling into the trap of thinking there was enough remaining time in the schedule to compensate for early delays has left many owners with a late project. Because each delay can lead to other delays, it is imperative to correct or compensate for delays as soon as they occur.

Electronic/Web-Based Project Management Systems

There are a number of electronic and web-based project management systems in the marketplace. These products all proclaim that the construction documentation process can now be paperless. The unfortunate reality is that the construction industry still relies on paper, but through the use of technology, the transfer of information and the archiving and retrieval of information can be greatly enhanced.

The decision to utilize an electronic or web-based project management system is a key strategic decision that should be made prior to the initiation of a project. The institution should be clear in its desired goals and outcomes for a system, and then seek to find the best technology solution to achieve these goals.  Key considerations include the following:

  • Capabilities of system (each vendor has different strengths)
  • Transparency
  • Ease of use/training (all parties involved in the construction process will need to use the system)
  • Costs (program/project license vs. individual seat license)
  • Hosting capability
  • Costs

There are several choices in the market.  The best technology solution is the one that comes closest to meeting the institution’s goals, at the best price.


Partnering is a practice that transcends the traditional adversarial relationships on a project while building trust and teamwork among the individuals involved in the construction effort. It represents a cooperative effort among the owner, contractor, and architect/engineer to work toward a common goal while recognizing the respective needs of the team members. Partnering recognizes that relationships play a central role in the success or failure of a project.

Partnering agreements vary throughout the industry and are being utilized in both private and public projects. Successful partnering agreements create an atmosphere of trust, cooperation, and enhanced communication among the project parties. Each member of the agreement, through formal or informal workshops and retreats, comes to understand the other’s point of view. Each member recognizes and respects the needs of the other team members. The need for the contractor to earn a fair profit on the project is as important as the owner’s need for cost-effective, high-quality, timely construction. The construction problems that arise on a project are addressed from a team approach rather than trying to pass blame to one particular party. Win-win situations are favored over win-lose. Individuals take more responsibility for their actions, and group cooperation leads to more creative solutions to problems.

The objective of partnering is to reduce claims and disputes and subsequent litigation by transcending the traditional adversarial relationships that exist on projects. It represents more an attitude change than a formal contractual requirement. The modest investment of time and money spent forging a partnering agreement is more than offset by the benefits of strong, healthy, productive working relationships among the construction team members.

Ethical Considerations

All colleges and universities strive to maintain a positive image and excellent public relations. In meeting this institutional objective, the facilities officers responsible for managing construction programs should conduct their affairs in a professional, ethical, and fair manner. Maintaining a good reputation with the contracting community will reflect positively on the institution.

Construction contract administrators should continually build relationships with those contractors providing service to the institution. The most successful construction programs are those that work with contractors to improve their own processes and procedures for campus construction work.

Developing a reputation for being unethical or unfair can result in the institution receiving higher than necessary bids for construction projects. Known as a university factor, this is the margin contractors will add to their bids to cover the increased risk of dealing with an unfair or unreasonable owner. Those owners who view construction contracts as an opportunity to get “something for nothing” will have the highest margins.

There is a major difference between owners who try to get something for nothing and owners who are firm in enforcing the clear requirements of the contract. Owners who are firm but fair are respected by contractors. These owners insist on getting what was specified, but are not hesitant to write a change order when the contract language is ambiguous. They also are willing to overrule the advice of their own design consultant if they feel the consultant is being unfair with the contractor.

However, it may not be enough for owners to simply conduct their own work in a fair and ethical manner. Owners may also need to establish procedures and policies to encourage contractors to perform university work in an ethical manner. Unfortunately, it is not uncommon for contractors to blame the institution for their own unethical practices (e.g., bid shopping and delayed subcontractor payments).

Bid shopping is when a contractor uses one subcontractor’s price to encourage another subcontractor to undercut the price in order to get the job. It is considered unethical because the first subcontractor submitted a fair and competitive bid in good faith, whereas the second subcontractor may not have even looked at the drawings. The money saved by shopping the bids goes directly into the contractor’s profits, and the owner may get a subcontractor who, because the bid was unrealistically low, may attempt to cut corners in the work. One way to discourage bid shopping is to require general contractors to submit the names of their subcontractors with their bids. This establishes which subcontractors’ bids were used by the contractor and reduces the opportunity to later shop bids.

Another unethical practice is withholding payments for work that is completed. Owners should never withhold a contractor’s progress payment unless the withholding clearly follows the contract provisions. Otherwise owners are exposing themselves to breach-of-contract claims. Similarly, owners should encourage contractors, through contract language as well as contract administration, to issue prompt and timely payments to their subcontractors. Too often, contractors will withhold payments to subcontractors while unjustifiably citing that the owner has not yet paid the invoice. The perceived bureaucracy of the institution often makes this excuse believable. To combat this practice, owners should make public to any inquiring subcontractors the status of all progress payments, including dates and amounts paid. It also is an effective practice for the owner’s representative to discuss timely payment in all project coordination meetings. It is unfortunate that the owner must take on this role of policing the ethics of its general contractors. However, conducting a professional, ethical, and fair program will go a long way in making university projects attractive to the contracting community. This in turn will increase competition, decrease costs, and enhance the reputation of the college or university.



Construction is a complex and contract-driven process that requires a sound, effective management system. Colleges and universities that have an ongoing construction program should continually develop and refine their systems, procedures, and processes and maintain an adequate construction project management staff. Qualified and well-trained CMs, supported by progressive management systems and processes, will add value to the construction effort by ensuring that all campus projects meet the goals of cost, quality, and timing.

College and university facilities managers must take a leadership role in bringing progressive approaches to their construction programs. Successful programs save their institutions money by maximizing value of their construction dollar and enhance the reputation of their institutions by fostering a professional, ethical, and teamwork environment.

Footnotes and References


1The Construction Management Association of America, “An Owner’s Guide to Construction Management,” 2002;

The American Institute of Architects, The Architect’s Handbook of Professional Practice. Washington, DC: American Institute of Architects, 2008.

Barrie, Donald S., and Boud C. Paulson, Jr., Professional Construction Management, 3rd ed. New York: McGraw-Hill, 1992;

Department of Industrial Relations, State of California, Contractor Prequalification;

Richard H., and Glenn A. Sears. Construction Contracting. New York: John Wiley & Sons, Inc., 1994.

The Construction Specifications Institute. Manual of Practice. Alexandria, VA: Construction Specifications Institute, 2004

The Construction Specifications Institute/Construction Specifications Canada. Master Format. Alexandria, VA: Construction Specifications Institute/Construction Specifications Canada, 2004.

“Liquidated Damages.” Construction Claims Monthly, November/December 1989.

Sample closeout document:

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