Construction and Renovation Strategies for the Institutional Owner

By  John E. Osborn, John E. Osborn. P.C.

construction site
“If you don’t know where you are going, you will end up somewhere else,” Marcelo Velez [talking about planning a construction project for an institutional owner], quoting Yogi Berra.
On May 1, 2018, the Greater New York Construction User Council (“GNYCUC”), presented an interactive panel discussion, moderated by experienced construction litigator, General Counsel of the  GNYCUC,  and counsel for institutional owners,  John E. “Jack” Osborn together with representatives of four institutional owners, all officers of the GNYCUC, including high end commercial real estate, a university, a museum and transportation infrastructure:  John H. Pierce, Senior Vice President for Design & Construction, Rockefeller Group, Chuck Kneaves, Senior Project Manager for Construction, Museum of Modern Art, Marcelo Velez, Vice President for Manhattanville Development, Columbia University, and Bernadette Vero, Director of Project Controls and Technical Services, MTA/Metro North Railroad.

As the construction project begins, the Institutional Owner holds all of the cards.  The Owner prepares the contracts, controls the contract administration, manages close out and controls the choice of dispute resolution.  So what can go wrong?  You would be surprised!

The program featured a discussion of key considerations critical to the success of the construction and renovation by an institutional owner.

Planning and Program

  • Set the budget and program; define what you want to achieve; include details of space planning and locating of mechanical equipment, as well as overall design.
  • Focus on planning and operational issues [avoid the 10 Most Deadly Construction Sins; see below].
  • Get Buy In from all stakeholders; make sure the design and construction team educates the end user on the process
  • Focus on clear set of goals and parameters and “hold to it”

Project Delivery Methods

  • Bring in Construction Manager early: right after schematic design
  • Bringing in the Construction Manager early gives you a “road map”; especially helpful in a “tight site”
  • Bringing in Construction Manager in early facilitates the estimating process and allows for efficient value engineering [allow 2-3 months for this phase)
  • Metro North Sees benefit of using Design Build
  • Columbia University is conservative; will start With Construction Manager as constructor; if cannot convert to GMP will proceed as Construction Manager at Risk

Schedule

  • Accurate and carefully vetted Critical Path Schedule
  • Make sure all stake holders understand the relationship between budget and schedule
  • For Metro North, schedule must be precise and maintained [track closure dates are critical]

Helpful Contract Clauses

  • Allow Owner to change Architect and to continue using the Architect’s Instruments of Service
  • Clear process for addressing changed conditions
  • No Damages For Delay [Panel Consensus to limit delay damages]
  • If notice of claim not timely; claim is waived [some agreement to allow payment even if notice requirement not met]
  • Changes in scope and time must be specific and “tightly” drafted
  • Helpful to have “off the shelf standard contract” with which owner is familiar and best able to maneuver

Creative “Troubleshooting Solutions” To Use When Things Get Off Track

  • Don’t stand on notice defense – negotiate a fair outcome
  • Don’t encourage letter writing
  • Bring in a third party team building consultant with industry “ wisdom”
  • Stand by the promises you make in troubleshooting and team building meetings
  • Celebrate accomplishment of intermediate goals

Innovative Dispute Resolution Approaches

  • Use of BIM on project often limits claims; reduces conflicts [Columbia University has used it for 19 years)
  • Facilitated session goes a long way to bring parties to look at project a different way
  • Columbia University does not have an Alternative Dispute Resolution Clause in its contracts
  • Limited or no exposure to Dispute Resolution Board (“DRB”); willingness to explore
  • Little or no litigation or arbitration experience (desire to resolve disputes without resort to formal, binding dispute resolution)

Lessons Learned And Take Aways

  • Planning the right qualified team equals success
  • Clear decision making process is critical
  • Urgency to accomplish project goals is a critical ingredient
  • Choosing the right architect for the project is a prerequisite

 

 Avoid the 10 Most Deadly Construction Sins

Taken from “What Corporate Counsel Needs to Know About Construction and Renovation:  The Ten Most Deadly Construction Sins: How to Avoid Them” From The Metropolitan Corporate Counsel, P. 19, May 1999 By John E. Osborn, Esq., John E. Osborn, P.C.two-architect-man-working-with-compasses-and-blueprints-for-a-picture-id875087710

From my years of trying construction cases, I kept a list of what troubled projects have in common, which I call “The 10 Most Deadly Construction Sins.”

Without fail, on troubled projects, one or more of “The 10 Most Deadly Construction Sins,” caused the problem… so, if you study this list before your next project, and avoid each and every sin, you will be far more likely have a successful project, and, if there is a problem,  you will be better able to resolve disputes, during the project, without falling into a protracted and costly dispute resolution process.

The 10 Most Deadly Construction Sins are:

  1. Lack of Focus Up Front
  2. Failing to Choose the Best Method of Project Delivery
  3. Failure to Assemble the Right Project Team
  4. Failure to Coordinate the Project Team
  5. Failure to Provide a Method of Changing the Scope, Price or Schedule
  6. Failure to Understand (Truly Understand) Local Conditions [zoning, building codes, landmark laws and unions]
  7. No Accurate Schedule or Too Elaborate a Schedule or Lack of Accurate Updates
  8. No Periodic Meetings; Failure to Keep Job Meeting Minutes
  9. No Vision on Dispute Resolution
  10. Failure to Recognize that Quality Wins the Day.