Public Construction Projects: A Recipe for Disaster

During my 3 decades in the construction industry, I’ve seen many publicly funded projects get derailed.

Part of the reason is that government projects use a very restrictive set of guidelines to choose a contractor, so they often end up hiring someone who’s second rate.

Recently in downtown Berkley, California, the BART plaza was renovated for $13 million.

Astonishingly, the project was completed an entire year late, and now BART is insisting that the contractor owes the city $2.4 million dollars. In response, the contractor says BART owes them extra money. (In all likelihood, each party is partially to blame.)

BART says the plaza was completed 455 days late, and the contractor is required to pay a $3,545 fine for each day of delay. The company also missed milestones (not the first time a contractor has done that) for which it must pay additional damages, bringing the total amount to $2.4 million.

The contractor, USS Cal Builders, is disputing BART’s claim that it caused the delay. The Stanton-based company says the real culprit was the transit agency’s change orders. In addition, USS Cal Builders says BART owes it money for all the added expenses which resulted from the delays.

Far too common

Sadly, anyone familiar with the construction industry is probably not surprised by this story. This scenario is extremely common.

Delays, disputes, added costs, and contentious disagreements are par for the course.

I don’t know the details of this story. With that said, it’s very plausible that both sides are to blame.

BART may have requested change orders. At that point, it behooves the contractor to keep detailed records of each change order, and make it clear to the city that the project will be delayed as a result of the changes. If the city requests a change order, and the contractor does not mention the new deadline, the city has every right to expect the deadline to remain intact.

“Hostage Crisis”

Very often, contractors bid too low at the outset of a project, and rely on change orders to boost their profits. It’s an old tactic–get hired, and when change orders arise (they always do), overcharge the client. Contractors know that once the project is in full swing, they hold all the leverage.

Owners are not interested in the hassle of firing the contractor and pressing “reset” in the middle of a project. So they swallow the extra costs, figuring that if the project comes out looking pretty, and decent quality, they’ve come out ahead of the game.

It’s quite a sad situation–contractors have lowered expectations to the point where owners get taken advantage of, yet owners STILL think they came out ahead if the project goes somewhat well. They convince themselves that as long as there is no litigation, and no leaks or water damage, the project is a resounding success.

In essence, it’s as if they have 20/20 vision.

It does not need to be that way in 2020. There is a solution!

Most industries are well advanced, using technology to ensure a great product, on time and on budget. And I believe that while the construction industry is lagging behind, there is hope for real change.

-Steve Whitehorn

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