It’s a juggling act: How to find balance in contract administration

Contract administration is one of two highest weighted areas on the IDPX Exam, at 27 scored questions worth 18%. Here's what you'll need to know:

The interior designer manages all the different activities executed during the period of the contract between the owner and the contractor.

The designer's duties range from contract negotiations to work changes to approving payments and project close-out. Keeping all the different parts and teams constantly balanced and moving can be tricky.

Construction project delivery methods

As an interior designer, you need to be familiar with the different types of construction and project methods. The approach will determine the contractual parties and responsibilities of each.

Each method has different risks, schedules, costs, and appropriateness based on the project size and complexity. You'll need to know the details and pros/cons for each and which types of projects they are best suited for.

Design-bid-build

Design-bid-build is the most familiar and traditional approach. A project is designed by a designer who sends the construction drawings out to contractors to bid. After the winning contractor is selected, the project is built by the contractor.

Design-build

In a design-build project, both design and construction are are completed by the same company. One example is a design professional who also owns a construction company or a construction company that employs design professionals.

Fast-track

A fast-track construction project begins construction before the entire design is complete. Fast-tracked projects usually involve a construction manager (CM) hired by the owner. The CM advises on costs, material selections and construction issues. The CM negotiates and creates contracts with contractors / subcontractors to complete the work.

Contract administration

Bid / tendered contracts

Sending drawings and specifications out to bid (or tender) is a way of getting competitive pricing. Bidding documents are part of the project manual, but not part of the legal contract documents. You'll need to know the bidding process and what it includes.

Bidding documents include:

• Invitation to bid
• Instructions to bidders
• Bid forms
• Bid security information
• Requirements for a performance bond, if required. (A statement by an insurance company to ensure completion of the project should the contractor default on its obligations)
• Requirements for a labor and material payment bond, if required. (This bond promises payment to labor and material vendors by a defaulting contractor)

Substitutions

Often, contractors will suggest substitutions for materials specified in the bid package. The Instructions to Bidders should contain information about substitutions. It should spell out when substitutions are allowed, how they are evaluated, and the process for reviewing substitution submissions.

The bidder must submit the substitution and supporting information at least 10 days before the bid opening. If the substitution is approved, the interior designer must issue an addendum to all bidders stating the substitution is acceptable.

Contract negotiation

For bid / tendered projects, the interior designer may assist the owner with deciding which contractor to use. The interior designer may also help negotiate final pricing and conditions. Contract negotiation is usually done through a series of interviews with the short-listed candidates.

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Contract administration activities

Field visits

If part of the Owner-Designer agreement, the interior designer will visit the site during construction. The field administration inspection schedule is typically spelled out in the agreement.

The visits ensure 3 things:

1. Monitoring the progress / quality of work
2. Protecting the owner against defects in work
3. Determining if the progress will meet the expectations indicated in the construction documents

The designer follows up after each visit with a written formal field report to the owner.

Documentation

Submittals

Submitted to the interior designer after reviewed and signed off by the contractor. Submittals include:

• Shop drawings
• Samples
• Product data

Work changes

Changes during construction are expected and part of the process. There are three types of changes:

1. Minor changes in work: A minor change does not affect the cost or time schedule of a project. The interior designer is allowed to make minor changes in work without the owner's approval.
2. Construction change directive: This is a directive to the contractor to perform additional work. The change directive is given by the owner when cost or time are not agreed upon. One situation is when the cost of changes or their impact on the schedule can't be determined until later. The owner gives the contractor permission to go ahead and complete the work. Another situation is when both parties don't have time to prepare/review a formal change order.
3. Formal change order: The change order is a legal amendment to the construction contract. This document authorizes a change from the original contract documents modifying schedule, cost, or both. This may also reference prior construction change directives. It is typically prepared by the interior designer but issued by the owner, or party to the agreement with the contractor. A typical scenario is a situation that increases the contractor's scope of work.

Project Communication

All project communication must should be recorded and copied to the appropriate parties. Clear communication and documentation keeps the project running, and can prevent future disputes.

Some examples include:

• Meeting minutes of all project meetings
• Telephone logs and telephone conversation notes
• Email logs
• Transmittal logs

The project manager is responsible for the management of communication. While it sounds like a simple matter, it can get quite complex. Project communication needs to be sent to the right people at the right time.

While a lot of verbal discussions can occur on site and over the phone, it's pertinent to always follow up in writing. Project communications can include:

• General correspondence
• Meeting minutes
• Telephone and email logs
• Transmittal logs for documents received and sent out
• Design review notes
• Client approvals

Purchase order review

Another responsibility in project management is to review purchase orders and follow up on delivery times for furniture, accessories, and any critical items that may impact the project.

Certificates of payment / invoices

Issuing certificates of payment to the contractor and consultants is another project manager duty. The consultant / contractor issues an invoice, also called an application for payment, to the project manager listing the work completed, dates and hours. The project manager either approves or disapproves the application based on the accuracy of the information provided.

If the owner hired the consultant, the project manager recommends payment and forwards it to the owner to issue payment. Otherwise, if the consultant was hired by the project manager, payment is issued directly to the consultant.

Project progress and tracking

This process is also called monitoring. It's keeping track of the project's progress to make sure it's on track in terms of time, quality and cost. One good way to track project progress is by using project management charts, like Microsoft Project.

A project manager may use a fee projection chart early on in a project to calculate preliminary project costs and schedule. By comparing the actual figures to the projections, the project manager can determine if the project is on track.

Rejecting work and claims

Depending on the contract specifics, the interior designer may or may not have the authority to reject work.

Construction

The General Conditions of the Contract for Construction (AIA Document A201) give the interior designer the authority to reject non-conforming construction work.

FF&E

In the General Conditions of the Contract for FF&E (AIA Document A251) the designer does not have the right to reject items, as only the owner has the power to reject.

Either the contractor or owner may initiate a construction claim seeking payment, an extension, or other adjustment from the contract. Claims must be submitted in writing with supporting documentation 21 days from the event.

The interior designer's responsibility is to review the claim and make a final decision about the claim. But the designer's ruling is legally subject to mediation, arbitration and litigation.

Construction Progress Payments

Money paid to the contractor at set intervals is called progress payment. These time periods are set in the contract, and are often monthly. According to AIA General Conditions of the Contract for Construction, the interior designer reviews the contractor's notarized application for payment. The determines if the amount requested is in line with the work completed and the materials used.

Application for payment details:

• Are issued by the contractor at least 10 days before the agreed upon payment date
• Include value of work completed up until the date of the application
• Include value of any materials purchased and stored but not yet used on the job site
• Once approved by the designer, a 10% retainer is withheld until the completion of the entire project
• Can be withheld for payment by the designer for a number of reasons, including defective work, damage, etc.

Project closeout

Project closeout originates with the contractor by notifying the interior designer in writing. Along with this, the contractor submits a list of items to be fixed or completed before final payment. This list goes by several different names: punch list, snag list, and deficiency list.

Project close-out procedures include:

• Making sure the client has all operating and maintenance instructions, guarantees/warranties and contact information for service and parts re-order
• Copies of professional photographs that may have been taken of the project
• Schedule a series of regular meetings (over a few weeks to several months) to discuss:
  • Whether the space is being used as intended and satisfy the original program requirements in terms of stated goals, adjacencies, flexibility, function?
  • Are the finishes holding up as expected (excluding normal wear and tear)?
  • Are there any maintenance problems?
  • Are lighting and acoustics adequate for the space?
  • Are the client and users satisfied with the space, furniture & fixtures?
  • Is there any additional design work required to modify the space?

Helping a client through this stressful, difficult time will resonate and do as much for your reputation as delivering a good looking, on-time, on-budget project. Besides referrals, maintaining follow-up communication also keeps you in the loop for any developing projects  that you might be considered for.

Feedback will also help you and your firm make internal improvements for future jobs too.

Substantial completion is a stage in a project when, the work is complete enough so the space can be occupied and used. Upon inspection and agreement, the interior designer issues a certificate of substantial completion. Punch list items still may need to be completed. Warranties and utility and maintenance responsibilities shift at this point.

The Final Certificate of Payment is issued after the work is completed. Some of the items the contractor must submit to the owner include:

• All warranties and maintenance contracts, operating instructions, certificates of inspections of equipment and systems
• Certificate of Occupancy (CO) issued by the local building regulatory office
• Set of drawings, if required by the Owner-Contractor Agreement
• Extra stock materials, as indicated in the specifications
• Final keying of locks and key turnover to owner
• Final cleaning

For some projects the designer may perform a post occupancy evaluation, but this is an extra service.

Post-occupancy evaluation services (POE)

Even though a client has moved in to a space doesn't mean the job is “done”. Follow-up with a client afterwards can be part of the project and should be budgeted in your fees, but separate from your design services. Most of the time the POE is not paid for by the client, unless they plan to build multiples of the same type of space, for example – a chain of restaurants.

Expect to hear some problems and complaints soon after the client's occupancy and be ready to assist with minor issues like:

• Having contractor fix small items not originally included on punch / deficiency list
• Small adjustments to furniture, building controls, etc.

The POE can give the designer valuable information that can help with future projects. The client may choose to pay for the designer to perform a POE, when they plan to build multiples of similar project, such as a chain restaurant, retail store, or branch.

For the interior designer studying for the NCIDQ Exam, finding balance is important, too. Work with Qpractice to learn where to spend your time on the areas that are worth more.