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

The interior designer manages all the different activities executed during the contract period 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 balanced and moving can be tricky.

Contract administration is one of the two highest weighted areas on the IDPX Exam. As an interior designer, you need to be familiar with the different construction and project methods. The approach will determine the contractual parties and responsibilities of each.

Construction Project Delivery Methods

Each method has different risks, schedules, costs, and appropriateness based on the project size and complexity. Therefore, 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. First, the designer sends the construction drawings out to contractors to bid. After the winning contractor is selected, the contractor builds the project.

Design-build

In a design-build project, the same company completes both design and construction. 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. First, the CM advises on costs, material selections, and construction issues. Then, the CM negotiates and creates contracts with contractors/subcontractors to complete the work.

Contract Administration

Bid or 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. So 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 ten 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 shortlisted candidates.

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 contract.

The visits ensure three 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 part of the process. There are three types of changes:

1. Minor changes in work: A minor change does not affect the cost or 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 costs or time are not agreed upon. One situation is when the price 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 the schedule, cost, or both. The change order 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 be recorded and copied to the appropriate parties. Clear communication and documentation keep 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 many 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's 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 project manager hired the consultant, 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 ensure 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 to calculate preliminary project costs and schedules. Then, 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 FF&E.

Either the contractor or owner may initiate a construction claim seeking payment, an extension, or other adjustments 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 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 designer 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 ten days before the agreed-upon payment date
• Include the value of work completed up until the date of the application
• Include the 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
• It can be withheld for payment by the designer for several 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 satisfies 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 the owner
• Final cleaning

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

Post-Occupancy Evaluations (POE)

Even though a client has moved into a space doesn't mean the job is “done”. Follow-up with a client afterward 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 the contractor fix small items not included initially on the punch/deficiency list.
• Minor adjustments to furniture, building controls, etc.

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.

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 multiple similar projects, such as a chain restaurant, retail store, or branch.

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