Problematic Construction Contract Clauses: Coordination

This is the second blog post in a series that discusses clauses in construction contracts with the goal of providing awareness of contract terms that often cause difficulties and give rise to claims.

Previous blog posts have addressed problematic contract clauses involving differing site conditions, no damages for delay, and changes. This post discusses coordination clauses, and other posts will discuss the following clauses:

• Suspension of work
• Warranty and defects liability
• Variation in quantity
• Inspection
• Force majeure
• Flow down
• Compensation and payment
• Weather
• Escalation
• Oral modifications

Coordination
Coordination clauses are designed to protect the owner from liability for delays to a contractor caused by another contractor working on the same project. An implied duty exists for a contractor to coordinate its efforts with other contractors working either side by side or in succession. Specific scheduling coordination language dictating specific duties of interfacing contractors are being used more frequently. The owner should be aware, however, that such clauses generally do not override the implied duty not to hinder, delay, or interfere with the contractor’s performance.

An example of contract provisions having coordination requirements follows:

Section 1 – Scope of Work
1.4.3    The Contractor shall provide Construction Management Services that shall include, but not be limited to, the activities listed below. Refer to the Construction/Construction Management Scope and Responsibility Matrix – Attachment 1C – for further details.

• Provide a team of professional and qualified construction management personnel to coordinate and manage the site construction activities. Construction management personnel shall have full knowledge of and ensure compliance with all applicable laws, regulations, conditions of labor, local conditions, site conditions, and site procedures including environmental aspects.
• Contractor is responsible for developing a plan for supplier technical or erection support for owner’s approval. The management and coordination of supplier support during construction shall be part of the contractor scope of work.
• Coordination of construction completion activities with Owner’s startup activities.

1.4.8    The Contractor shall be responsible for obtaining all permits, certifications, licenses, written approvals, etc. required in the name of Contractor (and its sub-contractors) from the various governing authorities (local, county, provincial and central) for the performance of the Work. These permits, certifications, licenses, written approvals, etc. include, but are not limited to, those associated with all approvals of the Contractor’s basic engineering design; of the detail engineering design; of the construction. The Contractor should develop a thorough, comprehensive and well coordinated plan that adequately addresses the resourcing requirements needed to obtain the permits, certifications, licenses, approvals in a timely manner. The elements of such a plan are anticipated to include, but are not limited to, the following:

• Timely liaison and coordination with all affected authorities as required at Central, Provincial, County and Local government level.
• Timely liaison and coordination of visits as required to all affected authorities.
• Timely liaison and coordination of all visits as required by affected authorities to the Site or the office(s) of Contractor or sub-contractor(s).
• All preparation work for the review meetings, including but not limited to: preparation of all necessary document(s), printing, collating, translation of documents into Chinese and English language, timely distribution to all affected authorities, and all other coordination necessary to bring the meetings to a successful result.

1.4.9    Administration and coordination of all detail design, procurement, construction, planning, cost, progress, documents and changes and to report and advise on these activities.

Section 2 – Engineering/Project Management Instructions
2.9    Correspondence, Routing and Approach
2.9.1    Correspondence between Owner and Contractor shall be conducted in the English language, in accordance with a “Coordination Procedure” which covers and which is required to be prepared by Contractor for Owner approval within 1 month of commencement of work.

2.9.1.1    The “Coordination Procedure” shall cover the interfaces between Owner and Contractor. More specifically, it shall outline the general requirements to be followed for the management, engineering and procurement services to execute the Work and provide guidance, references, and clarifications on administrative and procedural matters or activities which are required to properly execute and complete the project.

2.9.1.2    A correspondence numbering system for transmittals, faxes and phone conversations shall be documented in the “Coordination Procedure.”

2.9.1.3    A detailed distribution matrix shall be created as part of the “Coordination Procedure” for distribution of all correspondence, transmittals, and documentation.

2.9.2    All communications documenting decisions, clarifications, and agreements relevant to the performance of work and/or the cost or schedule shall flow through the Owner’s Project Manager or designee. A similar contact shall be identified for the Contractor. This shall be documented in the “Coordination Procedure.”

Section 4 – Construction/Construction Management Instructions
4.2    Construction Site Organizations
4.2.1    Contractor’s Construction Management Organization
4.2.1.2    Contractor shall perform the work at the Site with effective coordination among the engineering, procurement, construction, permitting and Owner’s pre-commissioning groups, and any Third Parties engaged in or contributing to the achievement of Final Acceptance of the Construction Work.

FIDIC contracts provide a cooperation requirement that the Employer may instruct the contractor to allow appropriate opportunities for carrying out work to (a) the Employer’s Personnel, (b) any other contractors employed by the Employer, and (c) the public authority personnel. Any such instruction shall constitute a Variation if it causes the contractor to incur unforeseeable cost.¹ FIDIC contracts also provide an Avoidance of Interference clause requiring the contractor not to interfere unnecessarily or improperly with the convenience of the public or the access to and use and occupation of all roads and footpaths.²

The failure of owners and contractors to properly coordinate the work is often a major source of problems on construction projects. These potential problems are particularly acute when the owner takes on the responsibility of managing multi-prime construction contractors or the prime contractor has numerous subcontractors. We recommend that project management personnel carefully review the coordination clauses to be aware of these requirements.

¹    See FIDIC Conditions of Contract for Construction MDB Harmonised Edition for Building and Engineering Works Designed by the Employer, Clause 4.6, May 2005.

²    Id., Clause 4.14.

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