The Power of Approval

If your experience with construction contract administration is like that of many, you may think of it as “being jerked around” more than “administering”. You may be confounded by flood of RFIs and feel you are unable to do anything other than prepare RFI responses, or you may feel weighed down by a flood of daily “ultimatum” letters from a contractor demanding immediate direction or face delays. Although it is true that the architect is not in control of incoming communication from a contractor, the architect has a very powerful role in a Design-Bid-Build project. The architect holds a power of approval that regulates the flow of payment to the project’s contractor. That power can be expressed in a positive, pro-active manner. It is not justification for trying to force a contractor to do something that is not required by the contract, but it is a way to remind the contractor that the architect is there during construction to make sure that the contractor fulfills the contract requirements and provides what is required by the contract.

While it may seem ‘old school’ to say that power follows money, it remains true in the world of building design and construction. Project organization (i.e., the chain of command) usually reflects the intended lines of authority and payment. Authority and payment are thus nearly synonymous. However, in the conventional Design-Bid-Build project organization, the owner pays the contractor but only makes payment based on the architect’s approvals (certifications) of the contractor’s work. So, the architect’s power of approval is significant. Exercised effectively, it tells the contractor: “If you provide what is required, payment will be approved.” AIA standard contracts (and statutory requirements in some locations) require prompt payment, so prompt processing and release of payment typically follow approval by the architect. The same contracts and statutory requirements include provisions for withholding payment for work not done or not done properly, reinforcing the architect’s power of approval.

Beyond observing the contractor’s work to determine compliance with the contract documents (“the design”), the architect has at least two useful tools for determining appropriate payment. The Schedule of Values provides a breakdown of the work into categories and amounts, and, if properly established at the outset of a project, it is an excellent tool for tracking construction progress and determining appropriate progress payments. Another useful tool is the contractor’s estimated cash flow, which should be obtained at the outset and can be used to track actual vs. estimated payments against time and provides an easy-to-follow view of the status of construction relative to the total contract value and the calendar schedule for project completion.

Standard contracts typically include a reasonable allowance for architect response time related to contractor RFIs and other submittals, and contract provisions may also stipulate timely submission by the contractor to avoid delays to the Work. So, the architect who feels bewildered by a flood of RFIs and other submittals or claims may need only to remind the contractor (in writing) of the requirement for timely submittals and request that the contractor prioritize the submittals that have been made (in the “flood”). Standard contracts typically allow for the architect to make an appropriate response, and that may be a response which establishes the need for more timely and prioritized submission by the contractor.

Posted in Construction Administration, Project Management

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