A Basic Checklist of Documents to Maintain from a Construction Project, Part 1 of 2

By Suzette S. Doody

Maintaining complete business records is critical to prove or disprove a construction claim. More often than not, parties do not begin to record and document a project until after problems arise, but it is critical to establish a written record of all fundamental agreements at the outset of any construction project. You may be asking yourself, “Aren’t we busy enough without having to worry about adequately documenting a project’s construction in anticipation of a lawsuit for construction related issues?” However, after a claim presents itself is not the time to try and gather the necessary construction project documentation to support a claim or defense. Written agreements and documentation will outweigh any oral evidence and alleged verbal agreements. A lack of complete business records can result in additional costs in proving or disproving a construction claim.

Before any construction project is commenced, however, a contractor should implement a project documentation policy. The following checklist includes the basic project documentation commonly necessary to assist with either proving or disproving a construction claim. The amount of documentation that will be maintained for each project is dependent on the size and type of a project. Bigger projects will obviously require more care in both the preparation and maintenance of project documents, while it is not economically feasible on smaller scale projects to retain such extensive documentation. Throughout the course of a project, it is crucial to maintain the following documents:

1. Construction Contract(s)
The construction contract(s) provide the framework by which the risks inherent in the construction process are allocated between the parties, i.e. each of the parties’ rights and obligations, proper notification of any claim, and what, if any, clauses limit a contractor’s ability to recover any costs created by the claim.

2. Bid Documents
Generally speaking, bid documents detail the scope of work performed and set forth the detailed specifications required under the contract. Bid documentation should include any takeoffs, pricing, subcontractor and supplier bids, overhead and profit mark-ups, and mark-ups for labor burdens.

3. Construction Schedule
In the event of a delay claim by an owner or developer, copies of all construction schedules are crucial. A claimant must prove three elements to prevail: that the delay was excusable, compensable and critical. Evaluation of a delay claim requires comparing the initial project schedule (which was the basis for the project bid) with the as-built schedules over the course of the project.

For more information contact sdoody@holmwright.com.

“Cash for Caulkers”—The Construction Industry’s Version of Cash for Clunkers?

By Jared M. Scarbrough


You’ve likely heard of “Cash for Clunkers”—a federal government program where a potential purchaser of certain new cars at participating dealerships could trade in an older car for an unusually-high trade-in rebate—but have you heard of “Cash for Caulkers”? Cash for Caulkers is President Obama’s proposal that calls for greater incentives—perhaps amounting to thousands of dollars—for homeowners to get new energy-efficient appliances, windows, and other such items.

The proposal will likely be patterned after New York State’s home energy efficiency program. Essentially, a homeowner seeking to take advantage of the program locates a participating contractor to schedule an energy audit—available on a designated website or by calling a toll-free number. Then, for about $500, the contractor will meet the homeowner at his or her residence and figure out how much energy the house wastes by placing a huge fan in the doorway that will suck outside air into the house, highlighting leaks in windows, doors, and walls. Among other things, the contractor will also test each appliance to see how much energy they use, and check the thickness of insulation and windows.

After the inspection, all of the information from the inspection is fed into a computer model that generates a checklist with everything that could be replaced, how much it will cost, and how much energy savings can be expected out of it. The homeowner decides how much work to do, and negotiates a price with the contractor. When the work is complete, the homeowner pays the contractor, and the contractor submits the paid invoice to the federal agency that runs the program. The homeowner then gets a reimbursement check from the agency of up to 50% of the project cost—with a maximum reimbursement of $12,000—usually within 30 days.

What does this mean for the construction industry? Well, for contractors hit hard by the recession and collapse in homebuilding, this program would be a godsend as it is expected to create over 250,000 construction jobs nationwide.

The proposal is currently in the early stages of development and there is no timetable for its implementation. But with the cost to the government a “mere” $10 billion, experts expect the proposal to be approved once the kinks are worked out and for the program to be initiated later this year.

For more information contact jscarbrough@holmwright.com/.

Legislative Updates: Arizona Registrar of Contractors

By Jessica A. Jackson

Effective October 1, 2009, a number of statutes have been revised that pertain to licensed contractors in Arizona. One major change involves an amendment to A.R.S. § 12-1365 regarding the notice that must appear in contracts for the sale of newly constructed homes. This statute mandates that the sale contract contain a notice to the homebuyer of their right to file a complaint with the Arizona Registrar of Contractors (“ROC”) against a homebuilder. This statute has now been amended to allow for a claim within two years after the close of escrow on the home or actual occupancy of the home, whichever occurs first—instead of two years after the commission of an act that would constitute grounds for suspension or revocation of a license, as the statute previously read. This change now gives homebuyers more time to file complaints with the ROC than before.

Additionally, a number of other amendments are now in place that should be highlighted:

• A.R.S. § 32-1124 was amended to require that the acronym “ROC” followed by the contractor’s license number be placed on all “broadcast, published, Internet or billboard advertising, letterhead and other documents” used by the contractor to correspond with customers or potential customers.
• A.R.S. § 32-1154 now lists as a ground for suspension or revocation of a license the “doing of a fraudulent act” resulting in another person being substantially injured, instead of the doing of a “wrongful or fraudulent act.” The act now must be fraudulent, and no longer includes “wrongful” acts.
• A.R.S. § 32-1158 deals with required elements for contracts over $1,000.00 between a contractor and an owner of property to be improved. It was amended to say that the required notice to the owner regarding their right to file a complaint with the ROC shall be in “at least 10-point font” instead of requiring that it be in exactly 10-point font as the statute used to require.
• A.R.S. § 41-1080 deals with providing proof of citizenship or alien status before obtaining a contractor’s license. It was amended to provide two clarifications concerning when documentation needs to be provided upon renewal or reinstatement of a license:

i) Where an individual has affirmatively established citizenship of the U.S. or a form of non-expiring work authorization issued by the federal government, the person is not required to provide subsequent documentation upon renewal or reinstatement of a license; and

ii) Where a person holds a limited form of work authorization issued by the federal government and it has expired, the person is required to provide documentation of that status.

For a copy of the ROC statute booklet that contains the relevant Arizona Statutes (including the amendments above) click here. Please contact Jessica Jackson at jjackson@holmwright.com or (480) 477-8593 for additional information.