Principle #9 – Owner Leverage
Preserving leverage as long as possible in the construction process.
|I love the quote from President Reagan: “Trust but verify.”
It worked with the Soviet Union on an INF treaty, it works with my kids concerning their location and activity, and it works on residential projects during construction.
In our 9th Principle: Protecting Owner leverage, we believe in managing and structuring the contractual relationships for projects to protect owner leverage as long as possible in the process. The strategy starts with recommending an American Institute of Architects (AIA) Owner/ Contractor agreement for our client’s projects. The contract defines responsibilities for the Owner, Contractor and the Architect that formalizes the same collaboration stated in our earlier principles, teamwork, budget confirmation and cost control. Using an AIA contract preserves owner leverage in several ways:
- Construction schedule of values – Using an AIA contract, the General Contractor produces a schedule of values as part of the contract breaking down the construction price by trade or vender. The contract dictates that the general contractor provides the schedule of values to the owner each month with a payment request showing how the percentage of complete work of each item equals the amount of the pay requested.
- The Architect certifies pay requests – The AIA contract requires that the Architect certifies Contractor pay requests. To certify the pay request, we visit the site visit during construction to verify the percentage of completion on the schedule equals what is on the pay request.
- Running retainage - The contract has a running retainage feature where each payment the Owner holds back 10% of the total invoice. 5% of the retainage is paid at “substantial completion,” when the project is finished but the punch list has not been completed. The last 5% of the retainage is paid when the punch list is complete.
We trust our contractors and reaffirm our trust monthly. Visiting the site during construction also allows us to:
- Listen to the owner about how the project is going
- Check in on the quality of work while answering contractor questions when workers are on site
- Catch problems that could be more expensive to fix later
- To remember why we designed these solutions from the beginning as detailed issues are worked out.
Bryan Jones, Principal Jones Pierce Inc. An Atlanta based Architectural firm specializing in custom home transformations and custom retirement homes in fun places. www.jonespierce.com
A tailored design with a winning process creates life sustaining result.
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Contact Jones Pierce: Bryan@JonesPierce.com
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