It’s common knowledge there are three phases of construction – design, bid, and build. The fourth unspoken phase in our industry? Litigate. According to Arcadis’ 2021 Global Construction Disputes Report, the average cost of disputes in 2020 for North America was $37.9 million, more than double 2019’s number ($18.8 million). That is a sobering statistic for our industry, and one whose impact on your business can be minimized. By owning your data from the onset of a project, no matter what platform a GC requires you to use, you are protecting your business, mitigating risk, and avoiding potential legal fees.
Here we’ll guide you through the legal risks in construction, dive into source of truth data, and provide solutions for how to protect your business from litigation with your own system.
Litigation in Construction: The Facts
Arcadis reported the number one cause of construction disputes in 2020 was the owner, general contractor, and/or subcontractor failing to comply with contractual obligations. Other common causes of litigation are quality of construction, project delays, nonpayment, and workplace injury.
Timeliness, or lack thereof, is a headlining theme with disputes. Lack of immediate access to documents causes lengthy court cases. In 2020, the average time to resolve disputes was 14.2 months. That is over a year of your company’s time, energy, and money put toward a case that could have been prevented.
Further delaying resolution? Court backlogs. The pandemic has impacted our judicial system, shutting down state and federal facilities for weeks or months at a time. Cases cannot progress in a timely manner, putting projects at a standstill. The overwhelmed legal system has caused many to settle quickly to resolve matters, whether they are responsible for the dispute or not.
Whose Source of Truth Is the Source of Truth?
When general contractors expect you to use their project management software, GCs become owners of the data’s source of truth. GCs purchase licenses for their software that grants your company access for the project duration, but what happens to your data at the completion of the job? When the license is revoked, that vital information stays in the hands of the GC.
There is also the issue of inefficiency. Different GCs use different project management software. You could be using Procore one month and BuilderTrend the next, there is no standard. Additionally, the GC is not going to give you access to manage your own team with their program.
The biggest risk a subcontractor faces is future litigation from the GC or owner. What happens three months after a project’s completion and there is a problem? You have no access to any documents. That includes plans, daily reports, photos, punch lists, change orders, and any trail of communication. How do you combat this major data ownership issue in an industry known for being litigious? By having your own cloud-based system, independent of the GC.
How to Protect Your Business From Litigation With Your Own Cloud-Based Software
You cannot over document what you do. The more data you accumulate, the better you protect your business from litigation. With cloud-based software like SmartUse, you’re able to access documents anytime, anywhere, helping prevent disputes with data at your fingertips. Having a system like this dramatically cuts the cost of research and reduces the associated legal fees. The lawsuit may not disappear, but you’ll spend a lot less preparing against it. The worst court cases are the ones that could have been prevented with proper documentation, so minimize risk by tracking your documents in real-time starting with the planning phase of the job.
Collect Daily Logs
Dailies need to be extremely organized and easily searchable. Make a record of everything, including work completed, photos, plan markups, punch lists, deliveries made (or delayed), equipment and materials used, and schedule delays.
Photos, Photos, Photos
These visual power tools can make or break disputes. Photos need to be timestamped and include location data. They also need to properly capture the completed task or issue at hand. A poorly framed photo can make any job site look bad, while a well-documented photo will capture the evidence you need. It is all about perspective.
Detailed Schedule Delays
Weather and site conditions are major factors in scheduling delays. Keep track of anything out of your control that causes work interruptions. Perhaps your team was able to work on a heavy rainfall day, but flooding caused material deliveries to be canceled, pushing the job completion date. Another critical issue to document is if a portion of the job site could not be worked on because another sub did not finish their work.
Fine-Tooth Comb Your Contracts
The only thing predictable in a construction project? Nothing will run exactly according to plan. Before you agree to any projects, take time to review every detail of the contract. A well-written agreement will address how to handle issues and disputes.
Recognize the importance of documentation early. If you put it off into post-construction for lawyers to resolve, you are looking at major time and money losses. SmartUse can help you be proactive about tracking your data now to mitigate risk and litigation in the future. Start your free trial now.
