Case 11: Self-performed failure A developer has negotiated with a general contractor to construct a mixed-use development, sixstory, retail, office, and parking facility. The structure is a mixture of cast-in-place concrete, post-tension concrete, and wood framing. The contractor is new to this state, and has been subcontracting all of the work out and not performing any self-performed work. The contractor is criticized because of this by the local general contractors and accused of being a “suitcase contractor.” The GC would like to self-perform some work, but has not yet established a reliable local workforce. The developer has hired an estimating consultant, who reviews the contractor’s estimate and finds that they received competitive bids in all normally self-performed areas, and the subcontractor prices are consistently lower than are the contractor’s direct estimates. Five months of construction pass and there is a failure with the post-tension cables. It turns out that the contractor has self-performed all of the concrete work instead of subcontracting it out, as was the plan. The contract is silent about requirements to use direct or subcontracted labor. It will cost over $300,000 to repair the damage. The contractor submits the repair cost to the developer’s insurance carrier as the developer was carrying the builder’s risk insurance. Is this an insurance claim? What is the best way for a contractor to become established in a new market and develop a workforce? Does the developer have a claim to make against the contractor because of the estimate review and the “agreement” to subcontract the concrete work?
Case 11: Self-performed failure
A developer has negotiated with a general contractor to construct a mixed-use development, sixstory, retail, office, and parking facility. The structure is a mixture of cast-in-place concrete,
post-tension concrete, and wood framing. The contractor is new to this state, and has been
subcontracting all of the work out and not performing any self-performed work. The contractor is
criticized because of this by the local general contractors and accused of being a “suitcase
contractor.” The GC would like to self-perform some work, but has not yet established a reliable
local workforce. The developer has hired an estimating consultant, who reviews the contractor’s
estimate and finds that they received competitive bids in all normally self-performed areas, and
the subcontractor prices are consistently lower than are the contractor’s direct estimates. Five
months of construction pass and there is a failure with the post-tension cables. It turns out that
the contractor has self-performed all of the concrete work instead of subcontracting it out, as was
the plan. The contract is silent about requirements to use direct or subcontracted labor. It will
cost over $300,000 to repair the damage. The contractor submits the repair cost to the
developer’s insurance carrier as the developer was carrying the builder’s risk insurance. Is this an
insurance claim? What is the best way for a contractor to become established in a new market
and develop a workforce? Does the developer have a claim to make against the contractor
because of the estimate review and the “agreement” to subcontract the concrete work?
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