The 3 Stages of the Owner-Contractor Relationship
A human-centric approach that's supported by a tech-centric one aligns expectations.
When it comes to the success of a project, there is no relationship more important than the owner-contractor relationship. When a project runs over budget, takes longer than planned for the schedule, and then gets tied up in claims and subcontractor liens for months–if not years–afterward, the question is often: “how did things come to this?”
It all comes down to avoiding misaligned expectations, and instead, taking a human-centric approach supported by a tech-centric one.
Stage 1 - The Honeymoon
Contractors are courting owners to secure business. They’re sending in hand-delivered bids and negotiating. Generally speaking, they’re flexible, a total open book in order to earn the right to take on the project. Excitement fills the air in anticipation of the potential for a long-term, multi-project partnership. The desire to make this first project a smash is strong.
Then, the contract is signed. This is the moment where the owner and contractor are more aligned than they may ever be again. The beginning of the project can be relatively smooth sailing, despite large upfront mobilization costs, movement onto the site, and progress with the camp and site infrastructure. But then, there’s often a bit of a lul. This is unfortunately where things can really start to drift apart.
Stage 2 - The Misunderstanding
Contractors and owners can become somewhat misaligned in accordance to what constitutes “agreed upon requirements” as per the contract. The glitches may include anything from administrative specifications to technical specification requirements or contract drawings. There is a time period where the owner and contractor are open to work through issues and change orders as they arrive. However, as things pile up, the scenario becomes match-like where the owner is in one corner, the contractor in the other.
This issue is exacerbated if the job turns out to be more complex or costly than either side anticipated. So, each digs in to protect their position, doing just enough to earn substantial completion. This is the point where quality can be affected, project features canceled, legalese start flying, and alignment really gets out of whack.
Stage 3 - The Digging-In
As the project nears substantial completion, both owner and contractor may be at the point where a costly punch-list is still out for resolution. The owners are receiving calls from subcontractors about payments, notices of liens, and construction claims. Meanwhile, the contractor is asking for the holdback. Everybody is preparing their case around, “what happened and whose cost should this be?”
Now we’ve reached the point where most often, lawyers and accountants end up benefiting most while owners, contractors, and subcontractors end up either paying more than planned or receiving less.
The Solution to a Healthy Owner-Contractor Relationship
It doesn’t have to be this way. Maintenance and capital projects are complex. PayShepherd offers detailed information about pending cost overruns as they surface, when issues are still small, versus post-large overage. As they escalate, these issues are more difficult to settle and often end up in claims.
PayShepherd is the contract assurance solution to maintaining a long-term, tech-centric contractual alignment that also addresses that critical human-centric requirement: that optimistic feeling experienced on the day the agreement is signed. The platform ensures people are paying, and paid only, what is due–nothing more, nothing less. But more importantly, PayShepherd maintains a culture of accountability and mutual success on the site, for the good of the entire project.
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