June 18, 2014

Partnering is Dead; Long Live Partnering


When I was growing up I didn't play Little League. I spent my summers with my Dad on construction projects. I learned about pulling nails and pouring concrete in places like La Grande, Maupin, Kalama, Elkhorn, and Spray. I also learned how the construction business worked in those post-war days. Every morning at about 10 o'clock my Dad and the Resident Engineer (they were all Professional Engineers then) would go into the nearest town for pie and coffee. Although I am sure they enjoyed the break, pie and coffee was not why they got together. They met to solve problems on the job and to discuss opportunities to meet shared goals — getting a quality project finished on time, with the contractor making a reasonable profit. Although they didn't know it, they were partnering.

This old fashioned partnering worked very well (except for one project in which Schrader Construction Co. had to sue the Oregon State Fish Commission for payment on a change order — which led directly to the Legislature's authorizing suits against the state for breaches of contract). Over the years, though, things have changed. Not only do we now have Project Managers instead of Resident Engineers, but cooperation on the jobsite has turned to distrust and animosity — even on jobs where "partnering" is required by the contract.

By definition, partnering is a formal process for building teamwork among the owner, contractor, design professional, subcontractors, and others on the jobsite. In its modern form, it starts with a facilitated pre-construction workshop which all parties attend. Participants may do some "team-building" exercises, and then create a mission statement for the project. The mission statement is intended to express common goals, set up means and methods for improved communications, establish conflict resolution procedures, and start the parties working together on a successful project.

Partnering has achieved many high-profile successes. The national Associated General Contractors gives a prestigious annual award for excellence in partnering. Local projects have won the award, and others have been finalists. Unfortunately, in too many instances partnering just hasn't worked. More and more, owner representatives see partnering as simply a means for contractors to get more money and avoid the claim-submission process. Some contractor representatives express cynicism about quality and cooperation, especially in the face of shrinking profits. As a result of the failures, more and more projects either skimp on partnering, or do not use it at all.

In an interesting turn of events, at the same time partnering is dying at project inception it is emerging as a way to salvage bad jobs. So-called "intervention partnering" or "project realignment" is now touted by sureties, owners, and contractors as a way to save the failing job.

Knowledgeable construction attorneys, consultants, and at least one partnering facilitation firm — Team Technologies of Olympia and Hillsboro — practice intervention partnering. Often, when things start to go bad, the contractor or owner will tell an attorney the project is behind schedule, claim notices are mounting, the contractor is losing money, jobsite personnel are dispirited or angry, and a disaster is about to happen. At this point the traditional attorney would analyze the contract documents, make sure the proper notices are sent, make sure documentation is in order, get an expert witness working before the job is finished, and prepare for a lengthy and expensive battle.

Intervention partnering — whether instigated by the attorney, owner, contractor, or surety — is different. First of all, the key parties come together for a heart-to-heart. Pretty soon, even the most hardened owner or contractor sees that if things don't change, the only ones who are going to make money are the lawyers. Once the parties understand this, progress can begin.

It is rarely in the best interests of the parties — or the project — to terminate one or more players, or to continue as adversaries. Instead of assigning blame, intervention partnering begins by setting aside existing claims and helping the parties develop a plan to complete the project within a realistic schedule. The plan must include a way for the parties to cooperate and may involve one or more project people being reassigned. Advance payments to let the contractor avoid losing its surety and financial credit may also be advantageous.

Once the bleeding is stopped, and everybody understands how to complete the project, a team can get to work solving the old claims. The team may involve current or former project personnel along with legal and consultant help. Claim resolution may be difficult and complicated, but it is essential to the good-faith underpinnings of project realignment. Whatever else happens, though, claim resolution should never interfere with completion of the project, although lessons learned may be used in the completion plan. If the owner and contractor can not be assured that the past problems will be dealt with in a fair and rapid manner, they will lose the trust it takes to finish the job.

Everyone wins when a troubled project can be realigned. It takes a lot of work and a lot of trust, but the results are far superior to the alternatives. The contractor knows it will be paid for problems for which the owner bears responsibility and can get back to doing what it does best — build projects. The owner gets a completed project without the expense, delay, and disruption of terminating and replacing the contractor. The surety avoids a termination or project failure. The attorneys do what construction attorneys should do — efficiently serve the interests of their clients and facilitate problem solving.

So, even without daily pie and coffee between the key players, it is not too late to realign thinking and performance when the project goes bad. Intervention partnering can happen at any stage, and facilitate a new focus on project issues and claims that allow the failing project to succeed.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations. For more information on this topic, please contact marketing@jordanramis.com or call (888) 598-7070.


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