During our recent webinar, “Construction is Back – Are you ready to manage the risk?” we received several good questions about the Construction Risk Management process. The webinar is available to watch on demand until December 13th – click here to register.
1. When evaluating a general contractor, how important is it that the general contractor’s staff is experienced in the building type we as the developer are doing?
It is vitally important for someone on the general contactor’s staff to have some knowledge and experience on the type of project that is being built. Every project type is different and has its own nuances. While the whole staff doesn’t need to be experienced in the type of project, someone needs to be.
2. You mentioned that the SBA waives the requirement for a Performance Bond when Funds Control by an independent 3rd party is in place – what about a Payment Bond that normally complements the Performance Bond?
The Funds Control portion of our bond alternative program essentially takes care of that. Since we are auditing each draw and determining how much each sub and supplier should get based on the line item percentage completion, and supported by the invoice documentation, the process ensures that the money is going into the project, and not being comingled with other project funds, or diverted elsewhere. The vast majority of defaults are payment related, not performance related. Therefore, the SBA has granted the waiver providing that the third party “controls the disbursement of the proceeds.”
3. Have you dealt with Public-Private Partnerships (PPP) – type funding projects?
We have been involved with Public-Private Partnership projects, but our fundamental Construction Risk Management process doesn’t change based on the type of funding. Some projects may have specific construction thresholds or requirements noted in order to obtain funding. Often, we are not told what type of funding is being utilized on the projects that we work on, although, through experience with our clients, we typically know if they gravitate towards SBA, USDA, HUD, or other type of lending.
4. Are you familiar with the Textura systems for pre-qualification management and construction payment management and if so what are your thoughts on the products?
Textura is essentially an online data management and collaboration platform for the construction industry. The paperless management system works well if all parties are using it. It can speed up the information flow, thus saving time/money. When utilized it is a good way to provide all parties, including our team, the appropriate information. It is still important for an independent third party to evaluate the information and compare it to the work at hand – technology does not replace good judgment!