Writing a Scope of Work, Badly
The scope of work is the most critical piece of a construction contract. Disagreement over scope of work is the most common cause of construction disputes. A proper, careful and detailed scope of work not only avoids disputes, it protects the owner from costly changes. Unfortunately, this critical piece of the contract often does not get the attention it requires.
We see many examples of this. They are often avoidable. For example, some contracts simply fail to list some or all of the specifications and drawings, or they refer to the wrong version. Too frequently, scope of work documents are referenced with insufficient clarity, or sometimes they are even described as “attached” but then they are not actually attached. Bid qualifications may be incorporated by reference, in conflict with other contract documents, or with ambiguity as to the extent of the qualifications. We have seen design development documents incorporated by reference, along with (inconsistent) specifications and drawings, without any provisions to clarify which one takes precedence. And of course, project specifications and drawings may simply be incomplete as at the contract date.
Use the Right Form of Contract
It is often the case that work is contracted while the design remains incomplete, particularly on complex industrial projects. This is not in itself a problem. Contract based on incomplete design carries certain risks. What is required is clarity as to the baseline scope of work, and contract provisions that clearly indicate what happens when completed design changes the construction cost (and schedule).
Particular forms of contract exist for this purpose; industrial construction owners have sophisticated contract forms that address the allocation of such risks. Design-Build and EPC (Engineering, Procurement and Construction) contracts are intended for use where the design is incomplete – or where the design is not even started. But contracts intended for use in a traditional Design-Bid-Build scenario (i.e. where the designer completes the design documents before the owner seeks bids for construction), such as CCDC 2, respond poorly to situations where the design is incomplete at the contract date. Change orders are guaranteed – and disputes over scope of work are quite likely.
In particular, it is risky if a stipulated price contract provides no clear baseline for determining what constitutes a change in scope. If the contract does not specify what scope the contract price is based on, how are the parties to agree what constitutes a change when the construction drawings and specifications are issued?
Careful What You Incorporate
Incorporating bid documents to define the scope of work is not uncommon. But in our experience, it is an imprudent shortcut. Bid documents may include information that is out of date by the time of contracting. They may contain bid clarifications that pertain to other bidders. They may contain qualifications that are at odds with other express contract terms. Disputes over scope of work are much less frequent when the contract restates the scope of work and supersedes the bid documents, rather than incorporating them.
Use Industry Standards and Best Practices
Use of standard trade definitions (e.g. Alberta Construction Trade Definitions) and standard construction specifications (e.g. National Master Construction Specification) represents the best practice for clearly defining scope of work. Trade definitions specify which trade is responsible for what; they are a complete list of inclusions and exclusions pertaining to scopes of work. Standard construction specifications provide templates to consistently organize, format and write project specifications.
Keep Out of Court
Of course, many construction owners and contractors do an excellent job of properly defining the scope of work. Those contracts don’t cross our desk (as construction litigators) too often, because disagreements are less frequent. Lawyers don’t usually get involved in writing construction specifications; there are professionals specifically (better) trained for this (e.g. Construction Specifications Canada). But some of us are frequently involved in resolving disputes when specifications are not clear. We tend to see a disproportionate number of contracts with poorly defined scopes of work, because the ensuing disputes come to us for litigation or arbitration.
Some gaps or ambiguities in the scope of work are inevitable given the complex and changing nature of construction work. On the other hand, many gaps or ambiguities are avoidable with careful attention to setting out the scope of work in detail at the outset.
Ensure the contract includes a clear and complete scope of work to avoid dispute as to what constitutes a change. Or, if appropriate, ensure that the right form of contract is used to address the fact that design is incomplete when the contract is made.