Construction Contracts: Qualifications

The Nitty Gritty of Q&Es

For more complex construction contracts, how the scope and costs are qualified is important for both buyer and provider. In this article, we focus on the agreement between owner and contractor and it’s key referenced document often titled something like “qualifications & exclusions” (Q&Es for short). The Q&Es are typically written by the contractor, negotiated between the parties, and bound into the contract as an exhibit.

As in the name, Q&Es serve to qualify what is and is not included, as well as related assumptions, and it often overrides scope, quality and responsibilities noted elsewhere. Given the fact that many projects are in a hurry these days, the underlying plans and specifications frequently do not reflect what is being negotiated between the owner and contractor, so having additional Q&Es make sense.

Careful Review is Critical

Because we work on many deals, Real Projectives® has seen many qualifications documents ranging from reasonable to ridiculous. So here are a few pointers for owners and buyers to help you ensure sound agreements:

• Don’t be afraid to ask questions and understand the reasons behind each qualification. Often stated issues can be handled in a better manner.
• Contractors will frequently ask for their document to supersede other documents and maybe even the contract language itself. If the latter occurs, the owner’s representatives must take the time to understand implications, discuss with legal counsel, and be certain the Q&Es do not reduce the rights of the owner or shift responsibility to where it doesn’t belong.
• Keep an eye out for generic (boilerplate) lists and commentary as all items should be tailored to the specifics of the work contemplated or otherwise should be removed.
• We’re not a fan of re-stating work scope already specified in other documents. The better default should be that work is included unless stated otherwise.
• Be careful of explicit quantities being inserted unless the work depends on a specific amount or they are necessary to cover an assumption of unknowns. A contractor not counting correctly should not fall back on the owner.
• For Q&Es that don’t match what is called for in the plans and specifications, make sure that they do reflect what is expected due to the drawings not being complete, something not being as clear as it should be, and any additions or subtractions as appropriate. Have the design team review and comment on the Q&Es so that any proposed products and details will be acceptable and compliant with the project goals and requirements.
• Don’t allow the exclusion of items that are supposed to be included. Yes, this is a double-negative and the Q&Es can be written in the same confusing way so read them twice.
• Watch out for items listed as allowances rather than determined prices. Allowances can be beneficial when a buyer knows something is wanted/needed, but hasn’t determined the specific products or quantities. Flooring materials and light fixtures are two good examples where the quantity is known but the exact carpet, tile or fixtures are still being decided on so an amount reflecting $/sf for tile and $/fixture for lights is included.
• Be careful of allowing exclusions for work that should be under the care and control of the contractor such as safety, material handling, taxes, licenses, etc. If the contractor isn’t going to do or pay for something, make sure you know who will.
• Share risks with the party that can best manage them. For instance, how a contractor performs the work should be their responsibility. Though including hidden or non-discoverable risks may drive up your cost, having contingencies in your budget and schedule for the unknowns is recommended.
• Don’t let negotiation of the Q&Es be presented at the last minute before the contract is in critical need of signing. Contractors will do this because it improves their leverage while minimizing that of the owners.

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