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Contracts can control costs in construction projects

It is often possible to mitigate risk in the future with careful contract drafting. Clearly-defined agreements, fairness and good communication help parties avoid Texas construction contract disputes. Among the ways contracts can be used to mitigate future risk are by clarifying unallowable labor, defining change order reporting, setting rates and caps on equipment and including bidding procedures.

It's easier to manage the cost of a construction project when there are well-defined unallowable and allowable labor rates. This depends on whether labor costs are based on predetermined rates or actual wages. All parties should understand what rates are billed to and associated with a particular project. If the contract language is not clear on this point, disputes may arise.

Change orders are common, and construction contracts should anticipate them and include mechanisms to manage them. The parties might agree beforehand on change order pricing, for example. If the costs of equipment aren't specifically controlled in the contract language, they can run out of hand. Thorough construction contracts include allowable equipment charges, charge caps, and equipment rates. The procedures for competitive bidding should also be included. Owners and developers should ensure competitive pricing by including language about obtaining comparative bids.

Another area of risk that can be addressed by contract is project cost auditing. By including language that makes clear project costs can be audited, the expectation is established that the owner or project developer has the right to review and audit all costs submitted.

The right language can make the difference between winning and losing in contract litigation. A well-drafted contract can also often keep a conflict from arising. An attorney with experience in construction contract disputes might be able to help during the early stages of a project by drafting contracts that anticipate risks and costs. If a dispute arises, an attorney might attempt to negotiate settlement or argue on behalf of the client during court proceedings.

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