Performance Clause In Contract

 
Thread Tools Search this Thread Display Modes
Old 05-28-2008, 04:21 PM   #1
Baby Sitter for Grown Men
 
pm_sup's Avatar
 
Trade: Project Manager
Join Date: Feb 2007
Posts: 116
Rewards Points: 175

Performance Clause In Contract


Does anyone have any examples of a performance clause in a contract?

I believe it's something applicable to our company
__________________
Building complex projects with incomplete IFC plans, under-qualified trades, low bidders, not enough time on the schedule, and no budget, for decades
pm_sup is offline  

Warning: The topics covered on this site include activities in which there exists the potential for serious injury or death. ContractorTalk.com DOES NOT guarantee the accuracy or completeness of any information contained on this site. Always use proper safety precaution and reference reliable outside sources before attempting any construction or remodeling task!

   
 

Old 05-28-2008, 06:36 PM   #2
Superior Firepower
 
skyhook's Avatar
 
Trade: GC Lic. since 1985
Join Date: Mar 2007
Location: Socal Ground Zero
Posts: 5,038
Rewards Points: 3,264

Re: Performance Clause In Contract


Quote:
Originally Posted by pm_sup View Post
Does anyone have any examples of a performance clause in a contract?

I believe it's something applicable to our company
You are a pm_sup and you never heard of a performance clause? Something smells fishy.

__________________
Concrete, you work it or it works you.

skyhook is online now  
Old 05-29-2008, 05:44 PM   #3
Baby Sitter for Grown Men
 
pm_sup's Avatar
 
Trade: Project Manager
Join Date: Feb 2007
Posts: 116
Rewards Points: 175

Re: Performance Clause In Contract


Yup, never written one.

I don't write the main contracts, which are tendered by our company. They do not have performance clauses. They are often 500K to 2M $ contracts

They should have performance clauses

My own SOW's are very specific, but don't require performance clauses as they are more minor trades and less critical to the schedules.

We catch Sh.. on site for trades that don't perform, but there is no incentive, or penalty financially.

Short of verbally abusing them and phoning constantly, there is not much we can do.

Anyway, thanks for your information -

NOT
__________________
Building complex projects with incomplete IFC plans, under-qualified trades, low bidders, not enough time on the schedule, and no budget, for decades
pm_sup is offline  
Old 05-29-2008, 06:38 PM   #4
Preserving the Past
 
Jason Whipple's Avatar
 
Trade: Restoration & Historic Preservation
Join Date: Dec 2007
Location: Cincinnati, Ohio
Posts: 3,569
Rewards Points: 2,054
Send a message via Skype™ to Jason Whipple

Re: Performance Clause In Contract


Quote:
Originally Posted by pm_sup View Post
Yup, never written one.
Just curious why you need to write this. Wouldn't this be a job for the companies "legal" division or lawyer?

They can be written to cover you ass in many, many ways. Even in Residential work when weather could be a delay.
__________________
Jason E Whipple, General Manager
Historic House Restoration, Cincinnati, Ohio
Facebook | Twitter
Jason Whipple is offline  
Old 05-29-2008, 07:00 PM   #5
Superior Firepower
 
skyhook's Avatar
 
Trade: GC Lic. since 1985
Join Date: Mar 2007
Location: Socal Ground Zero
Posts: 5,038
Rewards Points: 3,264

Re: Performance Clause In Contract


Maybe if you got in there and helped instead of baby sitting.
__________________
Concrete, you work it or it works you.

skyhook is online now  
Old 05-30-2008, 10:14 AM   #6
Baby Sitter for Grown Men
 
pm_sup's Avatar
 
Trade: Project Manager
Join Date: Feb 2007
Posts: 116
Rewards Points: 175

Re: Performance Clause In Contract


Quote:
Originally Posted by skyhook View Post
Maybe if you got in there and helped instead of baby sitting.
I'd certainly have to help you, if you were on our site. 1600 posts, wow. Do you actually work? or if you do work, do you have a life? LOL

Besides I think Babysitting is a prerequsite for being a site super, PM, boss or any business owner

Quote:
Originally Posted by Jason W View Post
Just curious why you need to write this. Wouldn't this be a job for the companies "legal" division or lawyer?

They can be written to cover you ass in many, many ways. Even in Residential work when weather could be a delay.
Yes, definitely their lawyer would have to review such a clause in their contract, prior to making it a standard part of their contract documentation.

When I say "we" it's all of our company as a team. It's hard to change things which are institutionalized. Most other companies at our level have these, it's the only way to get things done on schedule in this labour climate.
There should be heavy penalties for non performance, in critical trades.
__________________
Building complex projects with incomplete IFC plans, under-qualified trades, low bidders, not enough time on the schedule, and no budget, for decades
pm_sup is offline  
Old 05-30-2008, 10:34 AM   #7
Superior Firepower
 
skyhook's Avatar
 
Trade: GC Lic. since 1985
Join Date: Mar 2007
Location: Socal Ground Zero
Posts: 5,038
Rewards Points: 3,264

Re: Performance Clause In Contract


Quote:
Originally Posted by pm_sup View Post
I'd certainly have to help you, if you were on our site. 1600 posts, wow. Do you actually work? or if you do work, do you have a life? LOL
Besides I think Babysitting is a prerequsite for being a site super, PM, boss or any business owner
You have got to be a distaff. Otherwise how would you know everything about everything?
Also lacking in formal education judging by your ridiculous questions.
__________________
Concrete, you work it or it works you.


Last edited by skyhook; 06-02-2008 at 07:19 PM.
skyhook is online now  
Old 05-30-2008, 10:48 AM   #8
Preserving the Past
 
Jason Whipple's Avatar
 
Trade: Restoration & Historic Preservation
Join Date: Dec 2007
Location: Cincinnati, Ohio
Posts: 3,569
Rewards Points: 2,054
Send a message via Skype™ to Jason Whipple

Re: Performance Clause In Contract


Well, not knowing what the specific problems are on your sites, all I can say is, I'd be hard pressed to sign any contract that would make me pay penalties for being behind on a commercial job.

I've been on both sides of the coin as a sub and as a PM/Super. To many thing can happen that are out the the subs control to cause delays and almost always, it's never the GC's fault! I would be leery to leave my income up to the discretion of the guy paying me.
__________________
Jason E Whipple, General Manager
Historic House Restoration, Cincinnati, Ohio
Facebook | Twitter
Jason Whipple is offline  
Old 05-30-2008, 01:00 PM   #9
Pro
 
concretemasonry's Avatar
 
Trade: Masonry consultant
Join Date: Nov 2006
Location: MSP, Minnesota
Posts: 3,163
Rewards Points: 2,254

Re: Performance Clause In Contract


Performance clauses can be very effective if used as a bonus incentive to guarantee scheduled completion and encourage early completion. Obviously, in some cases, early completion by one sub may not be worth the cost.

The I35W bridge that collapsed in August, 2007 in Minneapolis has an incentive bonus for early completion of the replacement span. The bonus is $200,000 per day for every day (maximum of 100 days) it is completed before the required 12/25/2008 completion date (Construction started on Jan, 2008). The amount was determined as 1/2 of the daily extra cost to the community and businesses that the bridge is not usable (loss of time and business, long detours, extra fuel, overloading other roads, etc.).

At the present time, the contractor just says he is well ahead of schedule. Some feel it could be completed in late September or October. At $200,000 per day the maximum bonus is $20,000,000. The conctractor was NOT the low bidder, but there were other factors in the bid documents that affected the award. I think the winning bid (design/build) was about $250,000,000, but there were losing lower bids about $25-$50,000,000 lower.

If you can justify a performance bonus, the schedule date is the simplest to write and administrate. I think a penalty can be difficult for a GC to enforce on a sub because the GC does many things that can affect the subs.
__________________
Dick

Engineer, designer and consultant recently active domestically and internationally on construction and design in about 40 countries.
concretemasonry is offline  
Old 06-01-2008, 11:47 AM   #10
Registered User
 
19kevin56's Avatar
 
Trade: Masonry
Join Date: Apr 2008
Location: Southwest Florida
Posts: 18
Rewards Points: 10

Re: Performance Clause In Contract


pm_sup,

I will often times increase my price to a GC with an overly restrictive penalty or performance clause. The probability of a loss is increased, so I must cover the increased risk. And yes, I know the common scope review response "...well as long as you perform, you have nothing to worry about...".

Regards,

Kevin
19kevin56 is offline  
Old 06-02-2008, 12:15 PM   #11
Baby Sitter for Grown Men
 
pm_sup's Avatar
 
Trade: Project Manager
Join Date: Feb 2007
Posts: 116
Rewards Points: 175

Re: Performance Clause In Contract


Quote:
Originally Posted by Jason W View Post
Well, not knowing what the specific problems are on your sites, all I can say is, I'd be hard pressed to sign any contract that would make me pay penalties for being behind on a commercial job.

I've been on both sides of the coin as a sub and as a PM/Super. To many thing can happen that are out the the subs control to cause delays and almost always, it's never the GC's fault! I would be leery to leave my income up to the discretion of the guy paying me.
That is essentially why I am asking the question. It's easy enough to prepare a penalty clause, but it would have to be fair and reasonable otherwise subs are not going to bid if it is too ownerous. Too often it's US vs THEM or a your fault mentality instead of a team approach.

Quote:
Originally Posted by concretemasonry View Post
Performance clauses can be very effective if used as a bonus incentive to guarantee scheduled completion and encourage early completion. Obviously, in some cases, early completion by one sub may not be worth the cost.

The I35W bridge that collapsed in August, 2007 in Minneapolis has an incentive bonus for early completion of the replacement span. The bonus is $200,000 per day for every day (maximum of 100 days) it is completed before the required 12/25/2008 completion date (Construction started on Jan, 2008). The amount was determined as 1/2 of the daily extra cost to the community and businesses that the bridge is not usable (loss of time and business, long detours, extra fuel, overloading other roads, etc.).

At the present time, the contractor just says he is well ahead of schedule. Some feel it could be completed in late September or October. At $200,000 per day the maximum bonus is $20,000,000. The conctractor was NOT the low bidder, but there were other factors in the bid documents that affected the award. I think the winning bid (design/build) was about $250,000,000, but there were losing lower bids about $25-$50,000,000 lower.

If you can justify a performance bonus, the schedule date is the simplest to write and administrate. I think a penalty can be difficult for a GC to enforce on a sub because the GC does many things that can affect the subs.
"Selling" a performance bonus to my company's owners would be a stretch. Just like getting them to stop picking low-ball contractors. I'd love to have them pick a few good contractors so we are not fighting with the low-ball guys to show up, or have to spend all our deficiency budget rectifying substandard work.

Ideally you get more performance with sugar instead of salt.

Quote:
Originally Posted by 19kevin56 View Post
pm_sup,

I will often times increase my price to a GC with an overly restrictive penalty or performance clause. The probability of a loss is increased, so I must cover the increased risk. And yes, I know the common scope review response "...well as long as you perform, you have nothing to worry about...".

Regards,

Kevin
That makes sense. I'd honestly do the same thing if I were the sub.
So the question is, how do you make or design a performance clause that is fair to the sub, not ownerous and yet weed's out the non performing contractors?

Let's face it if you are the drywall contractor and keep getting f*&<ed up by the slow non performing insulation contractor, you'd want to kick his @ss as well.

Anyway thanks for the comments
__________________
Building complex projects with incomplete IFC plans, under-qualified trades, low bidders, not enough time on the schedule, and no budget, for decades

Last edited by pm_sup; 06-02-2008 at 01:33 PM. Reason: .
pm_sup is offline  
Old 06-02-2008, 06:18 PM   #12
Pro
 
nap's Avatar
 
Trade: sparky
Join Date: Jan 2008
Location: SW Michigan
Posts: 591
Rewards Points: 500

Re: Performance Clause In Contract


[QUOTE]
Quote:
Originally Posted by pm_sup View Post
That is essentially why I am asking the question. It's easy enough to prepare a penalty clause, but it would have to be fair and reasonable otherwise subs are not going to bid if it is too ownerous. Too often it's US vs THEM or a your fault mentality instead of a team approach.


quote]
did you maybe mean onerous?

Not sure where everubody is from but a penalty clause is common around my area. They are actually quite simple.

"<completion level required> required by <date>. Failure to meet obligation penalty of <$$$$$$> per <time period>

or to make it more simple:

substantial completion required by June 15, 2008. Failure to meet obligation penalty of $500.00 per day until completion goal is met.

There are often clauses inserted to accomodate a "weather day" or due to conditions "beyond the conrtrol of the sub" to allow for situations that would delay the sub and not be their fault.

Nothing hard about it. When a sub bids a job, they simply are going to look at the job and decide if they are going to accept it or not.

Regardless of what is written, it often gets down to an arguemnet as to whose fault the delay is so the GC must have a construction schedule. Each sub will document why they have been delayed as the job progresses such as:

Schedule states main electrical service complete and operational by june 1, 2008. Well, if the excavators have not leveled the ground, it pretty much isn't going to happen or if the masons have not built walls, it ain't happening so the EC would document the reason for the delay. At that point, the GC and the EC may come to a written agreement as to an additional time allowance or other agreed upon possibilities. When the job gets down to the end and the GC wants to charge the EC for a delay, he whips out his agreement or documtation and says, I don;t think so.

These things can go to court but generally they just get argued out.

Youalso must define "substantial completion" or any other term used as a benchmark for it to have any force in law.

bottom line: your construction schedule is the timeline you set out. If you know what you are doing, that is not going to be that difficult.

I have seen no early bonus clauses in contracts around here typically. The bottom line, if you set a proper construction schedule, it is not really possible to finish early. Each item must follow some other action so unless you have an across the board bonus, it won;t work.

To be honest with you, it sounds like you and your company have no idea what they are doing.

Quote:
or have to spend all our deficiency budget rectifying substandard work.
why would you be doing this. If a sub does not perform as contracted, then they are liable for making it so. There is always backcharging to reclaim any work you must undertake the sub will or cannot.
nap is offline  
Old 06-03-2008, 07:11 AM   #13
Registered User
 
19kevin56's Avatar
 
Trade: Masonry
Join Date: Apr 2008
Location: Southwest Florida
Posts: 18
Rewards Points: 10

Re: Performance Clause In Contract


pm_sub,

Now I believe we are getting to the root of the problem. Quote: "Just like getting them to stop picking low-ball contractors." This indicates to me that your problem is internal with regards to estimating and purchasing, rather than external with subcontractor performance. Every GC has time dependent general conditions costs. As such, the lowest sub's bid is not necessarily the lowest price. Increased schedule duration increases general conditions costs beyond those budgeted. Perhaps it would be more prudent to document the delays by the offending subs and correlate these with the increased general conditions costs, then present the results to the estimating and purchasing executives. Keeping the offending subs off future work may be a better solution than introducing another contract clause which WILL cause distrust and conflict.

Regards

Kevin
19kevin56 is offline  
Old 06-03-2008, 05:09 PM   #14
Member
 
Justbuilding's Avatar
 
Trade: Commercial Construction
Join Date: May 2008
Location: Portland, OR
Posts: 61
Rewards Points: 75

Re: Performance Clause In Contract


Im a little confused.
It sounds like you are asking for a "liquidated damages" clause in your contract, not a performance clause. To me a performance clause is something else.
Our contracts with our subcontractors is a pass thru from the owner to the subcontractor, if we don't have a liquidated damages clause in our contract with the owner, it is pretty difficult to get one in the contract with the sub. IMO on the dark side of unethical.
Our performance clause, being different says something along these lines:
"Subcontractor acknowledges that the dates required in the schedule are essential conditions of the subcontract and agrees that subcontractor's failure to perform and complete the Work consistent with such dates shall constitute a material violation of the Subcontract."
Another clause allows us to do the work for the the subcontractor after written notification and allowance for the the subcontractor to remedy their performance and failure to do so.

Dates in the Schedule may slide, but our stance is the duration of the work was bought in the contract and failure to make duration is the real sin. Now, if because of weather delays or other subcontractor delays not related to the Subcontractor cause a compression of schedule duration then fair is fair and the Subcontractor may be due monies for premium time or multiple crews.

It requires daily documentation of work progress, because if you are going to backcharge or perform work for a sub, without doubt you will be in mediation as a minimum, unless they know they are so screwed up they just accept the charges.

Of course to make all this work the Schedule has to be part of the Contract.
Justbuilding is offline  
Old 06-04-2008, 05:56 PM   #15
Baby Sitter for Grown Men
 
pm_sup's Avatar
 
Trade: Project Manager
Join Date: Feb 2007
Posts: 116
Rewards Points: 175

Re: Performance Clause In Contract


Thanks, some good information and helpful posts.

Part of the reason that we have to be more creative in looking at ways to improve production and maintain schedule is the extreme labour and qualified trades shortage in this region.

I feel for a lot of you in areas of the US where the economy is tight.

The news reported last night that over 100,000 qualified trades people will be required in Western Canada in the next 10 years, however this does not account for the number of retirees and aging baby boomers who will be leaving the trades over that time period.

Scary because most of the trades we are dealing with now are either understaffed, overworked or underqualified.
__________________
Building complex projects with incomplete IFC plans, under-qualified trades, low bidders, not enough time on the schedule, and no budget, for decades
pm_sup is offline  
Old 06-05-2008, 12:32 PM   #16
Moderator
 
Double-A's Avatar
 
Trade: GC - Remodeling Specialists
Join Date: Jul 2006
Location: Arkansas
Posts: 4,617
Rewards Points: 2,000
Send a message via ICQ to Double-A

Re: Performance Clause In Contract


PM, send me a PM later today or tonight and I'll dig through what I have and post it up. I have some somewhere.

__________________
"My clientsí wishes are the center of my attention." -- David Guido, a contractor in Woodstock, N.Y.
New York Times, July 20, 2006
Double-A is offline  


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes Rate This Thread
Rate This Thread:

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Time To Really Consider Escalation Clauses Ed the Roofer Business 18 06-25-2008 10:42 PM
Contract Clause Phraseology, Boilerplate, General Conditions Language? Ed the Roofer Business 21 05-05-2007 12:12 AM
Pre contract contract woodmagman Business 0 04-22-2007 12:43 PM
Rock Clause In Contract Driftwood Excavation & Site Work 9 03-15-2007 08:42 PM
Contract and terms. AFI Painting & Finish Work 28 09-29-2006 06:57 PM

Join Now... It's Fast and FREE!

I am a professional contractor
I am a DIY Homeowner
Drywall Talk is for
PROFESSIONAL CONTRACTORS ONLY!

At DrywallTalk.com we cater exlusivly to professional contractors who make their living as a contractor. Knowing that many homeowners and DIYers are looking for a community to call home, we've created www.DIYChatroom.com DIY Chatroom is full of helpful advices and perfect for DIY homeowners.

Redirecing in 10 seconds
No Thanks
terms of service

Already Have an Account?