Steps to Managing Your HOA's Major Construction Project

Construction project managementThe industry generally defines major repair/reconstruction projects as any project costing more than $500,000 or that involves more than three different types of skills, such as carpentry, sheet metal, roofing, painting, stucco, waterproofing and the like. Major projects can take two or more years to complete, depending on the size of the project or availability of funds.

Since we've discussed planning and paying for major reconstruction in a different article, we'll use this article to focus on managing the project while it's going on. 

Communication: An Essential Element of Project Management

A lot can change during the time it takes to complete a large-scale reconstruction project, such as membership on the board of directors, change of association management, or even a large turnover in unit ownership, as older residents sell and new owners move in. This makes communication very important to successful project management. The board of directors should establish lines of communication that will survive the personnel changes in project guidance to help keep projects on track and accounted for.

Communicating between Team Members

Once work is underway, frequent communication between team members is practically required. Changes in conditions and change orders (work that is added or removed from the original contract) must be dealt with as well as owner complaints and changes in schedules. Payments will need to be arranged, access to homeowners units planned for, and the list goes on. To smooth out this process, the people involved in the construction project must remain in contact with one another: 

  • Daily - The construction manager and general contractor’s superintendent both need a daily point of contact with a board member that can represent the HOA.
  • Weekly - The construction manager and the general contractor should meet weekly to discuss what has been accomplished in the past week, what is schedule for the next week, and any schedule or change orders.
  • Monthly - The board of directors and construction manager should have monthly meetings, discussing the full report of what has been accomplished in the past month, what is scheduled for the next month, and any schedule or change orders.

Keep in mind that this is a minimum level of communication for successful project management, and that your HOA can definitely be more involved in the process.

Changes to the Contract

The contractor or construction manager may wish to change the originally agreed upon contract for a number of reasons. Sometimes the details of assembling different parts of the work cannot be economically prepared by the contractor prior to the bid or job start (or even before the work begins). And other times the products that the contractor decides to use may be different than what was specified (due to problems matching existing colors, materials, or textures). 

The only way to ensure that there is agreement between board, manager and contractor is for the contractor to submit shop drawings of construction details (often called "submittals") and samples of materials for the board or the manager’s review and approval. 

Level of Documentation

Everyone knows that “time is money” and documenting what occurs on a major repair/reconstruction project takes time. The more detailed the documentation, the more money required. The board and construction manager should discuss and agree on the extent of the documentation and the expected cost at the time that the manager is hired. Just remember, all schedule changes, change orders and meeting minutes should be in writing. 

Paying for the Job

To pay for the construction project, the board and general contractor should agree upon a payment schedule prior to the start of work. On major projects, payment should be made at least monthly. A good rule of thumb for most HOAs is to retain 10 percent of all payments until the end of the project, as a sort of protection for the association against poor workmanship or unpaid bills by the contractor.

All requests for payment should be accompanied by conditional lien releases from subcontractors and suppliers for payments now due to them, and unconditional releases for payments already received.

Once the contractor submits his progress billing with all the correct documentation, payment to him should be prompt. Delaying payment increases project costs, complicates the contractor’s cash flow, reduces the contractor’s good will, causes the price of change orders to go up as the contractor attempts to recoup real or perceived losses, and generally makes life on the project more difficult. With proper financial planning, the HOA should be able to pay the contractor within fifteen days.

Project Closeout 

Here are seven things to be taken care of at the project closeout to ensure that the project is fully complete, the work is under warranty, and the HOA has a record of what was done.

  1. All punch list work must be completed and accepted.
  2. All change orders and back charges must be documented, agreed upon, and included within the contract sum.
  3. Any maintenance or operating manuals that were specified or required must be turned over to the association.
  4. A complete set of plans, specifications, shop drawings and submittals must be turned over to the association.
  5. Final unconditional lien releases from subcontractors and suppliers must be received by the construction manager prior to release of the final retainage to the general contractor.
  6. Arrangements should be made to receive all specified warranties as soon as final payment is given to the contractor.
  7. A final meeting of the board, the construction manager and the general contractor should be held to discuss and complete any last remaining item or issues.

Information provided by Richard Tippett, a member of the ECHO board of directors, the Central Coast Resource Panel, and the Maintenance Resource Panel. Image courtesy of hin255 at FreeDigitalPhotos.net

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