Episode 23: The Art of Specificity

A real estate development company’s largest risk is that a construction project will go terribly wrong, as construction ventures cost millions or hundreds of millions of dollars. For that reason, a construction contract not only states how those dollars will be used but also what will happen if unforeseen problems arise. If not spelled out clearly, those unforeseen problems can cripple the project and, in bad cases, bankrupt the company itself. This makes the drafting of a good construction contract an existential exercise, though unfortunately it’s an exercise which many people do without much warm-up! Because I count myself in that group, I decided to chat with an expert to ground myself in the issues.

Eli Woyke spent 15 years as in-house counsel for Erdman, a development and project delivery firm which has completed thousands of buildings in its history. Erdman focuses heavily on healthcare facilities which, because of the precision and technology required in them, can be some of the most expensive buildings to construct. In this time, he became an expert on both contract structure and eventually contract disputes. Now that he has started his own firm, he’s regularly sought out for his expertise in those and related subjects. It was awesome to have him on the show.

After a good introduction to contracts and the two goals Eli has for each one (00:18), we discussed some of the primary project delivery components of a contract: the scope of work and material specifications (03:30), pricing (14:30), and scheduling (24:42). Then we pivoted to analyze the things that can go wrong in a construction project (36:20) and the possible solutions to these issues. We discussed the challenges with a one-size-fits-all, ultra-conservative approach (52:40) and then the use of robust indemnity language to protect your balance sheet (55:33). We concluded by discussing the pros and cons of managing construction in-house and also some of the industry standard construction forms like those made by the AIA (1:15:25). The conversation was extremely informative to me and I’m confident it will be for you too. Note: we had a few technical difficulties with a slow video feed at times, but the audio turned out great, so I don’t believe that will be a problem.