As contractors, the idea that we do not entirely know the sub-surface of our projects is scary. Even if you have soil borings, those borings are only representative of their exact location. In a competitive bid climate we need to keep prices low, so we bid the best case scenario and throw in a little insurance policy called an undercut contingency. Undercuts are expensive, and place a heavy burden on the environment.
These contingencies typically include enough dollars to cover removing and replacing a small amount of the entire buildable area, or worse, they provide a unit price that is open ended. When bad soils are encountered, the contingencies are quickly exhausted or begin to escalate out of control and lead us to a difficult conversation with an unhappy owner.
On Earth Day, let’s consider there could be better ways. Better ways for our customers and for our planet.
Try a site guarantee and provide a lump sum price for site development that includes a calculated risk to modify poor soils when encountered. The owner gets a guaranteed price, and you, the experienced contractor, takes the risk. When things work out you get a little reward for your risk, and your customer sleeps easy knowing their project budget is safe.
If you don’t want to take all the risk, consider a modification contingency. Rather than funding undercuts for a small portion of the project, consider earmarking the same dollars for modifying one lift of the entire buildable area. Typically, the cost would be comparable to undercutting 25% of the same area, and if needed, leave the owner with a stronger more consistent subgrade. In this scenario, there is little risk of the owner exhausting the modification contingency and running over budget.
Another solution, a win-win, for both the owner and the contractor is for the contractor to buy the site with a modification contingency credit. With this method the contractor buy’s the site but offers a credit for modification not performed. Less risk for the contractor, but less reward as well.
On Earth Day, make it a point to stop undercutting your customers and our planet. Do the right thing for your projects and start including modification contingencies in your contracts.