What advice would you give contractors regarding documentation and recordkeeping to better protect themselves during disputes?
Jim Archibald
Partner
Bradley Arant Boult Cummings LLP
Disputes over payment, scope and delays are among the biggest risks contractors face. Thorough documentation doesn’t just help win these disputes; it may prevent them from happening at all.
Start with the contract: Every project should begin with a written agreement that clearly defines scope, schedule, payment terms and change-order procedures. Verbal understandings are difficult to enforce.
Track changes in real time: Change orders, change directives, RFIs and scope clarifications should always be documented in writing.
Keep a daily record: Daily logs noting weather, crew size, work completed, deliveries and delays create an invaluable time-stamped record of the events that result in claims. Photos and videos, dated and organized, are equally valuable, especially for differing site condition claims.
Document communications: Confirm important verbal conversations with a follow-up email; Text messages and emails should be preserved, not deleted.
Organize as you go: Waiting until a dispute arises to assemble records is far harder than maintaining organized files throughout the project. Create separate cost codes to track costs incurred for extra work, changed work, delays or lost productivity, and dutifully record costs to the proper codes as they are incurred.
AI can help. AI programs can organize thoughts and draft change orders, notices and letters quickly and efficiently. But check anything generated by AI carefully for accuracy and tone.
In construction, memory fades but records don’t. Contractors who document consistently protect their cash flow, their reputation and their legal position.
Luke R. Conrad
Partner, Construction & Public Contracts
Hinckley Allen
My advice is to focus on maintaining project documentation and contemporaneous recordkeeping with uncompromising discipline.
Many construction disputes are won or lost before the attorneys arrive. Construction teams that maintain quality records and comply with contractual notice provisions typically have a significant advantage; those that do not are often left reconstructing projects from memory and are at a significant contractual disadvantage.
While contract documents establish the baseline scope of project expectations, RFIs, meeting minutes, daily logs and timely communications serve as the reference point when project reality departs from expectations at project kick-off. Proper documentation is where claims for changed conditions, extra or disputed work succeed or fail. Documentation is equally important to defend against claims or allegations from other project participants. It is important that contractors:
- Capture directives in writing, confirming those phone or hallway conversations, meeting any required formal notice requirements.
- Establish tracking and cost codes to document claims and connect expenses to specific events; tracking labor, materials and equipment in real time.
- Maintain emails, notices and letters to document project issues such as unexpected soil conditions, unmarked utilities or water infiltration.
- Keep daily logs, monthly reports and schedule updates to help tie the narrative together.
Once a project is complete, participants quickly move on from the challenges the project faced; project records, cost accounts, daily logs and correspondence keep those issues alive. Strong documentation and recordkeeping keep your in-house or outside legal teams armed should disputes arise
Brad Parrott
Managing Partner ATL/FL
Hudson Lambert Parrott LLC
Always provide notice of adverse project events. Customer service orientation leads many contractors to remain silent in the face of project challenges. This silence comes home to roost usually toward the end of the project where we tend to find that no good deed goes unpunished. The antidote is the “friendly” notice. A contractual notice does not need to be legally charged, threatening or adversarial. All a notice letter needs to do is provide notice of an event and the impact. Notice allows for transparent management and hopefully overcoming the issue.
For example:
“Dear owner,
“As we discussed, owner supplied FF&E is delayed at port. We cannot achieve substantial completion without these items. We are working on a plan for owner to stage furniture at a nearby warehouse once released by the port authority and to coordinate FF&E move in an expedited manner upon arrival. This should help limit cost and time impacts. I suggest we have a planning meeting to make sure we all are exhausting all options to minimize this issue.”
This notice communicates two important things. First, there is a problem that can impact time and money. Second, we are here to help and to be part of the solution. This notice is received well by customers and, if necessary, a future juror, judge or arbitrator.
What key contract provisions in a construction agreement are often overlooked?
Steven B. Lesser
Shareholder & Chair of Construction Law & Litigation Practice
Becker & Poliakoff
Construction practitioners often overlook time is of the essence provisions, liquidated damage and risk shifting provisions.
Time is of the Essence: Include the phrase “time is of the essence” after reciting each momentous time frame in a construction contract. Some courts have held that blanket time of the essence provisions in a contract are ineffective to establish a material breach of contract if a time deadline is not achieved.
Liquidated Damages: Liquidated damages represent a daily amount anticipated to be sustained in the event of a delay. Courts will not uphold a liquidated damage clause that is too high or too low and can be deemed a penalty. Owners who simply select a number without evaluation risk a court tossing out a liquidated damage provision. To increase the chance of enforcement, perform an analysis as to how liquidated damages were established and keep a written record of it. Include a stipulation in the contract that the “amount of liquidated damages is a fair, reasonable assessment of the daily losses due to delay and is not to be deemed a penalty.”
Risk Shifting Analysis: Disclaim liability for damages by use of a “no damage for delay” clause. If liability cannot be disclaimed, shift the risk to others that performed work by use of an indemnification clause. If risk shifting is not available, acquiring insurance to cover the risk parties may also limit liability for consequential damages by using a mutual “waiver of consequential damage” clause.
Kimber Davison
Managing Partner
Griffith Davison
Construction contracts are some of the most complex agreements containing provisions that implicate finance, safety, insurance, liens, intellectual property and other industry-specific legal matters.
What often gets ignored in the exhaustive process are the standard provisions. One provision that I have found gets very little attention despite very serious risk implications for all parties is the warranty clause. Standard warranty language can be one of the shorter provisions in a contract—simply stating the contractor provides a warranty on workmanship and materials for one-year. Yet, warranty obligations are far more complex and have far greater implications for the success of each party to the contract than these concise provisions contemplate. What are the timing expectations for performing warranty work? How is it noticed? What if the project is completed and occupied in stages—is the warranty work also staged and expiring at different times? If so, how is that being tracked and by whom? What happens when warranty work is performed during the warranty period and the same issue resurfaces after the expiration of the warranty period? Another often overlooked contract provision is project close-out, including punchlist procedures. Often, I have found that a contractor’s procedures for compiling and performing the punchlist are not at all in compliance with the contract provision. The punchlist contract provision is often a standard “architect prepares a list . . .” That is not how the process is implemented on many projects. Paying attention to the seemingly boilerplate provisions can mean the difference between a successful and unsuccessful project.
Lane Kelman
Partner, Construction Group Chair
Cohen Seglias
Compliance with contract requirements can make a construction litigator’s job challenging. Immediately, I focus on notice and reservation of rights clauses, which can often be overlooked. Although seemingly standardized, both are central to a claim’s viability.
These provisions often work in tandem. Notice provisions allow owners and construction managers to mitigate damages and control costs. Implementation of them forces choices by owners and/or construction managers. Reservation of rights clauses serve a related purpose and can explicitly preserve the noticed claims. The nexus between the two is crucial and providing notice of a claim may not be sufficient if rights are not properly reserved.
In some jurisdictions, compliance with notice and reservation of rights provisions is strictly construed and can be fatal. In other jurisdictions, however, the assessment may be more fact intensive, and prejudice to the respective parties may be a factor.
Project teams should understand key contract provisions before work begins. Poor communication among field personnel, project management and accounting can lead to missed notice requirements or the release of claims. With proper training and communication, parties can reduce legal obstacles and related costs that arise when notice is untimely or claims are not properly preserved.
Attorneys and stakeholders should treat notice and reservation of rights provisions as early claim-assessment tools. Training and communication at the project level can help ensure timely notice and express preservation of rights. Implementing these good practices will lead to stronger claims.
Allen Estes III
Partner and Practice Group Co-Chair
Gordon Rees Scully Mansukhani
Before any construction contract is signed the parties should evaluate whether they fully understand and appreciate their risk and obligations under their respective contracts.
In a design-bid-build relationship, each party should evaluate the following:
For the owner, it is important to ensure that all risks have been appreciated and contracted to the appropriate parties.
For the designer, it is important to ensure that the design contract documents accurately set forth which obligations the designer will have during the design phase of the project and during the construction phase of the project.
For the general contractor, it is important to ensure that all obligations have been reviewed with both the home office and field team. There needs to be there a clear team understanding regarding how communications between the owner, designer and general contractor will occur on the project pursuant to the requirements of the contract. All subcontracts should be reviewed to ensure that there are not any scope gap issues.
For subcontractors, it is important to fully understand any obligation which is flowed down from the general contract. Review all provisions in the contract documents which affect the subcontract to ensure consistency and to full appreciate all risks which are flowed down. This is especially important for any notice, claim, change or dispute resolution provisions.
For suppliers, it is important to make sure that under the terms of your purchase order you are legally acting as a supplier and not acting as a subcontractor under the laws of the state in which you are delivering materials to.
Wm. Cary Wright
Shareholder
Carlton Fields P.A.
Liquidated damages provisions are often overlooked and under-appreciated by both owners and contractors. Liquidated damages are quantified typically on a daily-rate basis in a construction contract. The parties agree that if the project schedule is delayed, the owner will be entitled to a certain amount for each day of delay. The rate can be as low as $100 per day or as high as hundreds of thousands per day, depending on the size and nature of the project. The key is that the liquidated damages must reasonably approximate the estimated actual damages resulting from the delay—it cannot be a penalty (e.g., increased to provide greater incentive to complete the project); otherwise, they will be held unenforceable. For example, $50,000 per day would most likely be a penalty for a typical residential project, but not for a stadium project because stadium project damages could include damages such as relocating a major event to another city, advertising losses, additional costs to teams, impacts to television rights and to a myriad of vendors supporting the event.
Liquidated damages can give contractors certainty by defining delay damages in advance (and potentially capping that liability). Without such a provision, the contractor would be liable for actual delay damages, which could be significantly higher.
From the owner’s perspective, liquidated damages provide certainty and eliminate the need to sue to recover, and ultimately to prove up, actual delay damages, which introduces uncertainty, can be costly and often require litigation and expert testimony.
Andrew R. Kwiatkowski
Partner, Construction Law Practice Co-Chair
Dinsmore & Shohl LLP
Forum selection clauses are often overlooked in construction agreements and are routinely accepted without revision. As background, a forum selection clause specifies in what state or county the construction dispute must be litigated. That state or county may not be where the project is located and it may be inconvenient, more costly and it may force a party to have to hire new and unfamiliar counsel. Parties forced to litigate in a jurisdiction in which they are unfamiliar may also undermine their dispute strategy or make them less aggressive.
There are some states, such as Ohio and Tennessee, which have laws that invalidate forum selection clauses in construction agreements that require the parties to litigate a dispute in a state other than the state in which the project is located. The enforcement of these anti-forum selection statutes has had varied treatment in federal courts and state courts, in that federal courts have repeatedly not enforced anti-forum selection clauses while state courts have been more likely to do so. In either event, a contested forum selection clause by one party may lead to significant cost and litigation before the parties have an opportunity to litigate the merits.
What advice do you have for contractors navigating ongoing material cost volatility and supply-chain uncertainty?
Trent Cotney
Partner, Construction Team Leader
Adams & Reese
Contractors need to address cost volatility before they sign the contract, not after prices increase. Fixed-price work creates significant risk when material pricing, tariffs, freight costs and lead times remain uncertain. Contractors should use price-escalation clauses, confirm how long supplier quotes remain valid and identify which materials may require substitutions. The contract should also provide additional time and compensation for procurement delays, shortages and increased transportation or storage costs. Most importantly, contractors must provide timely written notice when these issues arise. Waiting until the end of the project often weakens an otherwise valid claim
Angela Richie
Partner and Practice Group Cochair
Gordon Rees Scully Mansukhani
Material cost volatility and supply-chain disruption are no longer isolated events—they have become recurring business risks that contractors must actively manage. Contractors often focus on fluctuations in the cost of steel, concrete or specialty products, but many of the most significant cost increases stem from related factors such as tariffs, labor shortages, freight constraints, delayed design information and slow approval processes that push procurement into a more expensive pricing window. In many cases, what appears to be a material escalation issue is actually a delay issue in disguise.
The best protection begins before the contract is signed. Contractors should clearly identify the assumptions underlying their pricing, shorten proposal validity periods when markets are volatile and negotiate escalation provisions that permit equitable adjustments for significant increases in material, labor, transportation or tariff-related costs. Contractors should also review supplier quotations carefully for price-protection deadlines and “must-order-by” dates and make sure those dates are communicated upstream.
After award, contractors should treat procurement schedules as risk-management tools. Maintaining a baseline schedule, tracking submittal and approval delays, and documenting changes that affect procurement timing can help mitigate escalation and preserve recovery rights if costs increase due to owner-caused delays. Just as importantly, contractors should provide timely notice whenever material pricing, lead times or availability are impacted.
What legal risks should contractors keep in mind when considering using AI in their business operations?
Mark W. Frilot
Shareholder
Baker, Donelson, Bearman, Caldwell & Berkowitz P.C.
Although AI can increase efficiency, contractors using these tools should consider several key legal risks:
Data privacy and security: AI tools often handle sensitive project, client or employee data. Contractors should verify that vendors keep inputs confidential. For government work, transmitting data to external AI systems could violate CMMC or NIST cybersecurity requirements.
Intellectual Property: Ownership of AI-generated work product remains legally uncertain because copyright protection generally requires human authorship. AI output may also infringe third-party intellectual property rights, and entering proprietary information into public AI tools may jeopardize trade secret protection.
Sharing Limitations and Professional Judgment: Many contracts restrict sharing project information with third parties, and AI use could inadvertently breach those obligations. Some agreements also require review by licensed professionals. AI cannot replace professional judgment, particularly where errors could result in cost overruns, project delays, safety concerns or standard-of-care liability.
Project Documentation: AI-generated meeting minutes and summaries may misinterpret technical discussions or misattribute statements. Contractors should carefully verify AI-generated records before incorporating them into the official project file.
Government Work: FAR compliance, export controls and data certification requirements may apply when AI contributes to estimates, designs, proposals or other work performed under federal contracts.
Hiring Decisions: Using AI in recruiting, candidate screening or staffing decisions may trigger disclosure, transparency, bias-testing or audit requirements under emerging state and local laws.
Insurance and Regulations: Existing liability, professional liability or cyber insurance policies may not cover AI-related losses. Because AI regulation continues to evolve, contractors should stay informed of legal development
What are the advantages of resolving disputes through mediation or arbitration instead of litigation?
Timothy D. Woodward
Partner
Shutts & Bowen LLP
Resolving a dispute through an early, earnest, good-faith mediation is virtually always preferable to winning a dispute through protracted litigation. This is for many reasons, some of which are more obvious than others. First, the costs of process, including and especially the attorneys’ and experts’ fees involved in litigation of significant construction disputes are extraordinary and there are no guarantees that a successful litigant will recover them. Second, and often overlooked, the corporate energy required to help support a significant dispute is of great value, even if not easily quantified. That is, maintaining a significant construction dispute necessarily requires substantial time and resource commitment by the parties themselves, including key management and valuable administrative staff. This energy is at the expense of working for the company on income-producing activity and, generally, the optics of a company being involved in significant litigation are less favorable than those of a company that works out its differences by agreement. Third, litigation takes a long time these days and the delays to final resolution are only further compounded through appeals. It can take years and an investment of millions of dollars of capital plus enormous time and resource commitment from each party to sustain a litigated dispute. Settling a dispute through compromise at mediation before first committing all these resources and time can often justify discounting claim values in exchange for certainty and speed. Fourth, mediation allows parties to control their own destiny, whereas litigation turns over the power to resolve the dispute to a judge or jury instead, resulting in greater risk and less predictability.
Should contractors involve legal counsel during the bidding and contract negotiation processes?
Thomas R. Krider
Managing Partner
Smith Currie Oles LLP
Yes, because the most valuable legal work on a construction project often happens before there is a project. Rights that seem preserved for later frequently must be exercised before bid, or they are gone.
Start with ambiguity. If the bid documents contain conflicting drawings, unclear scope or ambiguous specifications, the time to resolve them is through pre-bid RFIs. Courts routinely hold that a contractor who noticed, or should have noticed, a patent ambiguity and bid anyway, without seeking clarification, bears the consequences of its own interpretation. A well-crafted pre-bid RFI either clarifies the requirement for all bidders or creates a written record supporting the contractor’s reading. Counsel can spot these traps and frame the questions.
Public work raises the stakes further. Defects in the solicitation itself, such as unduly restrictive specifications, ambiguous evaluation criteria or improper bundling, generally must be protested before bids are due. Under the federal rule and most state analogues, a bidder who waits until after award to complain about a flaw apparent on the face of the solicitation has waived the protest. An experienced eye on the solicitation during the bid window preserves options that cannot be recovered later.
The same is true in negotiation: Indemnity, dispute procedures and liquidated damages terms are far cheaper to fix before signing than to litigate afterward. Involving counsel at the bid stage is not a cost of doing business. It is how contractors avoid buying a dispute along with the work.
What emerging legal or regulatory trends do you believe will have the biggest impact on the construction industry over the next few years?
Dirk Haire
Partner
Burr & Forman LLP
A substantial legal and regulatory trend that we have seen over the past two years is the federal government and some state governments mandating project labor agreements. The federal trend started in 2022 when the Biden Administration promulgated a mandatory PLA FAR rule for federal construction projects over $35 million. I was the lead lawyer that won a bid protest challenge by arguing that a mandatory PLA violates the Competition in Contracting Act. That case, decided in January 2025, is MVL v. United States. Since winning that case, the Trump Administration has surprisingly kept the Biden mandatory PLA FAR rule in place, and my team and I have successfully challenged and removed more than 40 PLAs from federal government construction solicitations. We also recently challenged and won a PLA bid protest on a State of Maryland highway project. It is clear from both state and federal bid protest rulings that mandatory PLAs are anti-competitive and substantially increase government construction projects costs. It is also clear, at least on federal government solicitations, that it is unlikely that the federal government can meet the legal standard necessary to utilize a mandatory PLA lawfully. In this regard, to the extent the federal government continues to try to issue mandatory PLAs, we expect to continue removing them from solicitations using the bid protest process.
Ernest C. Brown
CEO
Project Neutral Inc.
In California, a new statute, SB 440/Civil Code § 8850, imposes a massive civil penalty on project owners who do not timely respond to construction claims.
On private California projects with contracts signed on or after Jan. 1, 2026, a served Civil Code § 8850 claim requires a response from the owner in 30 days or imposes massive civil penalties.
Undisputed amounts that are paid late accrue 24% annual interest (2% per month). On a $2-million undisputed sum, 90 days of delay is roughly $120,000 in penalties.
The new SB 440 timeline is imposed by statute—regardless what the existing written contract says about the claims process; it is not waivable.
Project Neutral® offers an effective solution for owners and contractors—an early neutral evaluation—where we listen to both sides, interview key witnesses and provide an unbiased written analysis. It is a fixed-price, fixed-scope, 21-day written evaluation by a senior construction executive. Conducted under the mediation-privilege, it is purely advisory. We create draft change orders the parties can review, discuss and sign. It is the first stop on the ADR path, designed to make the rest of the path unnecessary. And, because it is a mediation-protected evaluation, it is inadmissible later. While an owner might issue a blanket denial—that has major risks. A quick report from a owner-hired claims consultant is not going to encompass the whole issue and is not privileged. It is unlikely to satisfy the statute or resolve the dispute.
An owner or contractor can suggest an ENE. It is a fixed-fee service, quoted at engagement. The fee is generally split between the parties. You do not need to worry about a massive bill for hourly services hitting your desk the next month. There are no hourly meters running.
How can contractors better protect themselves from payment disputes and slow-paying project owners?
Timothy C. “Tim” Ross
Shareholder, Practice Group Leader (Construction)
Andrews Myers P.C.
Being relentlessly proactive about payment. Slow-pay and no-pay situations have become increasingly prevalent due to numerous recent industry disruptions; COVID-19, tariffs, labor shortages, material unavailability and more stringent lending requirements. It’s now more important than ever for contractors to be proactive in protecting their right to payment. Proactively negotiating contract terms is the first and best method for doing so. Ensure a clear scope of work with defined milestones, shorter payment durations, reduced retainage and withholding rights, streamlined pay application requirements and quick resolution mechanisms for payment disputes. Also proactively request evidence of financing from the owner before commencing work. A favorable contract means nothing if the owner can’t pay. Owners should embrace contractors who proactively approach the relationship this way because contractors that do will likely employ the same diligence when performing the work. The reality is that in today’s tight market, contractors don’t always have the leverage to negotiate favorable terms. In those instances, proactive documentation is key. Send immediate written notice of project impacts, delays and subcontractor performance issues. Accurately maintain project schedules to account for delays. Develop descriptive, real-time records (daily reports, meeting minutes, journals and logs). And finally, proactively send notices to preserve your lien rights. These actions can make the difference in getting paid. Many people have probably heard the saying, “The squeaky wheel gets the grease.” The same is true for getting paid. In short: Be proactive in contract negotiations, vetting the owner’s financing, documenting the work and protecting your lien rights. Contractors who build these habits don’t just protect themselves from payment dispute, they position themselves as reliable, professional partners that owners want to work with repeatedly.
SEE ALSO: RISK RESET: CONCERNS TOP OF MIND FOR TOP CONSTRUCTION LAW FIRMS
