Chapter 4 of Quit Getting Screwed, by Karalynn Cromeens
Lioncrest Publishing
“They can’t deduct $23,000 from what they owe me for lintels; I never agreed to provide the lintels,” Jeff said in a panic. “Structural steel subcontractors never provide the lintels; the masonry subcontractor would provide those.”
Jeff owns Super Structural Steel Fabrication & Erection Subcontractor. He has been in the structural steel fabrication and erection business for more than twenty years and has never been required to provide lintels on a project.
“I did not put in my bid that I would do the lintels,” Jeff quickly explained.
Unfortunately, I informed him that it did not matter what was in his bid—it only mattered what was in the scope attached to the subcontract that he signed.
After a close review of the documents, I found what happened. Although the lintels were not in his scope when Jeff bid the project, upon reviewing the sections of the specifications that were in the subcontract he signed, it stated that he must provide the lintels. From the time Jeff had bid the project to the time he signed the subcontract, the specifications had changed. Now the “metal fabrications” section said he was required to provide the loose lintels.
There was no defense to the $23,000 back charge; Jeff had to pay up.
What Is the Scope?
The scope is the description of the work that you are hired to do on a project. Multiple documents describe your scope of work. Most importantly, the scope is described in the plans and specifications. We have already addressed in chapter 2 the importance of a close review of these documents when you are bidding the project. Unfortunately, when you receive a subcontract from the general contractor, your bid is not included anywhere in the subcontract or in related documents. That means your bid is not used to describe your scope of work. Like I mentioned in chapter 1, the scope of work attached to the subcontract you receive in response to your bid could be completely different from your bid.
Now, you could try to include your bid as one of the subcontract documents if you wanted to. To do this, you would add a reference to your bid in the list of subcontract documents. To take an example from chapter 2, it would look something like this:
Article 1 the Subcontract Documents
The subcontract documents consist of (1) this Subcontract Agreement; (2) the Prime Contract (the contract between the owner and General Contractor); (3) the Plans and specifications dated 12-1-2019; (4) Modifications issued subsequent to the Prime Contract, whether before or after the execution of this Agreement; (5) Modification to the subcontract; and (6) the proposal Subcontractor provided to General Contractor dated 1-1-2020.
Number 6 was added, which now says that your bid/proposal is part of the subcontract. Just make sure number 6 lists some way to identify the bid/proposal—the date works well to do this.
This may not win the scope argument if there is a conflict between the scope and your bid, but it would put you in a better position to argue what you were actually hired to do.
Another problematic provision I have recently been finding in subcontracts when the scope is being defined is this:
All Work described in the subcontract documents and any other Work that could be reasonably inferred therefrom.
You need to remove this whole sentence from the subcontract before you sign it. This is an open checkbook for the general contractor to add any amount of work to your scope and say that you are not entitled to a change order for the additional work because you agreed to it. The key words to look for are “reasonably inferred.” If you have a written agreement, nothing should have to be “reasonably inferred.”
Understanding the Scope Is Vital
The scope is by far the most important part of a subcontract. Agreeing to a scope that you have not reviewed could cost you and your company.
Once you sign, whatever is included in your scope and attached to the subcontract is what you will be required to do, whether or not the amount of the subcontract is enough to pay for the cost of all your work. If it is included in the scope of the subcontract you signed, you will not be given a change order for what you are required to do that was not in your bid.
Review the scope attached to the subcontract as if you are bidding a new project. Then compare the bid you did the first time with the scope attached to the subcontract. If the numbers are not the same, figure out why. If there was something added to your scope, send the general contractor a detailed letter explaining the difference and giving them the updated price. Then ask the general contractor to reissue the proposed subcontract with the new price.
Once the subcontract is reissued in the correct amount, then it is safe to sign. Do not start work until you receive and sign the updated contract. Do not rely on a statement that it will be added to the subcontract amount later either. That is unacceptable. Once you sign the contract, you will be held responsible to do the work described in the scope for the price in the subcontract, so be sure that it is accurate and that you and your company can afford it.
It is also important to make sure your scope is specific enough to protect your company. I represented Super Land Clearing Subcontractor, which was hired to remove dirt from a project site. When they began to work on the project, the city informed them that the dirt could not be hauled to just any dump site; it had to go to a permitted dump site. This substantially increased the cost of Super Land Clearing Sub’s work. When they submitted a request for a change order to the general contractor for the increased cost, the request was denied. The general contractor said that their subcontract stated that Sub would remove the dirt and was not entitled to more money if it turned out to cost more. Super Land Clearing Sub’s scope stated they were responsible for removing the dirt, but they should have been more detailed and included that the removal was only to a standard dump site and that if a permitted dump site was required, there would be additional cost. Not having that specific language cost Sub an extra $10,000 to remove the dirt to a permitted site.
What happens if you agree to a scope that is much larger than the subcontract amount? If possible, you must complete the scope of work you agreed to do, even if it means you will lose money. If you don’t complete the work, you will not get paid for the work you have already completed. Additionally, the general contractor is entitled to collect from you any funds they pay over your subcontract amount to complete your work if you were unable to finish.
That is why understanding the scope attached to your subcontract is so important. Whatever scope is attached is the work you will be required to do, regardless of the cost.
Don’t be like Jeff or Super Land Clearing Sub. Read and understand the scope, as it can be wildly different than your original bid. And just because your company may not offer a certain service, don’t assume that it could not be in your scope. Something that is considered “industry standard” will not be a defense to an express subcontract provision that says the opposite.
You cannot use any other document or statement to interpret or explain the subcontract you sign, so be sure to give the scope of work the attention it deserves.
In the next chapter, we’ll discuss how you should never sign a personal guarantee, which could destroy not only your business, but your personal life as well.
| Key Points |
| 1. The scope is by far the most important part of a subcontract. |
| 2. The scope is the work you agree to do and is explained by the documents described in the subcontract. |
| 3. Your bid is not part of the scope. |
| 4. Review the scope attached to the subcontract as if you were bidding a new project, and make sure it matches your original bid. |
