Sleeper Project Contract Clause 1

[bigmig]

I was wondering how you all address sleeper projects.....the ones that the owner pays for, you design, and then don't get built....sometimes
for years. Besides code updates, what verbage do you use in your contracts to make things go smoothly.

For instance, I have a huge job that has been dormant for 2 years. I'm dreading the day it springs out of the ground, in the middle of another
year's overbooked schedule. I basically have no way of controlling when it starts, and will have to push my other projects out of the way
to accommodate.

A clause that says something like "if project re-initiates, we will be back on project in 6 weeks from first notification" to give me time to tie up my other jobs
and line up my schedule.

Any takes on this would be appreciated.

 

[MikeHalloran]

A fixed delay of N weeks sort of assumes that you know the future state of your business' queue, and sort of predicts that you will actually be able to rearrange it enough to squeeze in a monster job. You risk upsetting all your other customers, or getting sued by that big one; both bad outcomes are possible; maybe both are likely.

"Fair", from your perspective, would be words to the effect of "if project re-initiates, yours goes to the next available position in the queue".



Time has a monetary value, and you may be underselling yours by agreeing in advance to completely rearrange your business on someone else's whim.

I am aware of one yacht builder who has a queue that extends several years out, and one patient repeat customer who has sold his position in that queue to another yacht buyer.
... for ten million dollars.
... three times.










Mike Halloran
Pembroke Pines, FL, USA

 

[BrianPetersen]

I have enough trouble with sleeper quotations ... the ones where the quotation for the work gets written and issued, then nothing happens, only for the project to pop up out of nowhere suddenly needing to be done yesterday if not sooner, which inevitably happens when we are already slammed. Small jobs / small company, but still ...

We have some "scheduling subject to availability" wording in our standard quotations, as well as "this quotation is valid for X days from the date of issue" or something of that sort, but the person who calls up needing something done yesterday only to find out that we're backlogged three weeks is not going to be a happy camper no matter what the quote says.

The frustrating thing is that I know that at least half the time, the delay getting the purchase order is simply because someone has been sitting on the paperwork and doing nothing with it. "If we need it tomorrow, we'll order it tomorrow."

We do what we can to accommodate ... miracles worked on a daily basis ... the impossible may take longer.

 

[bigmig]

@BrianPetersen,

I have a clause in my contract stating that the contract is good for 30 days. If I get the call 2 months later that they want to kick things off, I revise the contract and all applicable details regarding the new price and time line. This puts and end to the sleeper proposals.

As Mike said, time has a monetary value, but it also needs to have an set date of expiration, otherwise I am out of control of my schedule. If I write this into the contract the client signs, they can't sue me and win.

I had a client once who was sitting on a set of plans for 8 years waiting for the next recession so he could go get his labor at pennies on the dollar. He was a shark. We parted ways over non payment on the job we worked on.

It should be noted that a majority of the projects that do this are just that....projects that can only occur if the owner can get things for half price or more. They prey on subcontractor disparity. Once the economy picks up, everyone gives him the finger and goes to work for a better wage and more appreciative client. His project parks until the next recession, at which point he comes knocking.

Recessions are strange beasts.

 

[SteelPE]

All of my proposals say they are good for 30 days.... I have rarely enforced that clause though.

I have a similar problem with project except my project get developed to a certain stage and then sit for month on end.

I have one project that I started in March of 2014 and brought the project to a 75% complete state in August of 2014 and there the project sits to this day (9 months later). I get calls from the client saying that the project is going to move forward again at the end of the week only to have nothing happen. I have heard this so much that I don't believe the client anymore.

These jobs are frustrating to deal with and the costs associated with "getting back into them" is frustrating too.

 

[lacajun]

There are engineering firms that charge the Client to get back into projects that were put on hold by the Client.

Pamela K. Quillin, P.E.
Quillin Engineering, LLC

 

[IRstuff]

Sure, one would think that if this were a common occurrence, there should also be a charge at the start of a suspension to make sure that design documents and whatnot are properly stored and easily retrievable at a later date. Additionally, there would need to be a pass-down document that details where every design activity was left off, so that whoever works on the resumed project has a relatively easy start. Likewise, there ought to be a charge at the resumption to account for engineers re-familiarizing themselves with the project, the requirements, the pass-down documents, and where everything was left off.

TTFN
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[bigmig]

Here is what I ended up with. Any comments or suggestions will be considered:

Projects with delayed starts longer than 1 year past the structural permit submittal package completion date on the title block incur significant time, expense and scheduling conflicts. Delayed Project Starts will incur the following re-start expense when/if they eventually do begin:

• Over 1 year: $500 re-start fee
• Over 2 years: $1,500 re-start fee

Code changes between the code the project was designed for and the code that is now in effect (if they are different) that incur re-design requirements by the release of ASCE 7 design code currently adopted by the governing building department, will be billed at the standard hourly engineering rate that is in place in our office at the time of the project re-start. This fee is in addition to the re-start fee listed above.

Projects with delayed starts longer than 1 year past the structural permit submittal package completion will be scheduled at that time in coordination with the current office work load. Delays between the time of request of re-start and the actual restart process by our office may be as much as 6 weeks depending on office availability and time of request. Your signature at the end of this contract indicates that you have read and understand this limitation.

 

[MikeHalloran]

$500 is maybe enough to restart the coffeepot and wake up your Accounts Receivable staff. It's not enough to buy a demand letter from your attorney when the client balks at the bill or ignores it.



Mike Halloran
Pembroke Pines, FL, USA

 

[BrianPetersen]

I wouldn't make it a fixed number ... maybe a fixed percentage of the quoted fees. If the project is big, $500 might cover the cost of someone getting out of their chair.

I wouldn't tie yourself to limiting the restart delay to 6 weeks or any fixed number, either. "Several weeks or months", maybe.

 

[MacGyverS2000]

'twere it me, I might consider some language to the effect of "A project may be kept live (i.e., no restart fee) with a monthly fee in the amount of X% of the initial study cost". Make the percentage such that the monthly fee is relatively small, but the break-even point between paying a monthly fee and paying a larger one-time restart fee down the road is somewhere in the 6-month range (or whatever you desire). If they think it will restart soon, they'll likely choose the monthly and you know they're serious (sort of) if they continue to pay the fee. Maybe include some language that says if the monthly fee is late by more than 15 days, the project immediately reverts back to the one-time fee value. And so on...

Dan - Owner

http://www.Hi-TecDesigns.com

 

[MikeHalloran]

There's even a name for the fee: DEMURRAGE.

Since they became commercial enterprises, railroads have included a demurrage fee in their tariffs.

When a railroad freight car arrives at your location, you have a certain stated time, maybe a couple of days, to unload it, clean out your dust, and make it ready for pickup and re-use. Then the clock starts ticking, and your account is billed a small fee for every day that the car is not available to someone else.

Separately, 'small' is a relative thing. Around here, when you get a code enforcement notice taped to your door, you have a week to fix it, then you are liable for $250 per day of continued non-compliance. Muncipal governments, at least one for example, seem to think that 250 bucks a day is a small number in their world, but it's sure big enough to get my attention.

Similarly, your restart fee could start at some nominal number and then increase by a 'small' amount for each day or month or other unit of time for which your potential customer demurs making a decision.


Mike Halloran
Pembroke Pines, FL, USA

 

[MacGyverS2000]

TIL, Mike... thanks!

Dan - Owner

http://www.Hi-TecDesigns.com

 

[bilalk]

I enjoyed reading the responses to this posting. I am dealing with similar issues. In the Distributed Generation business today, project owners, developers, regulators, utilities, engineers, and consultants are all in the flux facilitating the legal contractual aspects of this business. There is large number of dormant sleeping projects in this sector at all project phases: pre-consultation, study assessments stage, approving, construction, commissioning, you name it. there is much non-paid work involved in record keeping and administering these projects. I support the idea of enacting charges for dormant'ing, re-initiating, etc....and I am looking forward for acceptable verbiage that I can take to the bank and discuss with my management and other forums participants.