Despite defect problems, condominiums are an 
important building type, especially in Florida, where  contractors such as Plaza Construction and Coastal Construction have thrived by building those structures with special attention to quality, preconstruction 
planning and documentation. Brad Meltzer, Plaza’s southeast regional principal, says, “When you look at Florida, if you don’t build condominiums, there’s not much left.”

There are other ways risk presents opportunity. Big contractors, such as Fluor and Granite, thrive by taking risks that smaller companies shun (see sidebar, p. 20). Companies of that size devote resources to structured risk-management processes and have senior managers  in charge of the processes.

But at smaller companies, where one bad project or severe regulatory penalty can damage a corporate 
balance sheet beyond repair, taking risks that defy 
common sense remains a temptation.

“I have signed a few contracts with clauses [when] I am thinking, ‘I should have my head examined,’ ” rued Fran Madigan, president of F.W. Madigan 
Co. Inc., a general contractor based in Worcester, Mass. “It is a highly litigious world, especially with construction.”

Developers, especially newer ones, topped the list as the most potentially problematic clients. David Wantman—president of the Wantman Group, a West Palm Beach, Fla.-based engineering firm with 260 
employees—says the steadily improving economy also has meant that more and more inexperienced developers are taking on projects.

They don’t fully understand what it takes to move a project through the local 
approval process and the importance of things such as zoning and density, he claims. “Those people didn’t go to school. They didn’t grow up in this business. Those are dangerous clients.”

Colin Edelstein, a director at Georgia general 
contractor and construction management firm 
NorSouth Constructs, says he also has seen an influx of developers that have no background in apartment 
projects rushing into the field. But he has taken on some of these firms as clients, using a thorough “precon” approach that is aimed 
at rooting out potential problems early on.

As in the Mission example, designers face special risks, even with experienced clients. Developers need plans prepared by designers in order to nail down financing or win local permits. But in Kansas, if the developer doesn’t go through with the project, the firm that produced that design may be out of luck.

Kansas has no lien protection for designers, notes Tiffany Arnold, general counsel to Henderson 
Engineers. While declining to comment on the lawsuit against Gateway and Valenti, she notes that the only way A-E firms can put a lien on the property in Kansas is if there is visible construction or the plans were used to improve the property, she said. “We certainly see this as a problem,” Arnold says.

Condominium-apartment projects are another sore point, according to ENR’s survey.

Ray Bruegman, president of Omaha-based Miller Electric Co., said the potential for after-the-fact lawsuits by unit owners can be a strong disincentive to take those jobs. In the case of a major development, all it takes is one or two owners irked about some perceived problem or mistake and your company can find itself with a major problem.

“One person gets on an elevator, and they tell one of their friends—and all of a sudden you have 500 [people] after you for no reason,” Bruegman noted. So far, Miller Electric has never been sued for its condo work. “Thank God,” he said.

Red Flags

Industry executives pointed to a range of terms and demands that can raise red flags, such as liquidated damages, consequential damages and “pay-if-paid” clauses.