What You Need to Know About Due Diligence in the Construction Industry

What You Need to Know About Due Diligence in the Construction Industry

In the construction industry, disputes are prone either due to contracts lacking all the necessary details, lack of understanding on each other’s policies and needs, as well as ignorance from either party.

One common source of disputes could be when you entrust a contractor with your construction project, only for them to make uninformed/unplanned for changes, require more cash, or fail to deliver the intended results.

Luckily, you can avoid such and more disputes or inconveniences through due diligence when contracting your builder or residential architect Atlanta company.

The following are due diligence checklists in a building project.

Design Responsibility

You need to identify the duty level that the contractor will assume in respect to design. Get to know whether the contract identifies performance criteria, and the responsibilities you will have to assume in regards to plans, designs, and provision of technical information. Find out if the contractor is entitled to rely on the accuracy of the information you hand over to him, and the architectural designs done by a residential architect Atlanta company. Understand if the contract accounts for any adequate time periods to conduct design reviews.

Remedies for Delay

Understand if the contract provides for payment of liquidated damages in case of delays. Also, consider the governing law’s impact on liquidated damages. In case you as the employer have rights to terminate the contract following delays, what damage compensation rates are you entitled to from the contractor?

Defected Work

Due diligence will help you know approaches to take in pursuit of solving defective work problems. You need to know if there are defect liability periods according to the contract, and what the local law states in regards to residual liability for latent defects. Identify whether the contract allows you to hire a construction administrator to note any chances of defected work.

Employer’s Risk

Note if all the employer’s obligations are under the contract within an employer’s control. Know all risks you are entitled to including tax problems.

Performance Security

Ascertain whether the contract provides for a parent company guarantee and if the parent company guarantor is the ultimate parent of your contractor. Understand the parent company’s responsibilities in regards to your project.

Suspension/ Termination

Try to find if the contract entitles you as an employer to suspend the contract and if the contractor is entitled to terminate it after a prolonged suspension. Understand all the rights of you as the employer and those of your contractor in regards to convenience, prolonged delay, the contractor’s remedied breach, and insolvency of the contractor.

Contract Price, Pay Provisions, and Taxes

Understand the payment amounts and terms. Know if you are supposed to pay the contractor in a lump sum, and all contingencies included. Understand if you are entitled to deduct some payment amounts following defected work results, and if so, the procedure to follow.


Identify if the contractor requires to take insurances for your project, and the scopes covered by such insurance. Also, see if there are defects provisions in the policy, and everything that it caters for

Dispute Resolution

Know the different types of disputes that are specified, and how the contract needs them to be handled.

Contract disputes, inconveniences, and losses can be significantly reduced by applying due diligence. Knowing all the terms of your contract and your contractor’s culture will help you know what to expect from your contractor. Also, do not overlook the significance of dealing with a reliable residential architect Atlanta service company.

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