A MEMBER ASKS:
Can I ask the membership to share any suggested language for construction contracts related to the Owner’s right to audit?
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QUESTION WAS BROUGHT UP ON THE DEC. 21ST ROUNTABLE- REGARDING LIENS.
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A recommended improvement in one of my construction audits related to the collection of lien waivers from the construction supply chain of a build project where lien rights exist (via state lien laws). I want to create a reasonable policy – know that we don’t have anything in place right now.
There are two approaches that I’m considering. I’m not sure if you use a combination of the two or just one or the other? Here’s what I’m thinking:
1. A tiered approach such as: Tier 1: Main Contractor (all GCs) and Design Consultant/Architect with direct relationships with the Owner. On the Design Consultant/Architect, I was thinking of saying that collection depended also on the size/scope of their work (cost of contract over $100K only?).
Tier 2: Subcontractors (all subs) and suppliers (for spend greater than $50K?)with a direct contract with the Tier 1.
Tier 3: Sub-contractors and suppliers working for sub-contractors in Tier 2 where we would set certain value (over $15K?) as the basis for collecting lien waivers. AND/OR
Set thresholds and materiality instead (say $50K or $100K) of tiers where we wouldn’t care if we had to pay to have the lien lifted. What are your thoughts? How do you address this policy within your audit teams/companies? Is there a different approach that works well that I haven’t considered above? Also, in terms of a form, unless the state in which the project is being done has mandatory lien waiver forms, then should we establish an accepted, standardized form that can be used for lien waivers? Any help would be much appreciated! I look forward to hearing back.