Smaller than a breadbox. No more than a tiny, puffy cloud on the horizon.
The trick is to see what sort of problem or potential problem lurks in that small imperfection out there.
In a multi-milliom-dollar real estate project it may be an invisible impracticality in the architect's otherwise dramatic plan that, six months down the road, surfaces and bogs down the whole job. Hasty and expensive improvisations have to be made on the site . . . the momentum slows . . . unanticipated expenses throw the budget out of whack. Suddenly, the whole project is a month, six weeks off schedule.
Chain of Litigation
The unhappy concrete subcontractor sues the general contractor . . . the contractor sues the architect . . . the lender begins threatening litigation of his own.
It was from a nine-year background of mediating such disputes--during which Hill International became the country's largest consulting firm specializing in construction claims avoidance and resolution--that led the company to unveil its current Project Assurance program, an effort to rescue complex real estate projects before they get to the head-butting point of no return.
With a payroll of about 250 experts working out of its corporate headquarters at Willingboro, N.J., and three regional offices, including the local one in Century City, Hill International operates globally in its trouble-shooting role.
As the dollar figures in construction projects soar and as the number of disciplines--and temperaments--that are involved mushroom at a comparable rate, it has almost become a rarity to find one coming to completion without at least one or two lawsuits trailing along behind it like tin cans tied to a dog's tail.
In 1983 alone, according to Hill International's president, Irvin Richter, nearly $500 million in construction claims and counterclaims were filed against both contractors and owners. And this, by best estimates, is probably no more than a third of the actual cases since it represents only those submitted to the American Arbitration Assn.
And--where else?--Los Angeles alone, represents 10% of the total claims nationally, while California accounts for 19% of the total.
The rationale behind Richter's Project Assurance is simple: no one wants to tell the "emperor"--the chief executive officer whose reputation is on the line--that his cat is dead.
"Every party in a project," Richter said in a recent telephone interview, "has one reason or another for either not telling or not understanding what's going on in the project. And the owner is the one who ultimately pays--he needs someone who doesn't have any responsibility in the case of a problem. That's what Project Assurance is--an independent, objective source.
"On the projects on which we've worked, which include some of the largest in the world, people invariably take a certain position, and the positions they take tend not to indict them. Can you expect people to testify against their own self-interests? No, of course not. They'll cover their own backsides before they'll look at the interests of their clients. It's human nature."
In a recent case in point, Richter said, Hill International was called in on a bogged-down, $300-million hotel-casino in Atlantic City.
"The time frame was critical because if the hotel wasn't finished by the end of the year the temporary license they had been issued would expire," Richter said, "and since there were no more temporary licenses to be issued, they would have to wait as long as a year before they could open. And, when you're carrying a debt of $300 million you've got a real problem.
"The project manager had kept telling them that they would open well before the deadline and, each time they were told that, they'd do things that dug them in even deeper--lining up financing, hiring their people and that sort of thing. Gradually, they lost confidence in the project manager and asked us to come in and tell them exactly where the project stood--we were unbiased and had no position to take as to why the project was late.
"We replaced the construction manager and finished it--arranging new money with the banks, which also had lost confidence in it, and managed to finish it in the necessary time frame."
How Richter's Project Assurance activities differ from the responsibilities and duties of a conventional construction manager simply underscore how complex the commercial real estate development business has become.