Contract documents

May 29, 2024

Construction backlogs don’t just happen; they’re the byproducts of careful planning, communication, financial stewardship, and transparency when it comes to the clients receiving the service. A backlog is something that every contractor, regardless of their size or length of operations, craves, as it represents security. Mining for opportunities in the construction industry is challenging even in the best economy, and when a contractor knows more work is waiting once their current project ends, there’s comfort.

If managed responsibly, a backlog can be a contractor’s greatest asset and a cornerstone for success. But by the same token, a mismanaged backlog can quickly become a liability and a financial burden that can sometimes be irrecoverable. Mismanaging a backlog often leads to missed deadlines, something no contractor ever wants on their resume. With the delays associated with missed deadlines, costs rise, quickly eating into profits. Add to this mix the potential of damaging relationships, valuable relationships that are necessary for building a business, and what’s left is a recipe for disaster, which is where the importance of proper backlog management matters.

Managing Backlog Properly

When it comes to managing backlog properly, contractors should follow these important steps.

1. Build a Backlog Philosophy: Backlogs don’t just happen, which is why there must be a philosophy for managing them. Contractors should refrain from aimlessly bidding on projects when they’re building a backlog. Instead, they should build a project profile and make sure potential opportunities align with the established profile before pursuing or adding to the backlog.
2. Honesty is the Best Policy:Honesty is one of the core building blocks of backlog management. First, the contractors must be honest about what they can handle. At this point, greed often enters the equation, causing the contractor to get off-course and deviate from the project profile. Securing projects is challenging, so going outside of the profile is understandable, but when it comes to building a backlog, it’s not advisable. Contractors should be honest with themselves and their clients. Overpromising and underdelivering is a sure-fire way for contractors to damage their business and burn bridges they might need to pass over. With that said, contractors should always opt for transparency concerning their bandwidth and capabilities, understanding that business relies on relationships, integrity, and, above all, honesty.
3. Pay Attention to Resources: Resources are the lifeline of a construction project, both from a material and human resource perspective. Resources play a pivotal role in backlog management, and it’s critical that a contractor knows who and what they have at their disposal when going through the stages of building and managing their backlog. Understanding the available resources can’t be overemphasized, as it answers many of the major questions associated with any project. Will this crew be finished in time for the next project if accepted? Is there enough working capital to finance the new opportunity effectively? Contractors must resolve these and many other questions during effective backlog management.
4. Remember, it’s Always About People: People are an important part of the construction and backlog management equation. Internally, contractors need to keep employees satisfied, motivated, and feeling valued. Externally, clients need to feel valued since they’re trusting contractors with projects that represent significant financial commitments. Contractors who can keep this principle in mind are well on their way to effectively building and managing a construction backlog that yields favorable results for years to come.

Conclusion

Managing a construction backlog takes effort. Those contractors who invest their time and energy into this critical part of their business stand to reap significant benefits. That investment includes software solutions and tools offered by AIA Contract Documents. Change orders are part of the backlog management process and AIA Document G701-2017 Change Order is the construction industry’s change order document of choice. G702-1992 Application and Certificate for Payment, G703-1992 Continuation Sheet, and G702S-2017 Application and Certificate for Payment Contractor-Subcontractor Version, all help contractors successfully manage their construction backlogs.

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AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.