What Is In There? Understanding Pre-Bond Construction Service Proposals

While preparing for a school bond election to finance a construction project, you may receive a proposal from an architectural or construction management firm for certain pre-bond services. Those services often include helping prepare a Michigan Department of Treasury preliminary qualification application and providing bond campaign assistance.

Many times, proposals include unwanted terms and conditions. Proposals also may include post-bond implementation services, undesirable limitation of liability provisions, extensive markups on reimbursable expenses, and other hidden fees. The proposed fee structure may be based on a percentage of an overly broad “cost of work” definition. For example, the cost of work may be defined to include other consultant fees, overhead, and unused contingencies, which in turn could cause an otherwise apparently reasonable percentage-based fee to balloon.

School officials may feel pressured to sign a proposal to obtain pre-bond services as soon as possible, especially when the proposal commits the construction firm to delay charging for services until bond passage. Importantly, a signed proposal may constitute a valid contract. Such a proposal could remove contractual protections and standard contractual provisions (e.g., from an AIA contract) affecting the post-bond implementation and construction services.

Schools that sign disadvantageous proposals can have difficulty negotiating acceptable final contract terms. Accordingly, such proposals should first be reviewed by legal counsel. To have your pre-bond and implementation services proposal reviewed, please contact a Thrun construction attorney.