Commercial construction contracts - high cost of construction and GC not agreeing to any penalties for delays.
Hello All,

I'm starting on a commercial project - a 12,000 sq.ft shopping center in San Antonio, TX with one major anchor tenant with a committed delivery date by which we have to handover the space to them. We just got General Contractor quotes and the lowest bid we have is $215/sq.ft, which I believe is crazy high vs couple of year ago. Also, the GC is not accepting any clause in the contract that sets up penalties/liquidated damages for major delays - so for example, he takes on another project and delays ours. Is that normal now? Are there any other ways we can put some kind of penalty in case of serious delays? Appreciate any insight.

Thanks
[{"id": "ie9n1sl", "text": "They may not want to agree to delay penalties due to supply chain issues that GC has no control over in regards to construction materials.", "replies": [{"id": "ie9zr68", "text": "You hit the nail on the head, no one can get certain oddball items right now like insulating foam and certain electrical components.", "replies": [], "depth": 2}, {"id": "iea0bl8", "text": "Exactly this, the past year has been tons of uncertainty. Lead times on items can fluctuate drastically week to week, materials shortages have caused massive delays (Up to 3 weeks to \u201cschedule\u201c concrete), and lastly the pretty obvious increase across the board of material prices. From my perspective working for a GC it\u2019s a no brainer not to set myself up for failure with hard dates / liquidated damage clauses that I don\u2019t have a firm grip on.", "replies": [], "depth": 2}, {"id": "ieaa5zh", "text": "PM for a big developer here and that is the case with us big time. It took us 6 months to get bathroom fans for an apartment complex and 12 months to get switch gear. It\u2019s bad. But at least we are getting paint.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ie9ogd2", "text": "Constructions costs have skyrocketed in the last few months.", "replies": [{"id": "ieaaugj", "text": "Seriously\u2026 must not have a huge portfolio where this is just coming to light.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ie9ojtd", "text": "Unfortunately, it's a bad time for anything ground up. Cost to build will be high but you should push the GC for delay penalties. Or go with the a higher bid and ask for the clause(s).", "replies": [], "depth": 1}, {"id": "ie9q3yp", "text": "Have them sign a GMAX contract. A lot of banks/lenders will require one anyways", "replies": [{"id": "iea2xte", "text": "GMAX?", "replies": [{"id": "ieb3msr", "text": "Guaranteed maximum", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ie9zxe2", "text": "Is $215sqft your core and shell costs?  I was thinking that was just TI\u2019s but if you\u2019re paying $215 for c/s I\u2019m super jealous.", "replies": [], "depth": 1}, {"id": "iea3fi2", "text": "If not too late, include an outside delivery date in your lead tenants lease that allows for a 3-4 month delay in delivery. You may have to give up day-for-day rent but won\u2019t lose the lease completely.", "replies": [{"id": "ieb3q0i", "text": "Really depends on the lease. We draft plenty of termination options if LL delay.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ieawkrt", "text": "You hold the funds.  If they want the job they come to the table on terms.", "replies": [], "depth": 1}, {"id": "iec6ykr", "text": "I\u2019ve seen a GC getting bags of concrete from Lowes when a concrete truck wouldn\u2019t show up for a month. \nNo one is going to agree to delay penalties if they are doing smaller projects.$215 psf would be for grey warm space in my area", "replies": [], "depth": 1}, {"id": "ieeiy9u", "text": "It sucks but contractors are flooded with work right now. They know that you have to get that work done and they know if you go with someone else they have plenty of work elsewhere. \n\nTough situation but I\u2019m not sure how many GCs will agree to a clause in the contract like that.", "replies": [], "depth": 1}]