Construction industry will rebound in 1994.

As an attorney specializing in the construction industry, I am always asked for my opinion as to whether the economy is improving and the construction industry is coming back, based on how busy my clients are.

There has definitely been an improvement in new projects in the last year, although not for everyone. Also, more firms than ever have turned to the public sector for work, with a lot of contractors seeking my advice on certification as women or minority-owned firms.

In lean times, everyone is very cost conscious. There is a lot of competition and clients expect a lot for their money. From the contractor's perspective, they probably have smaller crews and they must operate very efficiently and cost consciously, yet still be able to get the job done.

Owners will have to be extra careful in evaluating bids and proposals to make sure that no one has underbid the job just to get a contract. The process of negotiating a contract is a good test of whether the bid is realistic and the contractor will be able to complete the job for the bid price. If the contractor tries to change the scope of work and materials and wants change orders before the contract is even signed, that is usually a red flag that the job may have been underbid.

People are also more litigious when business is tough. This means that particular attention must be paid to contracts and business practices in order to avoid disputes which may wind up in a lawsuit. This is true for both owners and contractors.

The scope of work must be carefully spelled out relative to the price so that disputes do not develop as to what was to be provided for the contract price. This process should also limit the number of change orders. Payment should be tied to the percentage of completion. Owners should not allow contractors to be paid more than is justified for the stage they are at.

Commencement and completion dates should be set forth in the contract. The contract should not only require appropriate insurance, but it should all be verified before work begins. Owners should make sure that insurance is in effect with the right corporate names and in the required amounts.

Business practices must also be reviewed to avoid litigation. With all the competition for work, it is easier to find replacements if work is not proceeding according to contract. Contractors cannot ignore client complaints. They must answer telephone calls and respond to letters. The right legal counsel can be very helpful in smoothing out problems before litigation starts.

Business is not great, but it is a lot better. For those who pay attention to contracts and have good business practices, it should be a good year.