Contract Review for General Contracting
Contract Review defines how the company analyzes and negotiates the owner contract before signing. It aligns the commercial deal with what was priced, checks legal and risk terms, and confirms scope, schedule, and change procedures are workable. The process uses a structured checklist, redline workflow, and coordination with legal and leadership. When followed, the signed contract matches how you intend to deliver the project and avoids surprises in payment, risk, or obligations later.
1Collect and organize all contract documents from client——6 steps
Request latest contract package from client
Ask the client or their representative for the latest full contract package, including general conditions, supplementary conditions, and all exhibits. Confirm that what they send is the current version they intend you to sign.
Identify all parts of the contract
Open the package and list all components: main agreement, general conditions, supplementary conditions, technical exhibits, schedule exhibits, insurance requirements, and any special forms. Note the document titles and dates.
Check for references to external documents
Look through the contract for references to other documents (for example, “Owner’s Standard General Conditions 2018” or “Project Manual Volume 1”). Confirm whether these are included or need to be requested.
Create a contract documents folder
In the project file structure, create a “Contract_Review” folder and subfolders such as “Draft_Contract,” “Exhibits,” and “Redlines.” Save all received documents there using clear, descriptive file names.
Verify document versions and dates
Check the cover pages or footers for revision dates or version numbers. If there are multiple drafts in circulation, confirm with the client which one is current and archive superseded versions separately.
Log contract package receipt and contents
Create a simple log or index listing each contract document, its date, and its filename. Save this in the “Contract_Review” folder to help reviewers quickly see what’s included.
2Compare contract value and scope to approved estimate——6 steps
Locate final approved estimate and award letter
Open the final approved estimate and any award letter or notice of intent from the client. Note the contract value, accepted alternates, and major scope points you agreed to.
Verify contract sum against approved estimate
Compare the contract sum in the agreement to the approved estimate total, including accepted alternates. Make sure they match exactly or understand any small differences, such as rounding or negotiated adjustments.
Check alternates and unit prices alignment
Review the contract’s list of alternates and unit prices. Confirm they match what you proposed and what the client accepted in negotiations. Note any alternates included in the contract that you did not price or vice versa.
Compare written scope description to proposal
Read the contract’s description of the work and compare it to your proposal scope letter. Highlight any added responsibilities, changed wording, or removed clarifications that could affect cost or risk.
Flag any scope or value discrepancies
Make a list of all differences between contract value/scope and what you bid, even small ones. These may become redlines or negotiation points in later steps.
Document findings in a short “Scope & Value Check” note
Write a one-page note summarizing whether the contract matches your estimate and proposal. Save it in the Contract_Review folder to guide later discussions with leadership and legal.
3Review commercial terms: payment, retention, and taxes——6 steps
Locate payment-related sections in the contract
Find the sections dealing with progress payments, payment timing, applications for payment, retainage, and final payment. Bookmark or note their section numbers so you can refer back easily.
Check payment timing and approval process
Read how long the owner has to review and pay each pay application. Note any conditions like architect certification or funding approvals that must happen before you are paid.
Review retainage percentage and release conditions
Identify the retainage rate and when retainage is reduced or released (for example, at substantial completion or after punch list). Compare this to your company’s typical expectations.
Confirm treatment of taxes and exemptions
Check who is responsible for sales tax, use tax, or other project-specific taxes. Ensure this aligns with how you priced the job. If the project has tax-exempt status, confirm what documentation will be provided.
Identify any “pay-when-paid” or contingency language
Look for any language that ties your payment to the owner’s receipt of funds from a third party. This can introduce extra risk and may need to be addressed in negotiations or risk planning.
Note commercial concerns and questions
Write down any payment, retainage, or tax terms that fall outside your standard comfort zone. These items will be reviewed with finance and leadership during the contract negotiation step.
4Review schedule, milestones, and liquidated damages——6 steps
Find schedule and completion sections
Locate the sections that define contract time, substantial completion, final completion, and interim milestones. Note any referenced schedule exhibits or milestone charts.
Compare contract dates to your planned schedule
Check the required completion date and any interim milestones against your internal schedule assumptions. Note any differences in duration, phasing, or milestone dates.
Review liquidated damages or penalty clauses
Identify any liquidated damages or other penalties tied to late completion or missing milestones. Note the daily or lump-sum amounts and whether they apply to interim milestones or final completion only.
Check excusable delay and extension provisions
Read how the contract treats delays beyond your control (for example, weather, owner changes, force majeure). Ensure there is a clear path to time extensions when warranted.
Assess realism of schedule commitments
Based on your team’s understanding, decide whether the contractual schedule is realistic given scope, site conditions, and local market resources. If it is aggressive, note this as a risk item.
Document schedule-related risks and concerns
Summarize your findings in a short note, listing any schedule or liquidated damages terms that may require negotiation, contingency, or special planning during pre-construction.
5Review scope of work, drawings, and technical exhibits——6 steps
Locate the scope of work article and exhibits
Find the main article that describes the “Work” and identify any attached scope exhibits or referenced documents that further define what you must perform.
Confirm referenced drawing and spec sets
Identify which drawing issue dates and specification volumes are incorporated into the contract. Verify that these match the set you estimated from or understand where the differences are.
Check for “design responsibility” language
Look for clauses that shift design or performance responsibility to you, such as performance specs or design-assist language. Note any areas where you are responsible beyond typical contractor responsibilities.
Review special technical requirements
Scan technical exhibits for unique performance criteria, testing requirements, or special certifications (for example, LEED, cleanroom standards) that could affect cost and means and methods.
Compare to your proposal clarifications
Cross-check your proposal clarifications and exclusions against the contract scope. Note any clarifications that are missing or contradicted in the contract language.
List scope issues and potential misalignments
Create a list of scope-related concerns, including unclear responsibility boundaries, design responsibility, or missing references to important drawings/specs. These will feed into your redlines and discussions with the client.
6Review change order, allowances, and contingency clauses——6 steps
Find change order and modification sections
Locate the contract sections that explain how changes are initiated, priced, approved, and documented. Note who can authorize changes and what forms or procedures are required.
Review timing and documentation requirements
Check any time limits for submitting change pricing and notices of changed conditions. Note what documentation (breakdowns, backup, schedules) the owner requires with each change.
Examine how allowances are defined and reconciled
Identify any allowances listed in the contract, including their amounts and what they are intended to cover. Read how overages and underruns on allowances are reconciled and who controls selections.
Check for unilateral change authority
Look for clauses that allow the owner to direct changes without prior agreement on price, and how compensation is handled in those scenarios. Consider whether this process is manageable given your internal controls.
Review treatment of concealed and differing conditions
Read how the contract addresses unforeseen conditions (for example, hidden utilities or soil conditions different from reports). Ensure there is a path to equitable adjustments if these occur.
List change-process risks or negotiation points
Document any problematic change order or allowance language that could restrict fair compensation or be difficult to administer. These will be candidates for redlines or internal risk planning.
7Review insurance, bond, and indemnity requirements——6 steps
Locate insurance and bond exhibits
Find the contract section or exhibit that lists required insurance types, limits, and endorsements, as well as performance/payment bond requirements and any warranty bonds.
Compare requirements to standard company coverage
Check the specified insurance limits and types against your standard policies. Note any requirements that exceed your usual coverage or require special endorsements.
Review indemnity and defense provisions
Read the indemnity clause carefully. Look for broad language that may require you to indemnify the owner for their own negligence or for issues beyond your control.
Identify additional insured and waiver provisions
Check who must be named as additional insureds, what forms are required, and whether waivers of subrogation are mandated. These can affect your policies and subcontract requirements.
Estimate cost impact of special requirements
If the contract demands higher limits or unusual coverages, coordinate with your risk/insurance contact to estimate any added cost that should be reflected in project budgeting.
Note risk and insurance issues for legal and leadership
Document any insurance, bond, or indemnity provisions that are outside your standard tolerances or that legal counsel should review closely. These will go into your redline and negotiation preparation.
8Identify unacceptable or high-risk terms and draft proposed revisions——6 steps
Consolidate issues from all review notes
Gather all the concern lists you created (scope/value, commercial, schedule, change process, insurance/indemnity). Combine them into one master “Contract Issues List” to avoid duplicate entries.
Prioritize issues by risk level
Assign a risk level to each issue (for example, High, Medium, Low) based on potential impact on cost, schedule, or legal exposure. Focus most attention on High and Medium items.
Draft clear issue descriptions
For each item, write a short description of the problem in plain language (for example, “Retainage release only at final completion; propose partial release at substantial completion”). Avoid only quoting clause numbers without explanation.
Propose alternative wording or concepts
Where possible, suggest replacement language or a different approach that aligns with your company’s standards. You can start from your standard contract addendum language if your company has one.
Note whether each change is “must-have” or “nice-to-have”
Tag each issue to indicate how strongly you need the change. This helps later when negotiating and deciding which points you are willing to concede.
Prepare a redline or markup draft
Using the client’s editable contract form (if provided), apply tracked changes for your proposed revisions. If only a PDF is available, prepare a separate document listing requested changes by section.
9Coordinate legal and leadership review of contract——6 steps
Prepare a contract review summary packet
Assemble the key documents: contract package, Contract Issues List, your redline draft, estimate/risk summary, and any internal guidelines on acceptable terms. Put them into a single folder or PDF bundle.
Schedule review with legal and leadership
Set up a meeting or call with your designated legal contact and applicable leaders (for example, operations lead, company executive). Give them enough time to read core items before the discussion.
Highlight top risks and must-have changes
In the meeting, start by walking through the highest-risk items and the changes you consider “must-have.” Explain the practical impact of leaving each clause as-is, using real examples where possible.
Capture legal feedback and revised positions
As legal and leadership react, revise your “must-have” vs “nice-to-have” tags. Some items may be downgraded, and others may be added or strengthened based on their perspective.
Agree on negotiation boundaries
Confirm what you are authorized to accept, where you can compromise, and where you must hold firm. This avoids making promises to the client that leadership will not support later.
Update redlines and issues list per guidance
Apply the agreed changes to your redline draft and update the Contract Issues List to reflect final positions before sharing anything with the client.
10Negotiate contract terms with client and finalize for signature——6 steps
Send redlines and issues list to client
Provide the client with your marked-up contract or written list of requested changes. Include a brief cover note explaining that these reflect your standard practices and risk management, not an attempt to re-write the entire agreement.
Schedule a contract negotiation call or meeting
Arrange a time to walk through key items with the client and, if applicable, their legal counsel. Live discussion often resolves more issues in less time than multiple email exchanges.
Discuss high-priority items first
On the call, focus first on high-risk clauses and must-have changes. Explain your reasoning in practical terms (risk, insurance, market norms) rather than just saying “we don’t like this clause.”
Work through compromises within your boundaries
Be prepared to offer or accept alternative wording that still protects your core interests. Stay within the negotiation boundaries set by leadership and avoid agreeing to new language on the spot if you are unsure.
Document agreed changes and obtain clean contract version
Once agreement is reached, ask the client to issue a clean, updated contract incorporating all accepted revisions, or update your own redline to reflect final decisions. Review this version carefully before signatures.
Route final contract for internal signatures and recordkeeping
Follow your internal approval path (for example, executive signature) and then return signed copies to the client as instructed. Save fully executed copies in the project’s Contract folder and update project status to show contract execution is complete.
You found the SOP
Now make sure it actually gets done.
10 tasks is the easy part. The hard part is that six months from now the project still has to run this way when you are not the one watching.
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Founder of Subtrak · Twenty years in commercial roofing operations
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