If You Receive a Cure Notice on a Government Contract, It's Time To Panic and Get Help

 Photo by  Jamie Street  on  Unsplash

Photo by Jamie Street on Unsplash

In most emergencies we may encounter in life, the experts tell us: “Don’t panic. Stay calm.”

However, if you receive a “Cure Notice” letter from the Government, the time to stay calm is long gone.  The Government is panicking and you should as well. Panic - but with a purpose.

A cure notice is the Government’s warning that it intends to completely or partially terminate your contract because of your actual or anticipated failure to meet the obligations of the contract. You are facing Termination for Default (T for D) and have ten days to get your problems “cured” and the project back on track.  

Being Terminated for Default will shut down this contract, and worse, your performance record with the Government may be gravely tarnished, potentially disqualifying you from future contract opportunities.

I was recently called into two Government projects for two separate contractors, both of which had Cure Notices issued to the contractors. Both had received these notices for excessive schedule delays. The Government wasn’t seeing the performance and wanted to terminate the contractors for default.  

After I got on site and assessed what problems to address first (think: panicking with a purpose!) it became clear the Government didn’t issue the cure notices by surprise. The delays and problems were occurring for months. The problems on the jobsite had been minor which meant that the impacts to the schedule were minor, but over time, the small problems and delays compounded into major delays and the apparent failure of the contractor to maintain control of the job. To be clear, the contractors weren’t solely responsible for the problems on the job, but they were certainly the party at greatest financial risk if terminated and the party being held accountable to correct those problems. It’s not that my contractors weren’t trying to keep the job on the right path. The problem was they weren’t communicating with the Government often enough to demonstrate two things: 1. they were taking swift action to address their own problems and 2. to prove why a particular problem on site was something that needed to be addressed by the Government and not the responsibility of my client. 

When a cure notice arrives, debating over who’s at fault isn’t going to avoid your T for D.  Remember, you only have ten days! You’ve got to take immediate, effective action to demonstrate you are working hard to “cure” the problems and recover the schedule. Along the way, document all your actions, including detailing the root causes of each problem you cure. You’ll need these to present to the Contracting Officer so you can debate fault later.  What’s most important is the Government sees you taking visible action.

In taking action, and among other efforts, I recommend establishing a new front with the help of new leadership. A new person on the ground is the strongest, most visible, positive change a contractor can make to show the Government that the contractor will cure its problems and get back on track. Rarely, can any one person turn around a job in ten days. But a new person won’t be bogged down by the old baggage on the job and can be objective and act quickly with a clear mind. They have the least to lose and all to gain in showing they can recover the project.  

For my two projects that had received cure notices, we needed months to address the problems, not ten days. However, my presence alone during those first couple days, was enough to show the Government that these contractors were serious and deserved a chance to recover the job. Just listening to both the contractor and Government vent their frustrations began to ease the tension on the jobsite. In addition, I was able to come up with concrete solutions to quickly get hold of problems and deploy improvements on the ground. Within a couple days, a response to the cure notice was issued and the Government rescinded their threat of T for D.  

Assuming you’ve recovered the job, the Government has calmed down, and you get to work another day, the long-term lessons here are obvious: address the small problems quickly and effectively before they become big problems, communicate often, in enough detail and effectively to deliver on your obligations on the job. Put the Government on notice to do the same for their obligations. The best case scenario is to stay clear of a being in a position to receive a cure notice, but if you find yourself in a possession of a cure notice, remember to panic with a purpose and take quick action. If you need to, bring in a third party to help you sort it out. Mission Critical Operations is ready to help.

This article is not intended to provide legal advice of any kind.  The reader is advised to review and understand all clauses, terms and conditions that govern its contracts and to consult with an attorney for assistance with contractual matters.

Mission Critical Operations (MC-Ops) helps small contractors and owners recover from schedule delays, financial loss and poor quality control on projects throughout the nation.  We step-in to get control of and improve both field and administrative operations. We respond quickly to recover projects and then implement systems to prevent problems from recurring.  Our customers are self-performing heavy/civil contractors, specialty trade contractors, government contractors and institutional owners.

I Showed Up For Work Today

“Half the battle is just showing up.”  -Stephen Hawking

If half the battle is just showing up, then what is the other half?  

I was recently asked to assist a contractor who was behind schedule on a large project.  They couldn’t seem to get production “flowing.” Although they were expending much effort, the delays were mounting to the point where the owner considered terminating the contract.  Before taking on the project, I made a site visit to see for myself.  During my visit, I was surprised to see the contractor was behind schedule because it seemed to be a great job that most contractors and crews would envy:

  • The physical work is straightforward and repetitive but still challenging enough to spark creativity.

  • The job site is quiet with open space (ie. not in traffic, not a downtown high-rise).      

  • The owner is forgiving and wants to help the contractor succeed.

  • The contractor’s supervision team was engaged and wanting to deliver a good project.

So, what’s holding this project back?  Digging into the technical details, I did find room for improvement:

  1. Errors in following the layout measurements in the early phases were creating time-consuming rework in the latter phases.

  2. Members of the crew were assigned to fairly technical tasks where they had no prior training.

  3. There were few “tricks of the trade” being utilized to speed up the work.

  4. The foremen were overwhelmed chasing re-work and had little time to plan for upcoming work.

  5. The crew seemed to run into problems head-on instead of planning to avoid problems.

While challenging, these issues were not insurmountable.  Surely, I could be a fresh set of eyes and help clear the path and get this job moving.  I got hired to help.  

My initial approach was to be respectful of the foremen, let them run the job but get out in front of them, clear hurdles, avoid errors, and help them plan. After a few weeks on the job, things were better, but the project still needed to make-up for lost days. My approach was helping but it wasn’t enough.  

It finally occurred to me that my early assessment of the project missed one critical issue:  The crew just wasn’t coming to work. Sometimes, literally not showing up, other times showing up but barely paying attention. Each day, the foremen told me “We’re doing the best we can with what we’ve got.” Each day’s production was almost unpredictable and mostly dependent on how many people came to work that day and what particular skills they brought with them.  Call-outs will occur, but this was ridiculous. No matter what I said or did to help move production along, it didn’t matter if no one was there to listen.  

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My quick reaction, mostly out of frustration, was simply to fire everyone and hire a new crew. But who are we going to hire? Qualified, motivated employees aren’t waiting around for us to call with a job offer.  I needed to change my tactics, dig deeper and figure out how to get the crew to want to show up. Based on the number of un-paid call-out days the crew had accumulated, earning a day’s pay wasn’t enough incentive.

I turned to a good friend, Shawn Hawkins, who was an officer in the Army for over 20 years, leading soldiers in their work and who now runs his own trucking and construction business, Hamma Down Enterprises. His advice was to give the crew more responsibility. Huh? How could I give people who didn’t seem interested in the work, let alone show up for work at times, more responsibility? My friend went on to explain that a few key people need to be designated as squad leaders (borrowed from the Army’s methodology). Those leaders need a small group of personnel around them around who can learn the specialized skills of that squad, be directed in the work, and who feel accountable to their leader to perform it. More broadly, everyone needs a purpose, to know their place on the job and know that their work matters.  

I assured my friend that I would give this approach a try. When I hung up the phone I was kicking myself for not seeing this opportunity sooner. I guess I figured knowing what is expected of you should be obvious after a day or two on the job. After all, I know my plan, my reason for being there each day, but why did I assume everyone else has this same confidence? A deeper question I need to ask myself, and one that I should consider each day, is am I leading the work and the people who perform it? What my friend was challenging me to do and in-turn challenge others to do was lead, not just manage and certainly not just show up. By leading, I would teach others to lead.  After you show up, the other half of the battle, especially for those of us trusted to be in charge, is to lead.    

In my next blog post, I’ll share how we are doing.

Mission Critical Operations (MC-Ops) is a team of senior construction managers who help small contractors stop losing money on their projects. Our customers do great work but they need help running their projects. We assist with field operations and help prepare, organize and disperse critical project documentation. Our work enables our contractors to build the job right the first time and get paid for both contract work as well as changes, delays and unforeseen conditions that are forced upon them by the owner or other contractors. 

MC-Ops is often retained when their customers are short staffed in headcount and/or skill sets and when their projects are falling behind in schedule, quality and cost performance. MC-Ops provides its customers full-time support at the cost of a part-time employee. 


 

How to STOP Losing Money on Changes and Delays

Over the last few weeks, I’ve had the chance to talk with both long-time friends in the industry and some potential new clients. These are small contractors with their lives and personal finances tied up in their businesses.  By small, I mean they are not the mega contractors who have armies of trailer dwelling managers and project engineers. These contractors self-perform much of their work and while their staffs may be small, they do critically important work like renovating schools and military barracks, re-building local roads and replacing old water lines in neighborhoods.  They are often the subs for the mega contractors and actually DO the physical work – not just manage it.

As I talk with these folks, some common themes become clear. Some are good:

  1. Work is plentiful these days.

  2. Contractors are more selective, trying to pursue only work that best suits their skills.

Other themes are worrisome:

  1. Contractors can’t find good help to work in the trades nor in their management ranks.

  2. They are waiting 60-120 days to get paid.

  3. Contract terms from the owner and GC are forever pushing greater risk upon the smaller contractors.

  4. They can barely keep up doing the base contract work, let alone chase payment for changes and delays in a timely manner (those contract terms in #3 above don’t give you much chance).

Among those worrisome themes, #1, #2 and #3 are difficult realities of the construction industry and they are hard, if not impossible, for small contractors to change on their own. However, #4 frustrates me because what it really means is these contractors are losing money! Collecting payments for changes and delays caused by others should be an easy grab but that’s not always the case for the small contractor.  

For a small contractor, catching opportunities to get paid for changes and delays is tough because small contractors don’t have the staff or systems to capture, quantify and communicate these events in a timely manner to the owner or general contractor. Most contract terms dictate that changes in conditions or scope are to be communicated almost immediately and then work must continue (at the subs’ risk). However, many small contractors staff their jobs with only a Foremen or Superintendent who, rightfully so, spends most of their time on the ground overseeing work – not in the trailer sending emails and photos around.  

The small contractors focus mostly on just staying out of trouble on the base contract (such as avoiding delays to the critical path schedule) and I can’t blame them. When given the choice of organizing crews for over-time to ensure we hit a schedule date or trying to get paid for rental pumps to address unforeseen ground water, I would make sure I organize the overtime first and hit my schedule date. Chasing site photos or invoices for water pumps falls off the list.

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But why should small contractors have to choose between a rock (hitting schedule dates) and a hard place (forgoing payment for changes and delays)?  Not having the staff or system to capture payment for these events doesn’t have to be the problem – here’s how we’re going to help.

Mission Critical Operations is launching a new service called “STOP LOSING MONEY!” and its purpose is to help you, the small contractor get paid for changes and delays on your projects.  

To help our contractors STOP LOSING MONEY!, we provide you two services:

  1. Extra Staff: We assign a dedicated Project Engineer to support the customer’s field staff making sure project changes and delays are captured, quantified and communicated in accordance with the contract terms. The Project Engineer provides full time attention to the customer’s field staff, but at a part-time cost thus avoiding the costs and burdens of hiring a full-time employee. We follow-up and chase down owners and GC’s to make sure they follow their own rules compensating our contractors fairly and equitably for changes and delays.
     

  2. Project Management System: We have partnered with PROCORE, the most widely used construction management software tool, to prepare, organize, and disperse all project documentation in an online, secure, 24/7 accessible system – at NO ADDITIONAL COST and WITHOUT OUR CUSTOMERS HAVING TO BUY A LICENSE.  PROCORE gives us the tools to instantly capture, quantify and communicate changes and delays to the GC, owner and design professionals. Claiming to not have received communication about a change or delay in accordance with contract terms is no longer an excuse not to pay.      

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 See our website and posts on Linked In and Facebook for more details.

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 Mission Critical Operations (MC-Ops) is a team of senior construction managers who help small contractors stop losing money on their projects. Our customers do great work but they need help running the administrative side of their projects. We help prepare, organize and disperse critical project documentation ensuring its current and readily accessible. This enables our contractors to get paid for both in-scope work as well as changes, delays and unforeseen conditions that are forced upon them by the owner or other contractors. 

MC-Ops is often retained when their customers are short staffed in headcount and/or skill sets and when their projects are falling behind in schedule, quality and cost performance. MC-Ops provides its customers full-time support at the cost of a part-time employee.