Manufacturing Matters: Controlling Construction Costs

By J.P. Vogel of Gray Reed
Originally published January 27, 2025

Manufacturing construction is anticipating an uptick in 2025 with expected domestic economic protections and the continued consumer demand. Texas will remain a hotbed for this activity with continued business relocations, economic development incentives, and population growth. The Dallas Fort Worth Metroplex, Houston, and the I-35 Corridor will see the bulk of this upward movement. With any manufacturing construction project, time is always of the essence with the primary focus being revenue creation. That can lead to a multitude of issues, none more than important than substantial unanticipated increased costs of construction.

Who Foots the Bill?

No manufacturing construction project kicks off without the Owner having a firm understanding of their bottom line and their maximum cost threshold. While generating revenue is the clear goal, hitting rewarding profits are the truest standard of success. Profits of course flow from revenue outpacing costs. This is why manufacturing construction projects coming in under or on budget are critical and managing the legal issues from the negotiation phase of the project through completion should be given the highest priority.

The legal issues impacting these concerns are obvious:
1. clearly defining the contract price and basis for increases
2. change orders
3. allowances
4. exclusions
5. clearly defined scopes of work and materials
6. limitations of liability
7. acceleration

Careful attention must be given by the Project Owner to clearly defining the contract price and basis for increases. Whether the pricing method is guaranteed maximum price, time and material, or an alternate format Project Owner must ensure the pricing format and number agreed upon in the final contract reflects the entire contract scope of work and excludes the contractor bid which typically includes numerous exclusions and caveats leading to arguable basis for price increases. Moreover, Project Owners should have definitive language connecting any potential contract price increases to the contract’s change order language and specifically barring alternate methods for increases including verbal or informal email communications.

Stay Tuned

This is the first of a series of blogs related to what manufacturing owners must consider when protecting their economic interests in regulating construction costs of critical construction projects. This will address more general concerns whereas the subsequent blogs will focus on specific legal issues and strategies in the contract negotiation and management phases of an industrial construction project. Vogel will continue this discussion on the Texas Construction Law Blog.

J.P. Vogel is a Partner with the law firm Gray Reed. He guides clients through every phase of sophisticated, time-sensitive commercial construction projects and resolves disputes when they don’t go as planned. Vogel focuses on brainstorming new ways for clients to seize opportunities and overcome challenges—whether he’s helping an international company manage the chaotic construction of a Gulf Coast industrial facility, negotiating the high-leverage construction contracts for an office building project, or defending clients stuck in the midst of complex construction defect litigation. He can be reached at jpvogel@grayreed.com or 469.320.6175.