Can an Owner's Representative Deal Directly with a Sub-Contractor?

Oh boy. I wish the construction observer hadn’t done that. The correct procedure would have been for the construction observer to document the alleged defective work, preferably including photographs; bring it to the attention of the general contractor’s superintendent; and then document that notification in a written report. Then you, as the general contractor, could have inspected the work, agreed or disagreed with the construction observer, and made decisions from there. If you thought the construction observer was being too picky, you could have asked the licensed engineer (or architect or landscape architect) to look at the work and make a final decision. Alternatively, if you saw that the construction observer was correct, you could have given the subcontractor proper instructions, and payment for corrective action would not be an issue.

Based on what you’ve said, the construction observer seems to have overstepped his authority. A rule that was drilled into me before my first project as a resident engineer was to never give instructions to a subcontractor. If you (or whoever is acting as the engineer or owner’s representative) believe that the sub’s work fails to meet the contract documents, bring it to the general contractor’s attention. The general contractor will then handle it and conduct all dealings with the sub.

In this case, before paying the subcontractor’s invoice for extra costs and before passing it on in your own pay application, ask for a review of the situation with the sub, the construction observer, and the design professional. Ask for documentation that proves the work was defective. If such proof is shown, I’d say the sub has to eat the extra cost. However, if the proof is not shown or if the proof doesn’t exclude the possibility of corrective measures as opposed to removal and replacement, then I think you might have a legitimate claim for some extra costs. It might not be the full amount for which the sub asked, but it should be something. As well, it might be a bargaining chip if other issues are open to discussion.

The problem with direct dealings between the owner’s representative and subcontractors or suppliers is much too common on construction projects, especially on smaller projects where rigorous site relationships are relaxed. The construction observer is right there, watching the sub, and how easy it is to simply call out an instruction instead of walking across the site to the job trailer and finding the superintendent. How easy it is for the subcontractor to say, “Fine,” and not bother to seek out the superintendent to confirm the instructions. In your situation, both the construction observer and the subcontractor need more training on how site relationships are best maintained, and the construction observer needs to learn the limitations on his authority.