File, File, Wherefore Art Thou File

For this week’s Guest Post Friday here at Musings, we welcome back Douglas Reiser.  Doug (@douglasreiser) is a business attorney & LEED AP in Seattle, Washington. He is the principal at Reiser Legal PLLC, co-founder of ClaimKit, and editor of The Builders Counsel. Doug represents green businesses, green builders, contractors, organizations and craft brewers. His new venture, ClaimKit (formed with green building lawyer Chris Cheatham), solves construction file headaches for sureties, insurers, contractors and lawyers.

Many ages ago, I contributed to the Musings with a post about construction document management. Yep, an attorney taking the time to remind contractors that managing documents efficiently and electronically was smart and cheap.

I have contributed at least four articles to the Musings. There was an article on contractor UCC rights, one about green building certification and one about dispute resolution provisions for your construction contract. While useful, and certainly more legal focused, they weren’t my most important message. Smart documentation is that big message.

As a lawyer, I have wrestled with the worst of files. Unorganized boxes of torn and tattered documents that will never make it through a scanner. Sadly, I will also admit that I have yet to see the best of files. The automatically-synced, wholly electronic, digitally tagged and searchable construction file? It has been a myth.

Nowadays, we are seeing a big blend: a mix of paper records, electronic records and paper and electronic records. While this is a step in the right direction, it doesn’t change the amount of review time invested by your legal counsel, your surety or your insurer.

A recent article in Engineering-News Record paints the collection cost picture quite well. Collecting your project documents has become such a chore for attorneys that their bills are exceeding the value of the claims they are defending!  Collection procedures and costs have become so unsavory that lawyers have suggested using a contract clause to prohibit discovery of electronic mail, one of the most troubling sources of data to sift through.  The article suggests that some attorneys opine that a judge will honor the clause (and I am not so sure). But how can we expect to exclude such valuable written evidence from the courtroom?!  Why not just make it easier to attain?

The problem that I see is that everyone wants only use part of the digital world. For example: “let us use e-mail to communicate, but print out 100 page notices to send via UPS.” The bigger problem might not be that we require that these records get printed, but that we don’t scan and keep a digital copy.  We just have our e-mail in the e-file – and the stuff that came in the mail in the box file.

Once contractors truly realize how costly document collection and investigation has become, perhaps they will finally acknowledge that its time to make a change. If your subcontractor keeps messing things up and costing you three times what you could pay another subcontractor – you’d fire that subcontractor. Why not fire your document system?

So what can you do to be better? This was the same question posed to my colleague Chris Cheatham, who came to me to help find an answer. When we birthed ClaimKit last month, our goal was to fix bad files.  Since then, we have decided that we should be focused on preventing bad files from ever happening. Regardless of what the file looks like when you find it, the goal is to quickly deliver an attractive, accessible, easily navigable and shareable file.

Here are a few hints that all contractors should consider to help tame their file:

What you can do right now:

• It’s not just your file – Contractors need to be aware that they are not the only person who has to rely on their file. Their surety, insurer, accountant and attorney each might take a pass.  Turning over that file is likely to happen, and the longer it takes them sort it through, the more cost to you.

• Scan & file – Scan all records as they come in and store them in document-specific folders. Think about the easiest way to locate a record. It’s not by flipping through a box, and it’s not by sifting through a single folder titled “Name of Project.” The best way is to create a project folder filled with subfolders, and then to place each type of document in a specific folder (i.e. a change order goes in a folder called “change order”). Easy for your project staff to find it, and easy for your lawyer as well.
• Use a shared file –  I used to refer to this as the cloud, but really it’s a “shared file.” Software from Dropbox, ShareFile, Box.net, and other file storage services allow you to create a folder and share it with others. That way, everyone on the project can centrally store all records from the project. The office assistant can scan a copy of a recently received submittal and drop it in the folder, the project manager can drag an email from his mailbox and drop it in the folder, and the contract admin can drop a copy of the latest subcontractor proposal in the folder.  Easy, accessible, and shareable.
• Centralize – A single copy of each of your documents needs to be in one place. Duplication and division of documents is a killer. Utilize a shared folder system that stores all records, like the one discussed above and reduce duplicate copies.

What you can do when its time to turn a file over:

• Talk first, then react –  Sureties, insurers and attorneys are getting better at document collection. Talk to them before you do anything with your file. Your actions, though rooted in good intention, might make it worse.
• Permit collection at the source  – The document collection process is so very important – and where you can save money. The closer that a collector can get to the original file, the better and cheaper the file will be to construct. So before you tell your surety, insurer or attorney that you will send it all over, consider letting them send a scanning vendor to the site or your office to quickly scan and upload records.
• Code at the source – Thumbing through documents is a terrible task that costs lots of money. When a document is an image file (like a PDF) you cannot get to the meat of the document without seeing what is in the file. If you allow a professional to access your records early in the process, the document can be coded with vital searchable information – like document type, dates, parties involved, or location. That way, if your surety wants to see your permit application – all they have to do is search for it.
• Maintain Native Documents – Don’t bunch up a file to share it. If you keep a decent electronic shared file, share the folder. If it isn’t a shareable file, then consider burning it with all the file names and folders. Your counsel, insurers and sureties do not want a pile of mixed documents – they want small individual docs organized in neat spaces.

Efficient collection, navigable organization, and accessible delivery – these are the credos that make a file effective.  Take steps in 2012 to better your file, save yourself some money and save your risk management partners a headache.

Doug and I encourage your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.