0:33 AMBest Practices Construction Law | Matthew DeVries
Yesterday was daylight savings day, which means that you are probably running about your job this morning a little more groggy because you lost an hour of sleep. As I was waffling through emails today in my own groggy state, I received an alert about a new area code being added to the Nashville, Tennessee area. Naturally, I thought about bid day .
What about bid day? Think about how technology has improved all aspects of the construction industry. Think about how we deal with electronic drawings. Think about how we communicate between the project site and the home office. And think about how we transmit proposals on bid day by fax and email.
But technology does not solve all problems. Sometimes, problems with technology create their own problems. For example, in Federal Acquisition Services Team, LLC (pdf), B-410466, December 31, , the government contractor challenged an agency s decision not to consider its proposal that was transmitted by email but had been rejected by the agency s server. The contractor asserted that its proposal was improperly rejected and it was “bounced back” by the agency’s server for exceeding the applicable size limitation for emails. In the protester’s view, the problem occurred as the result of a “systemic failure” of the agency’s systems, and the agency therefore should consider the proposal. The GAO denied the protest.
The GAO determined that the proposal was never actually received by the agency. The fact that the proposal was rejected by the agency server was not important because other offerors received the same bounce back message and they modified their submissions and resent them. Finally, there was not sufficient evidence to prove a systemic failure with the agency s servers.
The takeaway. The real lesson from the Federal Acquisition Services Team decision is to be mindful of potential problems with technology and to plan for those problems. Here are a few tips:
Let technology help your chances on bid day, not hurt them.
Busy, busy, busy! I have reviewed five new construction contracts in the past two weeks. If you are a contractor, there are a number of key provisions that you will want to be on the look out before you sign the agreement. Check out my series on the Top 20 Contract Issues for Contractors and Subcontractors .
Recently I have worked on a couple of matters for contractors who were expecting unlimited access to their construction site, only to find the owner had given the prime access point to an adjacent contractor. The owners defended their actions based on standard contract specifications requiring “coordination and cooperation” of the contractors.
What have the courts done in these situations? They look both at the contract language and at implied duties. It is settled law that every contract contains an implied obligation that neither party will do anything to prevent, hinder or delay performance. An owner, including a DOT, is said to have violated the implied obligations where its action or inaction delays performance of the project, thus increasing costs. Here are two few cases addressing the situation:
Keep it positive. What about clauses like the “coordination and cooperation” of contractors clause? If there is a specific representation in the contract regarding access, then those clauses should not prevent recovery. In an old Supreme Court case, Hollerbach v. United States. 233 U.S. 165, 34 S.Ct. 553 (1914), the court made it clear that a government contractor is entitled to rely upon positive statements made in the specifications despite general cautionary language in other paragraphs of the specifications. The court held that the positive statement in the specifications constituted a representation upon which the contractor had a right to rely. But in order for the government to be held liable for its statements they must be interpreted as an express warranty.
In anticipation of what could be an influx of wintry weather, the Tennessee Department of Transportation has made arrangements to ensure the state’s roadways stay clear. According to the Johnson City Press. TDOT has distributed more than 200,000 tons of salt and 2 million gallons of brine to stations in each of the state’s 95 counties to prevent or treat potential road hazards. Cold weather not only affects traffic on our highways, it can dramatically affect construction projects.
What should a contractor do with such historic conditions and unusually severe weather affecting construction activities? In Daewoo Eng’g Constr. Co. v. U.S.. 557 F.3d 1332 (Fed. Cir. ). the contractor involved in building a 53-mile road around the island of Babeldaob submitted to the Corps a claim for delays and additional costs incurred because of high humidity, rainy weather and moist soils encountered on the project. The contractor sought $13 million in additional costs incurred and more than $50 million for future costs not yet incurred. The government filed a counter-claim alleging fraud and other violations.
Although the appellate decision focuses on the government’s claims, the lessons learned about delays stem from the trial court ‘s opinion. The trial court criticized the contractor’s witnesses for lacking credibility. The court concluded that the $50 million portion of the contractor’s claim addressing future costs was no more than “a claim to gain leverage against the United States [and] violates the principles on which Congress enacted the Contract Disputes Act.” Apparently, the contractor was seeking a substantial modification of compaction requirements for embankment that would have greatly reduced problems for the contractor. In the court’s view, the $50 million in future costs was an inflated figure inserted into the claim as a ploy to expedite the Corps’ decision on whether to modify the compaction requirements.
The most notable lesson from Daewoo is that contractors should seek the guidance of experts to assist in calculating damages and to perform a schedule analysis for their claims. You’ve read my tips on proving weather delays before, but they are worth repeating:
Finally, get guidance from your experts as soon as possible. What most likely doomed the Daewoo contractor was the difference in methodologies in assessing the claim. Although the claim was originally prepared using in-house personnel, the outside experts hired for trial abandoned altogether the methodologies the contractor utilized in the claim. The trial court concluded that “the experts’ method resulted in an entirely different claim to the Government. [and]. the claim that was certified by the plaintiff’s project manager became an orphan during trial, supported by no one and barely acknowledged by plaintiff’s attorneys.”
Even on the smallest claims involving the calculation of damages, contractors should—at a minimum—seek the guidance of an expert on the most desirable methodology and should permit the expert to review the results prior to inclusion of them in the claim submitted to the public entity.
The boxes are packed. The old office is empty. The new office is empty as well. The old computer has worn keys, the new keyboard clicks with excitement. I will have some news early next week about my new job when the rest of the world actually gets back to work after the holidays but I wanted to share a few thoughts about change.
Why is change so difficult? As a construction attorney for almost twenty years, I have realized that the industry is always in a state of flux. During strong economic times, I have a lot more contract drafting and project administration work. During hard economic times, I have a lot more construction litigation and mechanic’s liens. I’ve learned to adjust to the circumstances to meet the needs of my clients.
Whether you are dealing with a new safety policy on the site, a difficult personality on the design team, an estimate error that is going to affect the bottom line, or even a potential transition to a new job, here are a few things you can do to adapt to change:
In my situation, communication and flexibility on everyone’s part has enabled a good transition. I am sad to leave my old firm, but I am thrilled at the opportunity to help build a new and exciting construction practice. I will miss all my former colleagues … but who knows … I may see them in court!
You will rarely find me advertising on this blog. However, throughout the year I regularly receive inquiries about electronic discovery, mobile apps, and the paperless project. And every couple of years I partner with the Construction Pro Network to address these issues. I am pleased to announce that I will be doing a Webinar on October 8, , at 1:00 p.m. EST.
You can learn best practices for documentation and record management in this 90-minute webinar — From Paper to Paperless: Controlling Construction Documentation, Improving Record Management and Identifying Risk in an Electronic Age . This interactive program will provide you with guidance to help you develop effective procedures for documenting your projects, including the transformation to the paperless project. You’ll get answers to your pressing questions about electronic evidence on a construction project, including the legal issues surrounding social media. This course will explore:
Please join me for this informative Webinar!
My mentor and good friend, Cordell Parvin . has over the years shared with me some great best practices for contractors—whether talking about bid protests, accidents on the jobsite, or filing a claim.
Recently, Cordell sent me a list of items that all contractors should review when developing a request for additional compensation. I have edited the list and I am happy to share these ideas:
The American Institute of Architects (AIA) recently released seven updated documents in its design-build family. According to AIA, the Design-Build documents enhance the early interaction between the Owner and the Design-Builder, calling for clearly defined and mandated Owner’s Criteria for the Project and requiring submission of a Preliminary Design by the Design-Builder.
AIA Documents Overview. An AIA press release highlights the array of how AIA agreements seek to accommodate the various ways in which design build projects are delivered. The key document is, of course, the agreement between the Owner and the Design-Builder. In addition there are agreements for use between the Design-Builder and Architect, as well as between the Design-Builder and Contractor. There are also agreements for use between the Architect and consultants, and between the Contractor and subcontractors. If the Owner desires independent consulting services with respect to the Project design and/or construction, there is also an agreement for use between the Owner and that independent consultant. To help understand these design-build project variations, and the related contracts, the AIA Contract Documents team created a free Design-Build Relationship Diagrams (pdf).
Additional Changes. Other changes include updated insurance provisions that are consistent with current industry terminology and practices, and a Sustainable Project exhibit, which can be used if the Owner has identified a Sustainable Objective as part of the Owner’s Criteria. The Sustainable Project exhibit is derived from the most recent AIA Sustainable Project Documents and describes the process by which the Owner and Design-Builder will work to achieve the Sustainable Objective.
Best Practices. When I asked a representative of AIA about some of the best practices resulting from the new documents, it was all about clarifying the parties expectations throughout the process. Michael Bomba . Associate Counsel at AIA, provided the following statement:
Clarity regarding the parties’ obligations is of the utmost importance in any agreement. The AIA’s updated design-build documents include an enhanced description of the Design-Builder’s design process, thereby clearly aligning the parties’ expectations regarding the design process and related deliverables. Further, through the use of a new Sustainable Projects exhibit derived from the AIA’s Sustainable Projects Documents, the updated design-build documents provide a contractual mechanism to identify the Owner’s sustainable objective for the project, if any, and define the parties’ respective obligations for achieving the objective.
According to Bomba, the design-build documents clearly establish the Owner’s requirements for the project and do not allow the design-builder to deviate from those requirements without the Owner’s written consent.
Practice Point. Of course, any form document will give you a good starting point. But the best practice is to tailor your documents to fit your particular need. For example, the Exhibit A is an insurance and bonds exhibit. Unlike the 2004 version (which was Exhibit C), Exhibit A insurance provisions are not potentially duplicative of insurance requirements already provided in the General Conditions. Many practitioners never used Exhibit C of the 2004 version, and instead inserted limits in Section 11 of the 2004 Exhibit A General Conditions. The Exhibit A provides blanks to fill in for the insurance limits, as well as the traditional text. Practitioners will likely beef up these terms and conditions to suit their needs.
Sometimes it is a race to the courthouse and dispute resolution for construction disputes can take many forms: litigation, mediation, arbitration, med-arb, dispute review boards, flip-a-coin, etc. Every now and then, I will review a construction contract where one of the parties. at its sole option . has the right to demand arbitration. This can be a good provision if you are the party who has that option.
In Archer Western Contractors, LLC v. Holder Construction Company . the Georgia Court of Appeals recently affirmed the trial court’s decision to grant a contractor’s motion to compel arbitration with a sole option provision. The main subcontract included the following disputes clause:
[All disputes] arising out of or related to the Work or the [Phase 3] Subcontract or any breach thereof shall be decided, at the sole option of [contractor], by binding arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect.
The contract also contained a venue provision, which stated that “all matters relating to the validity, performance or interpretation of this Subcontract shall be governed by the laws of the state where the Project is located [Georgia].”
The subcontractor argued that the provision relating to venue and jurisdiction of any legal proceeding supplanted the arbitration provisions, but the Court of Appeals disagreed, finding that the provision merely provided for venue and jurisdiction if the contractor decided not to submit to binding arbitration.
While the decision did not turn on the sole option language, it is important to review carefully the disputes clause in your construction contract to fully understand who has the right to demand arbitration and what rules will apply.
I have written before about statutes of limitation and statutes of repose relating to construction disputes. I recently learned that these principles may not apply to a public owner s claims against design professionals and contractors.
Statutes of limitation/repose? In its simplest terms, a statute of limitation is a time limit for bringing a lawsuit (i.e.. you may have six years to file suit on a breach of contract dispute), whereas a statute of repose is the drop-dead date where the legal no longer exists. In other words, a statute of limitation may not run because the cause of action has not accrued (or started), but the statute of repose would bar any lawsuit not brought within the statutory time.
For example, in Tennessee, claims regarding improvements to real property must be brought within four years of substantial completion of the project, regardless of the date of discovery. There is an exception if the claim is discovered during the fourth year after completion. In this case, the claim must be brought within one year after discovery, or within five years after substantial completion of a project.
State immunity. If you have heard the phrase, the King can do no wrong, then you should understand this concept. In fact, the Connecticut Supreme Court recently held that the doctrine of nullum tempis occurrit regi ( no time runs against the King ) was alive and well in Connecticut common law and that the State’s right to bring suit against contractors and design professionals in connection with a State project completed 12 years earlier was unaffected by the passage of time, laches, Connecticut’s statutes of limitations and/or repose for contract and tort claims, and contractual provisions purporting to limit the State’s right to pursue its causes of action.
Time-barred claims. In State v. Lombardo Brothers Mason Contractors, Inc.. 307 Conn. 412 (), the State brought an action against 28 defendants, including design professionals, contractors and others, to recover damages for defective design and construction of the UCONN law library more than 12 years after completion of the project. The State was seeking to recover the costs of work needed to correct water infiltration problems that the State claimed to be the result of deficient design and construction. In response, all of the defendants raised the defense that the State’s claims were time-barred by statutes of limitations or repose.
The trial court agreed with all of the defendants, finding that nullum tempis had never been
adopted as the common law in Connecticut and that, as a result, the State’s claims were barred
by the statutes of limitations or repose. The Connecticut Supreme Court reversed, holding that nullum tempis was part of the State’s common law and a privilege afforded to the federal and state governments as one of incidents of sovereignty, which furthers the public policy of preserving the rights, revenues, and property of the State from loss caused by the negligence of public officers.
Lesson learned. While you may think that the Lombardo decision is directed only to lawyers, it provides a good tip for everyone. One of the most important things you can do when you find out you have a potential construction dispute is to review your contracts and applicable limitations periods to determine the timeliness of your claim. Those claims may be time barred, or in some instances, you may have a legal excuse for the delay.
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