Best Practices Construction Law

Best Practices Construction Law

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Matt has written articles and given presentations on all aspects of construction law. Find a resource here.

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Best Practices top posts include claims preparation, contract drafting, and litigation pitfalls. You don’t want to miss these ones.

Matthew DeVries

Matt is a construction & litigation attorney with Stites & Harbison, PLLC and father of seven young kids.

Differing Site Conditions and Why You Should Read Pages 17-20 of the Metcalf Decision

Posted in Best Practices, Case Law, Federal Construction, Legal Trends

It’s Friday morning and there are probably better things you would like to do with your remaining day than read a 22-page government contracts decision.

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But if you have ever experienced a differing site condition on your project, then here is why you should read pages 17-20 of the recent decision in Metcalf Construction Company v. United States (pdf).  On February 11, 2014, the Federal Circuit released its decision in the Metcalf Construction case, which addressed in part a differing site condition claim.

Although the appeal was based primarily on the standard for a breach of duty of good faith (and the opinion talks mostly about that issue), there is some good language in the second part of the opinion about how the trial court wrongly interpreted the differing site conditions provision in the public contract (pages 17-20).

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Don’t Settle Your Construction Dispute Without Checking with the (Insurance) Man

Posted in Best Practices, Case Law, Legal Trends

Who’s the Man?  Ever heard of that phrase?  Well, in a recent construction dispute in Maryland, “the Man” was the owner’s insurance company.  And the lesson learned was: don’t settle your construction dispute without first checking with the man!

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In Perini/Tompkins Joint Venture v. ACE American Insurance Company (pdf), applying Maryland and Tennessee law, the Fourth Circuit held that the joint venture contractor violated the terms of both the primary insurance and excess insurance policies by not obtaining the insurer’s consent before settlement.  Accordingly, the joint venture could not claim reimbursement under the policies.

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How to Assess Whether You Have A Disruption Claim on a Construction Project

Posted in Best Practices, Federal Construction

As parents of seven young children, my wife and I work hard to keep order, and schedules, and boundaries, and rules for daily activities.  So when Courtney and I went out of town last month, the kids (and their sitters) did not have same order, schedule, boundaries, and rules for an entire week. Our return to family life can be summed up in one word: DISRUPTION.

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On a construction project, one of the foremost problems a contractor may experience is how to identify and quantify the effects of a complex claim. Most of us can recognize the contributing factors in hindsight analysis. Few of us, however, spend enough time or thought towards identifying the contributing factors before they affect us.  If you go back to the basics, consider the types of costs and/or time impacts that you experience:

  1. Direct
  2. Disruption
  3. Delays
  4. Mitigation
  5. Delayed impact (a combination of any of the above)

Disruption costs and time can be difficult elements of a claim to recognize, identify and quantify—and sometimes are the most disputed. Disruption includes but is not limited to lost productivity due to:

  • Slow down
  • Delays
  • Acceleration
  • Lack of continuity
  • Loss of morale
  • Learning curve
  • Change of sequence
  • Change of means and methods
  • Change of time of performance (winter)

Recognizing that the above disruptions occur is the first hurdle.  In other words, a savvy contractor must be watchful to identify when they occur and then start to measure the impacts.

Constructive Changes and Acceleration on a Snow-Filled Project

Posted in Best Practices, Federal Construction

Two weeks ago, I was scheduled to leave town for an out-of-country trip.  But the snow storms in the Southeast crippled my layover city (Atlanta) on the eve before my travel date.  So when I received a call from my airline indicating that my flight had been cancelled, the only option was to leave earlier than planned.  I had not packed yet and I was forced into acceleration mode.

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Many contractors have to deal with unanticipated schedule delays and are required to accelerate their efforts to finish the work on time.  In the arena of federal contracting, constructive acceleration can be considered a constructive change.  Generally, acceleration includes the following elements:

  1. The contractor must be entitled to a time extension for excusable delays.
  2. The contractor must have notified the owner and requested the time extension.
  3. The owner must have either directed the contractor to accelerate work or refused to extend the contract time.
  4. The contractor should have given notice that it intends to claim for acceleration.
  5. The contractor’s cost must increase as a result of the acceleration.

Disputes over acceleration may be avoided by recognizing delays at the time they occur and determining the impact of those delays as early as possible.  To document the claim, the contractor should maintain a good schedule that is updated regularly.

How Contractors Can Make Sure to Receive DBE Participation Credit

Posted in Federal Construction, Tennessee, Transportation

Last week, I received an alert from Deborah Luter, TDOT’s Program Director for the Small Business Development Office (SBDP) regarding DBE participation credits.

CRO_logo_smallMany prime contractors may be unaware that subcontracting to a DBE on a TDOT contract does not necessarily mean DBE goal participation credit will be awarded. To receive credit for utilizing a DBE, the DBE must be certified by the SBDP Office or a TNUCP Partner for the work type for which they are to perform. Once approved as a DBE, each business receives a letter showing each work type they are permitted to perform for credit. Certification may be expanded to other work types at the DBEs request, but may only be granted upon proof of experience in performing the work, proof of ownership of the necessary equipment to perform said work and through an on-site visit (if necessary).*

It should also be noted that DBE Certification should not be confused with Prequalification, which is a function of TDOT’s Construction Office. DBEs may be prequalified to perform many different types of work but may only receive goal credit for those which they have been certified by TDOT’s SBDP Office or a TNUCP Partner. The Uniform Certification Application must be completed for initial DBE certification, while all contractors and subcontractors must complete the Prequalification Form in order to work on a TDOT job. Once the form is completed, approved contractors will be visible on the Prequalified Contractors spreadsheet, which is updated daily by TDOT’s Construction Office.

TDOT encourages Prime Contractors to use DBEs whenever possible, not only for goal projects. TDOT’s Online DBE Directory is available to show the exact work types DBEs are certified for credit and is searchable by name, work type, etc. This is an excellent resource for finding DBEs for projects (not just TDOT) as well as a resource whenever in doubt on the types of work for which a DBE is certified.

Any Problems with One Owner and Multiple Contractors? Sometimes.

Posted in Best Practices, Claims and Disputes

Increasingly, two or more contractors may each have a separate contract with the owner for different portions of the work on a single project.

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Interference may arise, for example, from one contractor’s storage of materials on a site where the other has work to perform, or from one contractor’s failure to progress with work that is preliminary to the other’s work.  There is ordinarily no direct contact between the separate prime contractors and the owner may disclaim responsibility for any lack of cooperation between them.

Although an older case, the decision in Moore Construction Co. v. Clarksville Dept. of Elect., 707 S.E.2d 1 (Tenn. 1985), illustrates such a situation.  In Moore, a prime contractor brought suit against a co‑prime claiming the following: defective work by the co‑prime and its subcontractors; co‑prime’s storage of materials on the work site instead of in agreed storage areas; trash strewn by co‑prime; and co‑prime’s false assurances regarding the date when the site would be available to the delayed prime.

The court’s decision laid out very succinctly the facts that support a claim of interference against another prime contractor:

Unless the construction contracts involved clearly provide otherwise, prime contractors on construction projects involving multiple prime contractors will be considered to be as intended or third party beneficiaries of the contracts between the project’s owner and other prime contractors . . .  The courts have generally relied upon the following factors to support a prime contractor’s third party claim:

a.         The construction contracts contain substantially the same language;

b.         All contracts provide that time is of the essence;

c.         All contracts provide for prompt performance and completion;

d.         Each contract recognizes the other contractors’ rights to performance;

e.         Each contract contains a non‑interference provision; and

f.          Each contract obligates the prime contractor to pay for the damage it may cause to the work, materials, or equipment of other contractors working on the project.

In addition to claims against the other contractor, claims may also be made against the owner for failure to coordinate the work.

Question: What do you think are the most important factors supporting a claim like this?

New Book (and Website) on Construction ADR Released This Week!

Posted in Alternative Dispute Resolution

As many of you know, I am heavily involved in the American Bar Association’s Forum on the Construction Industry.   For you non-lawyers, that’s a group (about 6,000) of geeky construction lawyers who get together three times a year for some of the best presentations on construction law, new technologies, risk management, financing, and many others hot topics.  In fact, at the end of the month we will be in the Bahamas learning how to be a better construction lawyer through best practices and technology (pdf).

As the Editor for the Forum Online, I have the privilege of assisting with the release of Construction ADR, a new book published by the Forum.  The book contains a detailed discussion and analysis of all aspects of ADR processes used in the construction industry including mediation, arbitration, DRBs, IDMs, and project neutrals. It provides both practical advice and analysis from experts in construction ADR and citations to case law, treatises, and other publications. The book is directed at the novice as well as the expert and will assist construction lawyers performing legal research as well as those looking for expert advice and analysis.

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For the first time…and this is what is most exciting…the Forum is including real time updates to the book at www.constructionADRbook.com.  The newest cases, concepts, articles, and analysis dealing with each subject will be available immediately online.  The chapter update section will also contain a blog, for commentary by many of the premier authors.

(Full disclosure: I am not an author, but I know many of them.  This is the real deal! Heavy hitters! I am the editor of the website, though.)

Supreme Court Speaks on Forum Selection Clause in Construction Dispute

Posted in Case Law

Earlier in the year, I made an April Fool’s Day  joke on Twitter about the Supreme Court granting an appeal in a construction dispute. Apparently, the joke was on me…because the Supreme Court did take an appeal in a construction dispute!

On December 3, 2013, the Supreme Court issued its opinion in In re Atl. Marine Const. Co., Inc., which reversed the Fifth Circuit’s decision reported at 701 F.3d 736 (5th Cir. 2012).

Forum selection clause.  The underlying dispute related to a subcontract agreement on a construction project located on Fort Hood in Texas. When the general contractor did not pay the subcontractor for its work, the subcontractor filed a lawsuit in federal court in Texas based upon diversity jurisdiction (…that means a dispute in excess of $75k between parties of different states…).  The general contractor tried to get out of the lawsuit by filing a motion to dismiss or, in the alternative, tried to get the case transferred to Virginia based upon a forum selection clause in the subcontract agreement.

Trial court.  The trial judge did not dismiss the case, nor did he agree to transfer the case to Virginia.  The court held that the project, and most of the project documentation, was located in Texas.  In addition, almost all of the witnesses lived in Texas and would not be able to testify if the case were transferred to Virginia.

The appeals court.  The general contractor filed an appeal to the United States Court of Appeals for the Fifth Circuit in the form of what was called a Petition for Writ of Mandamus in an attempt to reverse the trial court’s ruling. The Fifth Circuit denied the writ petition.  All three panel members agreed that the standard for obtaining a writ of mandamus was not met in this case.  One of the panel members agreed with the result, but wrote a concurring opinion.  In its decision, the majority of the panel concluded that the parties’ contractual choice of forum was not the only factor which should be weighed in a motion to transfer venue.  Stated differently, the majority reasoned that the federal venue statutes, not the parties’ contractual forum selection clause, should govern whether Texas, as opposed to Virginia, was a proper forum for the case to be heard.

The Supreme Court. SCOTUSblog has all of the key documents and dates leading up the Supreme Court’s decision. The issues on appeal were: (1) Whether the Court’s decision in Stewart Organization, Inc. v. Ricoh Corp. changed the standard for enforcement of clauses that designate an alternative federal forum, limiting review of such clauses to a discretionary, balancing-of-conveniences analysis under 28 U.S.C. § 1404(a); and (2) whether district courts should allocate the burdens of proof among parties seeking to enforce or to avoid a forum-selection clause.   In the end, the Court concluded that the forum selection clause was enforceable–the Court also said the parties’ contract should be followed unless extraordinary circumstances exist. The Court found that the proper procedure for enforcement is a motion to transfer venue as opposed to a motion to dismiss.

Practical implications.  While the issues in the case were not construction-specific, such as whether pay if paid clause is enforceable, the ultimate decision affects the contracting process for parties to a construction project.  This case provides a little more guidance to the construction contracting process, including the following:

  • Forum selection clauses will generally be enforced as written. As demonstrated in the Atlantic Marine Construction case, a court should enforce the agreement absent extraordinary circumstances.
  • When drafting a forum selection clause, you should think about all the where questions: (a) where the parties are located; (b) where the witnesses reside; (c) where the contract negotiations took place; and (d) where the project is located.
  • By requiring in your forum selection clause that disputes be resolved in state court, you can eliminate these issues from the dispute.  For example, the majority panel in Atlantic Marine Construction noted dismissal would have been proper had the parties’ forum selection clause required the case to be heard only in state court since federal courts may only transfer cases to other federal court.

Question: Have you read the decision? What are some additional practical implications?

Coaching Football and Planning Construction Projects: It’s All the Same Thing

Posted in Best Practices

My good friend and mentor Cordell Parvin once suggested that planning done by contractors for a successful construction project is not unlike the planning done by football coaches for a successful season. He is right!

Coaching football.  Successful football organizations consist of specialized teams or units: (a) the offense; (b) the defense; and (c) and special teams. Within those teams there is often a further specialization. For example, the defensive team consists of linemen, linebackers and secondary. All of these specialized units must plan and work together in order to be successful. In construction, the specialized units consist of crews headed by project engineers and/or foremen.

Successful coaches spend a great deal of time preparing for a season…so should contractors! Tweet this! In fact, they spend a great deal of time planning the team’s practices. Good coaches simply out-plan and out-prepare their competitors.

Planning the project. After a contract is awarded, the contractor’s first task is to put together a project management team. The makeup of the team will obviously depend on the size of the project and the contractor’s field personnel. On a big project constructed by a large company, there may be project engineers. On a smaller project, there may only be foremen. The team may or may not have been involved with estimating the project. Once the team has been assembled, the project engineers and foremen must study the plans and specifications in great detail. The project engineers must consult with the estimators to learn how the estimators conceptualized and bid the project. Taking the estimators’ concepts, the project engineers and/or foremen develop a detailed, coherent work plan for constructing the project.

Image: DH Parks

What Should You Do When There is an Accident on Your Construction Site

Posted in Best Practices

You probably saw last month’s report about a second work-related fatality at the construction site of the San Francisco 49er’s new football stadium. Police and fire investigators have determined that the truck driver’s death was a workplace accident and not a crime. 

The delivery truck driver was reportedly crushed by a bundle of rebar being unloaded from his truck. It’s the second worker death at the construction project. Examples like this are good reminders of the lessons to learn when investigating or handling an accident on a construction site. These include:

  • Prepare before the accident. It is important to prepare before the accident by having a checklist or best practices protocol to follow if an accident should occur.  This should include identifying chain of command for notice purposes, identifying internal investigation team members, identifying who will be a company spokesperson, and identifying your risk management team (insurance and legal).
  • Act diligently when an accident occurs.  Don’t waste all that preparation time before the accident and then not follow your protocol.  Make sure medical issues are resolved immediately and lock down the site for evidence preservation.  Make a list of all witnesses. Photograph and video the conditions.
  • Organize post-accident activities.  There may be contractual obligations, regulatory requirements and public relation issues that will come after the accident occurs.  Make sure that you review your contract to comply with any notice requirements that may need to be given.  If OSHA becomes involved in the workplace accident, then prepare for the investigation with your safety team and risk management team.
  • Manage the accident documents.  While on the job site, an investigator may ask to see certain records such as the OSHA 300 logs, safety manuals, first aid / medical records, training records, safety meeting minutes, inspection records, and accident reports. In order to keep track of what has been requested and provided to the investigator, make a list of all requested documents and keep a transmittal log of how various documents were transmitted.
  • Understand privileges.  Please note that accident reports should be reviewed by your attorney prior to production to any investigator.  Accident reports should be limited to the facts and should not contain any speculative theories or guesses as to why an accident occurred. If your attorney has directed the preparation of the accident report, that report is privileged and should not be produced to the inspector.

Most construction companies, at some point in their life, will experience a job site accident. It is important for your company to have a plan in place for the day.  What lessons learned can you share?