Best Practices Construction Law

Best Practices Construction Law

Best Practices Resources

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

Top Posts

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.

Best Practices for Developing a Contractor’s Request for Compensation

Posted in Best Practices, Claims and Disputes

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.

money2

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:

  1. Identify the best person to manage the team.  You need to select someone who is resposible and can lead in the following areas, which may involve more than one person: (a) Project personnel, who have detailed knowledge of the facts; (b) Estimator or project engineer, who has knowledge of the project, but is more objective than field personnel; (c) Legal representative, who can provide the proper legal framework for a claim and can identify and develop the legal strategy for recovery; and (d) Scheduling personnel, who can provide proper schedule analysis if there is a time consideration.
  2. Identify issues and establish a roadmap. This is often the starting point for reviewing a claim and the key to a successful analysis of issues.  The leader should: (a) Interview estimator/project engineer, superintendent and other project personnel; (b) Review aspects of project that changed from the time of bid; (c) Review cost reports with most knowledgeable person; (d) Review segregated job costs, if any; (e) Compare your bid with other bids; and (f) Prepare a roadmap for potential claim preparation.
  3. Review the contract terms.  As you develop the claim, the contract documents are the first set of documents that you shoudl review.  The following provisions are important: (a) Changes (including notice provisions); (b) Differing Site Conditions (including notice provisions); (c) Delays (including notice provisions); (d) Disputes (specifically required steps); and (e) Schedule.  Also, you will want to identify any contract interpretation issues.
  4. Review the contractor’s plan of work.  This includes talking about the anticipated means and methods with estimator/project engineer; reviewing crew sizes and anticipated crew movements; analyzing the anticipated productivity (per cy, sf, etc.) and determine whether that productivity was realistic; identify anticipated equipment and expected time to be on project; and identify planned staffing (tasks and durations).
  5. Analyze the schedule. At first, take a look at the initial approved schedule to determine whether the logic makes sense, review the durations for reasonableness, and decide whether the has any restraints.  Next, check the updates which can include the Owner’s responses and any notes or memos reflecting status of the project each month. At this point, determine if contract procedure was followed. If not, why not?
  6. Review change orders and correspondence.  At this point, your focus should be on what has been documented on the project to date.  You are going to go back to the original scope of work to see if that was well defined, and changes have been made either in the field or as part of a negotiated, detailed change. You are going to review the actual change order to confirm that all costs and time have been captured and make sure you have not otherwise released any claims by language in the change order.  You need to confirm that the changes procedure in the contract was followed. If not, why not?
  7. Assess other pertinent documents. Make sure your files have been organized so that you can review the following: (a) requests for information (RFIs): determine the number of RFIs and the cause; (b) daily reports; identify pertinent ones (determined by roadmap) and use as supporting documentation for proof of events or impacts.
  8. Identify whether there was loss of productivity.  Determine actual productivity and compare it with the anticipated productivity.  Identify any trends and determine whether there is a causal event for any loss of productivity that may be compensable.
  9. Evaluate any costs that are recoverable.   Identify differences with plan on staffing (number and durations) and evaluate the reasons for any differences.  Perform a “bottom up” analysis, which starts with the cost reports and works up.  Review each major cost code in job cost reports and try to determine every possible reason for differences between budgeted and actual costs.  Determine which cost increases were caused by events for which the owner or other contractors may be responsible.
  10. Prove legal entitlement.  Too many facts and no law could hurt your claim, just as much as too much law and no facts could limit your recovery.  You need to paint the right story based upon the facts and use the law to prove your legal entitlement.  Your recovery could be based upon or limited by a contract provision, some applicable statute (such as a no damages for delay clause being invalid), or the applicable case law.

AIA’s Updated Design-Build Documents Highlight Some Best Practices

Posted in Best Practices, Contract Docs

The American Institute of Architects (AIA) recently released seven updated documents in its design-build family.  According to AIA, the 2014 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.

design-build-aia

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 2014 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 2014 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.

For additional analysis of the 2014 documents, please see my partner, Anne Gorham‘s article, New 2014 AIA A141 Design Build Documents: Throw-Back or All New?

“Sole Option” Arbitration Provision in Construction Contract Can Be Good

Posted in Alternative Dispute Resolution, Arbitration

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.

Business Executives Running in a Race

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.

Are Construction Dispute Claims by the State Ever Time Barred? Depends.

Posted in Case Law, Federal Construction, Legal Trends

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.

time2

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 (2012), 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.

Bargaining Room v. False Claims: 5 Tips for Negotiation of Construction Claims

Posted in Best Practices, Claims and Disputes, Federal Construction

Earlier this week, a settlement was reached in dispute where the contractor and designer were alleged to have filed false claims with the U.S. Government on two road projects in South Carolina.  The issue raises an important question: What should a contractor do during negotiations to allow for some “bargaining room” so as to avoid any appearance of filing a false claim?

fraud

Although this question may seem contrary to the common sense approach to never overstate the claim amount, it’s actually not.  To be clear, the claim should never be false, unreliable, misleading, or overstated.  In today’s environment, such a claim might give rise to a criminally false claim accusation.

On the other hand, equitable adjustments are, by definition, adjustments based upon judgmental factors, estimates, opinions, and conclusions that are sometimes incapable of mathematical certainty.  Equitable adjustments are based on many subjective variables, and it is only natural that they can vary in range substantially.  This variance is particularly true when the claim involves delay or impact costs.

Contractor’s Perspective.  A contractor’s interpretation of the claim-causing events and financial impact of those events should be as reasonable as truth and fair dealing allow.  It should be able to support each judgment or subjective variable it has made.

Owner’s Perspective.  Owners often begins negotiations from the opposite end of the spectrum for the same reasons.  Owner representatives apply their judgment as conservatively as truth and fair dealing allow.  Consequently, each side typically gives a little in negotiations to reach a mutually agreeable settlement.

Here are some helpful tips for contractors include:

  1. Always tell the truth.  Once a contractor loses its credibility, it will have difficulty regaining it, not only for this particular claim, but for years to come.
  2. Include visuals in the presentation of the claim.  Any time a contractor can represent a point visually, the chances are greater that the point will be compre­hended and remembered.  For example, linear sched­ules can be used to visually demonstrate inefficiency at certain places on the job.
  3. Be prepared.  A contractor must know the terms of the contract and the contract plans in great detail.  In addition, it should be able to explain its plan of building the project and how that plan was upset by the claimed events.  Finally, a contractor should be prepared to explain and visually demonstrate the effect of those events on costs and time to construct the project.
  4. Do not negotiate against yourself.  Most negotiations between private parties involve some sort of stair-step approach, with each side giving a little until an agreement is reached.  Some public owners don’t negotiate that way.  They expect the contractor to guess what number they have in mind to resolve the matter.  That approach puts the contractor in a difficult negotiating position.
  5. Seek mediation as an alternative.  When negotiations are not going well between the contractor and the owner, a contractor should suggest mediation as an alternative.  In mediation, an independent third party listens to each side’s position and at   tempts to work with the parties to reach a resolution of the claim.  The mediator may offer his or her ideas on the strengths and weaknesses of each party’s position.  Sometimes, hearing it from an independent third party will cause a reassessment by both parties.

Question: What tips do you have for negotiating claims?

Infographic: Safety In Construction Industry Explained

Posted in Regional Construction, Safety, Tennessee

On June 2, 2014, the AGC of Middle Tennessee will be partnering with other construction trade associations across the state, Tennessee OSHA Outreach Training Centers, as well as TOSHA to have a statewide construction “Fall Protection Safety Stand Down.”  As you may be aware, fall construction accidents are one of OSHA’s Focus Four Hazards.

On the heels of the announcement of the Safety Stand Down event, I recently received an email from a colleague at Viewpoint, who recently analyzed the construction industry’s safety statistics over the past decade.  While I rarely publish unsolicited guest posts, every now and then I find a golden nugget either submitted by another industry expert or company.

The infographic below breaks down the most common injuries in construction, work fatalities in each construction type, how construction’s fatalities compare to other industry numbers, and construction fatalities by state.

Construction SafetyInfographic by Viewpoint

8 Best Practice Tips for a Schedule Analysis of Construction Delays

Posted in Best Practices, Claims and Disputes
A number of families will be traveling this holiday weekend, and some are travel-savvy enough to check out travel websites like www.911.Virginia.org for real-time traffic information and identification of construction delays.  When savvy contractors face delays on a project, they immediately take steps to provide notice, document, evaluate and plan for recovery from those delays. delays It almost goes without saying that if you have to pursue or defend a delay claim, you are going to need some evidence (whether by expert or otherwise) to establish or to challenge entitlement to the damages sought.  And we all know that there can be different routes to the same goal.  However, the different methods of schedule analysis can lead to varying results.  So, which method is correct? In a great Construction Law International article by my friends Don Gavin and Rob D’Onofrio, the authors suggest a series of best practices that should improve on the reliability of schedule analysis and increase its acceptability in the industry.  According to the article, there are eight guidelines that any schedule delay analysis comply with, including:
  1. Compare the planned work before and after each delay. Practically, this means that you should compare the plan to perform the remaining work before each delay and the plan to perform the remaining work after that delay, which will require a review of the schedule updates during the project.  This will also involve looking at the estimated impact, as well as the actual impact, of the delay.
  2. Identify the critical delays. Generally, the delay must affect the critical path of the work to be compensable.  If the delay absorbs the “float” in the schedule, then it is not compensable.  According to the authors, “If an activity does not have any float, by definition it is critical as it would impact the required contract completion date.”
  3. Evaluate the delays in both a chronological order and a cumulative manner.  If you do not look at the delays in sequence, it can “mask” what actually occurred on the project.
  4. Adjust the completion date to reflect excusable delay as it occurs.  This will assist in finding the actual float values and determining which activities are actually critical at any point during the project timeline.
  5. Include accurate as-built information.  Again, it is important analyze the actual progress of construction, which can best be achieved through accurate as-built data.
  6. Minimize projected future delays.  If you include projected future delays in the schedule, they should be minimized because projected delays can alter float calculations and possibly change which activities are critical.
  7. Correct any logic flaws.  If you correct any logic flaws found in the schedule, make sure to document and explain the changes at the time they are made.  Understand that judges and arbitrators can be skeptical when substantial changes are made after construction is complete.
  8. Tie causation to each delay.  Ultimately, you will have to show whether the delay is non-excusable, excusable/compensable, or excusable/non-compensable.

Using these guidelines, any contractor can begin to evaluate and prepare a potential delay claim as the conditions on project causing the delay occur.  If the claim turns to a dispute, you will have done a significant amount of preliminary work that an attorney and/or consultant will need to assist you in the claim.

Question: What other best practices can you identify for putting together a delay claim?

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.

book

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).

Continue Reading

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!

maryland

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.

Continue Reading

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.

3-150

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.