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.

“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.

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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?

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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).

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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!

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.

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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.

snow

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.