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 at Burr & Forman LLP and father of seven young kids.

Living Forward: A Book That Will Change You, Your Business and the Construction Industry

Posted in Leadership

 

In seven years of blogging, I have never marketed another company’s or individual’s services or products.  Today, I decided to make an exception for one special reason: I believe that Michael Hyatt and Daniel Harkavy’s new book, Living Forward will actually change your and my life.  Here’s why:
Living-Forward-Book-Post-Image-V1-760x463

A Virtual Mentor. I met Michael Hyatt during a transition point in my life.  Well, I didn’t actually meet him, but I found him on the Internet. I had just moved to Nashville, Tennessee, after relocating my construction law practice here, to be closer to family. At the time, Michael was CEO of Thomas Nelson Publishing located in Nashville. I happened to come across Michael’s blog, which he had just started. Over the next 10 years, I’ve seen Michael transition from a corporate leader to a Virtual Mentor, helping hundreds of thousands of people with the struggles in their daily life—from Fortune 500 CEO to small business owner to blogging mommies to this construction lawyer in Nashville.  Since we live in the same area, I’ve had the opportunity to meet Michael and his wife Gail on numerous occasions.

A Practical Problem Solver.  If you think that Michael is one of those out-of-reach, unapproachable public figures, with simply a handful of lofty ideas, you could not be more wrong. Just take a surf of his website on any given topic from how to treat employees, how to fight fair in marriage, and even the best ways to get out of a funk. All practical solutions to everyday problems. His advice helped me to answer common problems for my followers. One of my favorite lessons learned was captured in a blog post I wrote about what to do when your computer presentation crashes right before your big speech. Michael even tweeted this blog post one day and my stats went out the roof. Needless to say, Michael is the real deal.

A Forward Thinker.  With my leadership-crush on Michael, imagine my surprise when I was selected to be part of the launch team for Michael and Daniel’s new book Living Forward, which at the time, I felt was just a way to get the book a month before its release. But when I received the first chapter, as well as started to meet a number of the of the launch team members, I couldn’t be more excited to be part of the team. This book is about experiencing the life you want, while navigating all the distractions, difficulties, and demands that pile up day-by-day, year-by-year.  It leads you through a simple step-by-step life-planning process so every day adds up to the life you want now and creates the legacy you want to leave behind.

Sounds Too Thoughty, Right?  Wrong.  As a busy construction lawyer and husband and father of seven children, my time is limited.  I  find myself in “emergency mode” every single day. I tackle the problems that land in my lap at the moment or the ones that I see coming.  This is not to say that I do not plan for my caseload or family challenges, but I often seem to be living too close to the present without enough reliance on planning for the future. That’s where “Living Forward” has helped me identify a plan to get back on track: professionally, personally and spiritually. Even after reading the first chapter, there was a spark in my belly that started to inflame my desire to change. Here’s just one little nugget that I learned within the first few pages:

You may feel that you’ve drifted too far of course to get back on track, like the shore is just too far away. Perhaps you have given up hope and don’t believe things can ever be different. This is simply not true. It’s never too late. Be encouraged. You can’t change the past, but all of us have the power to change the future. The right choices today will radically alter the shape of tomorrow.

I don’t want to leave you with just a teaser of what you may find in this book and it how it can help you professionally and personally in your business and life. As part of the launch team I’m excited to share a few golden nuggets if you preorder Michael and Daniel’s book. (Again, I’ve never marketed on this blog, but I believe so much in changing my circumstances that I want to share with you that passion.)  If you order by February 29, you’ll receive:

  • A free copy of the audiobook (worth $22)
  • Admission to live online launch event (worth $197)
  • Detailed action plan guide (worth $47)
  • Living Forward quickstart audio training (worth $47)
  • Complete library of Life Planning templates (worth $47)

You can find out more about these pre-order bonuses—including our Leadership Package—by clicking here.  And while I am on the launch team, I do not receive any money or compensation if you decide to join me on this journey.

A Final Word.  I really feel weird opening my soul to you (…I said “leadership-crush” earlier…), but I think it is important for us to be truly honest with each other. My construction practice has experienced losses and successes. Your construction or development company has not reached its financial goals. Both of our families have been wrought with tears, giggles, fear, joy and frustration on all levels.  We both have experienced times in our life or we felt like we were just drifting and not living a purposeful life with achievable goals. That changes today!

Will you please join me, Michael and Daniel on this amazing endeavor?

No Lump on the Head for One Contractor’s Failure to Follow Public Bid Instructions

Posted in Best Practices, Bid Protest, Federal Construction

In our house of chaos, rules are especially important.  And when you don’t follow the rules—like no jumping on the furniture—you could end up with a lump on your head.  Just ask Jackson.

Polaroid

In the world of government contracts, you know that rules, instructions, and directions should be followed precisely.  In the case of Silver Bow Construction v. State of Alaska, the Alaska Supreme Court reviewed whether the State could find that a bidder whose bid exceeded the 10-page limit for bids could nonetheless be awarded the contract in question.

The Facts. In November 2010, the State issued a request for proposals to perform exterior renovations to the Governor’s House in Juneau. The request imposed specific submission requirements and guidelines. Paragraph 8 of the request included the instructions relevant to this appeal, which provided in part:

The maximum number of attached pages (each printed side equals one page) for criteria Responses shall not exceed: 10 pages.

Paragraph 8 warned that “Criteria Responses which exceed the maximum page limit or otherwise do not meet requirements stated herein, may result in disqualification.”

One contractor submitted a 7-page proposal; Silver Bow submitted a 10-page proposal; another contractor submitted an 11-page proposal; and Alaska Commercial Contractors (the awardee) submitted a 15-page proposal.

The Protest.  Silver Bow protested the bid and argued that the over-length bid by Alaska Commercial was non-responsive and that the successful bidder should have been disqualified. The State countered that the page count was a matter of form and did not confer an advantage on the winning bidder.

The Opinion.  On appeal, the Alaska Supreme Court concluded that the State reasonably found that the over-length bid did not confer an unfair advantage on the winning bidder. It then upheld the State’s bid award as being within its discretion, particularly where (by use of the permissive word “may” in Paragraph 8 of the instructions) the State had the discretion to decide whether a failure to comply with this requirement could be a basis for disqualification.

So What?  The decision in Silver Bow highlights the distinction of substantive and non-substantive issues in a request for proposal.  In the government contracts arena, where a bid received two minutes past a deadline is likely rejected, the decision may not make sense. However, you should make every effort to follow the instructions to bidders so as not to leave a lump on your head.

Top 10 Compliance Laws for Federal Highway Contractors

Posted in Best Practices, Federal Construction

Following up on my post about the Yates Memo, I started to think more about the areas of compliance that federal highway contractors must face.  Contractors certify many things and interact with a wide variety of governmental agencies. Similar to what occurred after the bid-rigging scandals, governmental scrutiny has increased because of a loss of trust.

investigate

So, my question to contractors is: Do you have a corporate compliance program designed to avoid purposeful or inadvertent violations of law by your employees?

In 1991, after defense contractor scandals, the U.S. Sentencing Commission issued sentencing guidelines for corporations. For a corporate compliance program to be effective, the guidelines provide it must, as a minimum, include the following elements:

  • Reasonable compliance standards;
  • Effective oversight of program;
  • Due care in delegating authority;
  • Communication to employees;
  • Enforcement of program;
  • Consistent enforcement; and
  • Periodic review of program.

The Top Ten

What are the potential issues facing highway contractors? Here are my top ten

  1. False claims;
  2. Antitrust;
  3. EEO;
  4. OSHA/safety and health;
  5. DOT (commercial driver’s licenses);
  6. DBE;
  7. Environmental;
  8. Procurement and government contracting;
  9. Finance and tax; and
  10. Labor/employment.

Each of these areas is guided by specific statutory law or by guidelines published by the pertinent regulatory agencies. It is important to understand the law and the regulations in each of  the areas of the compliance program and to develop a code of conduct for each area.

Keeping current is obviously a concern. For example, a couple of years ago the U.S. DOT revised the DBE regulations. The U.S. DOT issued new rules with respect to commercial driver’s licenses that may have broad applicability to trucking.

The structure or organization is a key component of whether a company is truly abiding by its compliance program. The highest level of management must propose the standards for them to have legitimacy within the corporation. Next, a high-level person or persons must be responsible for overseeing compliance.

High-level security

Many different examples of the structure have been used, and no strict rules determine how the program must be set up. Some firms have compliance committees, others a compliance officer who both has the respect of the employees and the clout to deal with those who may create a problem. The individual should answer directly to the CEO of the company or a committee of the board. This individual may be called an ombudsman or an ethics officer. Either way, this individual is an absolute necessity in the compliance program.

Any compliance officers or committees should be formally designated as such by the highest level of management. Formal acknowledgement affirms the company’s commitment and lends credibility to the structure. To carry out their duties, these individuals must have and understand a manual outlining how to carry out the program.

If a problem ever arises, the government agency is likely to look at the relationship of the contractor’s efforts to comply and how the problem occurred. In this context paper compliance programs may be worse than not having a compliance program. If employees at the appropriate level do not know of or understand the compliance program, then the contractor has not taken compliance seriously. As a result, contractors must ensure their employees are well trained. That may be no small effort.

Finally, there must be accountability. Obviously, contractors hope they will have no problems. Using the program in their decision making is one way to anticipate and avoid problems. Reviewing and auditing activities in each of the risk areas is essential. Additionally, violations of law or ethics must be identified, investigated and addressed.

Over the next several months and years, corporations will be placed under a higher degree of scrutiny than before. With a strong compliance program, contractors can take steps to avoid willful or inadvertent violations of law or regulations by their employees.

What Federal Contractors Should Know About the “Yates Memo”

Posted in Best Practices, Federal Construction

On September 9, 2015, United States Deputy Attorney General Sally Q. Yates issued a memorandum directing increased focus on individual culpability in matters of corporate wrongdoing. In addition to fines and sanctions against the corporation, the memo highlights six policy directives targeting individuals involved in corporate wrongdoing. If you are a federal contractor, watch out!

corporate

According to Yates, “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” The Yates Memo sets out six policy directives:

  1. Identifying Individuals Threshold for Cooperation Credit. In the past, DOJ has given partial cooperation credit to corporations based on disclosure of wrongdoing, even without complete details about the individuals involved. That’s over. The new policy requires complete disclosure of individuals as a “threshold requirement” for any cooperation credit. And it applies to “all individuals involved in or responsible for the misconduct at issue, regardless of their position, status or seniority.” As corollaries to that directive, DOJ is instructing its attorneys to investigate and build cases against individuals from the start and to include a “company’s continued cooperation with respect to individuals” as a term of any plea or settlement agreement.
  2. Investigations Focus on Individuals from Inception. DOJ will focus on individual culpability from the start of any investigation. The Yates Memo cites advantages, among them: getting at the “full extent” of the misconduct and increasing the likelihood of individual prosecutions. Mostly importantly, it increases the likelihood of involved individuals giving up targets “higher up the corporate hierarchy.”   “Flipping” witnesses to walk-up a conspiracy is an established prosecutorial tactic.
  3. Criminal / Civil Staff Collusion. DOJ will increase communication and cooperation between staff in the criminal and civil divisions. The move is expected to lead to better coordination, allocation of consequences to the most appropriate “venue”, and more parallel proceedings.
  4. No Protection by Settlement. “Absent extraordinary circumstances,” corporate resolutions cannot provide protection to individuals ‒ whether dismissal, immunity, or release – without 4. high-level written approval.
  5. No Corporate Resolution without Prosecutorial Plan for Individuals. If individual prosecutions have not been brought or otherwise resolved by the time of entity resolution, any corporate settlement (or similar) memo must include a detailed prosecution plan for the individuals involved in the wrongdoing. While tolling agreements remain an exception, they now must account for individuals as well.
  6. Civil Enforcement Beyond Individual’s Ability to Pay. An individual defendant’s ability to pay fines or restitution no longer will be a principal determinant in civil enforcement charging decisions, having been demoted in the relative hierarchy of considerations.

If you are a government contractor, you should review the Yates Memo and understand its implications on your company, directors, executive and employees. Understand that individuals now have “skin in the game” and could be held criminally and civilly accountable for misconduct.

 

New Executive Order Requires Paid Sick Leave for Federal Contractors

Posted in Best Practices, Federal Construction

I have seven kids.  I fully understand the importance of “leave” from work when another kid comes along (…how did that happen?…) or when a close family member is sick.  But right now, they are all happy.

CC.family-33

Signed by President Barack Obama on September 7, 2015, Executive Order No. 13706 will require federal contractors and subcontractors to provide employees with one hour of paid sick leave for every 30 hours worked, which is up to seven days of paid sick leave per year.  The Executive Order is scheduled to take effect for contracts entered into after January 1, 2017.

Sick leave includes time off for the employee’s physical or mental illness, injury, a medical condition, treatment, or diagnosis thereof. It also covers time off to seek counseling, relocation, or assistance due to domestic violence, sexual assault, or stalking. Leave also extends to the same for an employee’s spouse, child, parent, blood-related family member, or someone “whose close association with the employee is the equivalent of a family relationship.”   That’s the legal speak!

But what’s the practical effect on federal contractors?  Here are some takeaways:

  • Since the rule applies only to federal contractors, you may not be required to change your existing employment practices.
  • Even if you are a federal contractor, your existing policies regarding paid leave may be sufficient if it provides at least as much is required and for the same reasons required by the Executive Order.
  • Employees will be required to give notice of the need for paid sick leave at least seven days in advance, if the leave is foreseeable, or as soon as possible if not foreseeable.
  • After three or more consecutive days of sick leave, an employee must provide its employer with certification of the need for the leave.
  • Employers may not retaliate against employees for taking or attempting to take paid sick leave.
  • Terminated employees are not entitled to unpaid sick leave as compensation upon separation from the job.
  • The rule is broad in scope and covers much more than just an employee’s doctor’s appointments—it covers family members and domestic partners.
  • Leave may be taken for physical or mental treatments, or assistance due to domestic or sexual abuse.
  • Unused leave amounts may be carried over from year to year.

As an employer, it is reasonable to assume that paid sick leave will lead to higher costs, which as a government contractor are will be passed on to the government. Of course, you may already be providing paid sick leave either as a result your company policies or collective bargaining agreements.

Cosmetic Defects Found to Be Basis for Termination of Contractor for Default

Posted in Best Practices, Case Law, Claims and Disputes

In the construction world, many of us lawyers talk about what is known as a material breach in order to support a termination of the contract.  In other words, the event that supports the claim for default or termination or breach of contract must be a material one or one that goes to the heart of the contract matter.  Sometimes, the question comes down to whether an aesthetic or cosmetic defect constitutes a proper ground for termination.

defect

Cosmetic damages. In the recent case of Brenner v. Zaleski (PDF), the court upheld the owners’ decision to terminate the contractor for default for, among other reasons, the existence of numerous cosmetic defects.  The case involved the construction of a new wooden loft in a condominium. During performance, the owners informed the contractor that they were concerned about certain cosmetic flaws in the work.  The contractor became very aggressive during one of the conversations with the owner, who ultimately decided to terminate the contractor for default.

Trial court.  After the termination, the owners hired an engineer who found a structural flaw in the contractor’s work.  The owners sued the contractor for breach of contract.  The trial court held that the contractor was terminated prematurely, finding that the primary reason the owners terminated the contract was because of the aggressive tone of the contractor during their conversations. The court also held that the contractor was not given an opportunity to cure or repair the defects.

Appellate court.  The owners ultimately prevailed on appeal, where the appellate court ruled that “[t]here is no obligation on the part of the owner to allow a contractor, who has breached his undertaking by the performance of an unskilled and unsuitable job, additional time or opportunity to rectify his work.”  The appellate court also found that although the owners did not appreciate the contractor’s aggressive behavior, this did not preclude the quality of the contractor’s work from being an additional reason for his termination.

So what?  There are so many construction law issues in this case that can provide guidance to contractors—whether working on a new residential home, a large commercial development, or a significant transportation project.  Here are a few:

  1. The contract always matters.  In any dispute, the court or arbitrator will look to the parties’ contract to determine the obligations, rights and damages available to the parties.  In the case of a termination, the contract expressly addresses the circumstances when the contract can be terminated for the convenience of the owner or for the default of the contractor.
  2. Material breach always matters.  The “materiality” of the breach is important for so many reasons. First, generally you must prove a material breach in order to recover damages.  Next, the court or arbitrator will often look to which party committed the first material breach in deciding whether to enforce various provisions of the contract.  Finally, as a contractor, you will have only a limited number of circumstances to terminate a contract with an owner (i.e., non-payment, interference or owner-related delays, non-delivery of owner-provided materials), all of which mush be material to your performance.
  3. Cosmetic defects sometimes matter.  While probably not the traditional rule, the decision in Brenner demonstrates that cosmetic defects can support a claim for termination for default. While I do not believe the court would have reached the same result without some proof of a structural defect, the decision focused on the “quality of the work” of the contractor which was challenged by the owners.

Provide Notice (and 10 Other Tasks) When Pursuing a Construction Claim

Posted in Best Practices, Case Law, Claims and Disputes, Project Management, Scheduling

When dealing with construction claims—whether one for construction defects, outstanding payment, or delay damages—an initial hurdle is making sure that proper notice has been given.  Generally, you have to make sure that you comply with the contract or insurance provisions by: (1) giving written notice of the claim; (2) to the correct party; (3) within the time required; and (4) identifying the event giving rise to the claim.

claim

Notice is important because it is usually a precondition to recovery.  Recently, a court in New York held that notice to an insurance broker was not the same as the contractually required notice to the insurance carrier.  This decision illustrates the importance of following a process when dealing with a claim. Some other equally important tasks include:

  1. Identify the best person to manage the team.  You need to select someone who is responsible 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 should 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.

Risk or Reward? Using Drones on Your Construction Project

Posted in Best Practices, Claims and Disputes, Technology

In this week’s issue of ENR, technology writer Luke Abaffy details the use of drones by Minnesota Department of Transportation (MnDOT) to conduct bridge inspections.

We’ve all seen the YouTube videos or Facebook posts of a drone in action. The recent article in the ENR magazine highlights a new testing program by MnDOT that is starting to use the technology in an effort to save time and money on bridge inspections. According to the article, closing off traffic is part of the inspection process, which is a cost savings when the use of drone technology is introduced into the process. However, according to federal standards outlined in the ENR article, drones may only be used to inspect the bridge components and they cannot take over the job fully under current laws:

The Federal Highway Administration’s National Bridge Inspection Standards state that a drone can be used to inspect a fracture-critical bridge span but cannot replace a crew of on-site inspectors. Therefore, drones represent only added cost.

Compare Abaffy’s article with Tom Sawyer’s article in ENR, where a drone operator was recently fined $1.9m by the FAA for unauthorized flights over New York City and Chicago.  This was the largest civil penalty against an unmanned aerial-system operator.

The issue therefore raises the question of whether the use of new technologies, such as inspection by drones, present a risk or a reward?  As a construction attorney, I think the answer is: both risk and reward.

For example, photography has been used in the construction industry to document the progress of the work. Over the years, this process has become more efficient through the use of digital photography and more recently with smart phones. Project team members have the ability to document the status of work on a real-time basis and preserve the photographs in a project management system. This has become more useful when dealing with claims regarding delays and construction defects.

The problem arises, however, when the project management team does not have a protocol in place to preserve the evidence. When I am asked to represent a contractor in a dispute, the claim is most likely pursued or defended based upon the information known to the client, whether by witness statement, project records, or photographs/videos. Provided that this information is readily accessible, it helps in pursuit of the claim process, whether pursuing additional compensation or defending a claim of construction defects. The real challenge becomes getting access to this information as early as possible.

When you think of the rewards versus the risks, I think the use of drone technology will be helpful (just as photographic evidence is useful) to the claims analysis. At this stage, there does not appear to be any reported case law on whether a court or arbitrator would find any challenges to the use of drone technology on a construction project. Likely, the judge or arbitrator would apply traditional, evidentiary standards in reviewing the proposed evidence. Unless there is an issue like the limitations placed by the Federal Aviation Administration rules about the use of drone equipment (i.e., that the drone cannot fly within 500 feet of anyone who isn’t the operator of the drone), then I think there is a greater reward based on the cost savings to a contractor in using these technologies.

As they say, time flies… And only time will tell.

Integrity in Contracting: Lessons From A Young Princess

Posted in Best Practices

Essays are a great way to teach lessons. In our house of seven children, it seems that almost every day is an “Essay Day.” Last week, when caught in the middle of a lie—about an issue that was not even important— one of my young Princesses was required to write an essay about INTEGRITY.

integrity

Take a look at what she wrote.  Despite the trend of repetition, the Princess did a great job:

Integrity means to be honest when no one is looking. If you have integrity you will have more privileges and trust and friends. If you have integrity your friends will trust you because they know you are trustworthy in all things and at all times. . . . If you have integrity, you are honest, trustworthy and you are a good friend to have especially when your friend needs help with an outfit choice.

A career in the construction industry, just like the legal industry, can be made or destroyed based upon your reputation. What if you are known as the contractor who cuts corners, is hard to communicate with, or is just plain difficult? What if you are the owner-developer who has a reputation for never approving changes or for always delaying on responses to requests for information? The fact is … your reputation will follow you.

Reputation, however, is not the only thing that should concern you. There are countless federal and state regulations and statutes that address (and sometimes require) ethical practices in contracting. Indeed,  the Federal Acquisition Regulation requires contractors receiving awards in excess of $5 million on a government contract adopt written codes of business ethics and conduct.  The Associated General Contractors of America published a Five-Star Ethics and Compliance Program (pdf).

The point is … ethics and integrity should be part of our everyday lives … no matter where in the construction diagram you fall. And it should not be treated as a marketing trend. In the words of one eleven year old: “You should be honest even when no one is looking.”

ATTN: Federal Contractors, Beware of Harassment and Discrimination on Construction Sites

Posted in Best Practices, Federal Construction

“Did you hear the one about . . . ?”  Of course you have.  We have all heard the racial and discriminatory jokes at the work place.  If you are a federal contractor, you should be aware of Executive Order 11246.

hispanic

In separate investigations, a staffing agency and a construction company were recently charged with violating Executive Order 11246, which prohibits certain acts on federal projects. In lawyer-speak, Executive Order 11246 expressly prohibits federal contractors and federally–assisted construction contractors and subcontractors, who do over $10,000 in Government business in one year from discriminating in employment decisions on the basis of race, color, religion, sex, sexual orientation, gender identity or national origin. The Executive Order also requires Government contractors to take affirmative action to ensure that equal opportunity is provided in all aspects of their employment.

But what does that really mean?  In the case of WMS Solutions, a staffing agency that provided laborers on demolition and asbestos removal projects in Washington, D.C., the Office of Federal Contract Compliance Programs (OFCCP) alleged that WMS allowed other federal contractors to physically assault, make racial slurs and threaten to deport Hispanic workers.  The OFCCP also alleged that WMS intentionally paid women less than men and assigned fewer work hours to African American, non-white and female laborers.

In the case of Fort Myer Construction Corp., the OFCCP charged the contractor with discrimination in its hiring practices of women, African American and Hispanic laborers.  Compliance offers received more than 30 calls from employees who had reported harassment, threats, and intimidation in the work place. Significantly, Fort Myer’s vice president allegedly attempted to keep employees from talking to OFCCP compliance officers during the investigation. One of the female compliance officers personally was subjected to inappropriate sexual jokes during her investigation.

So What?  While the WMS Solutions case is the subject of a lawsuit filed by the OFCCP, the Fort Myer’s complaint settled when the contractor agreed to pay $900,000 in back wages and interest to class members and make new job offers as positions become available.  But here is what you really need to know:

  1. Know the law.  OFCCP enforces Executive Order 11246, the Vietnam Era Veterans’ Readjustment Assistance Act and Section 503 of the Rehabilitation Act of 1973, which, as amended, prohibit those  doing business with the federal government, both contractors and subcontractors, from discriminating in employment on the basis of sex, race, color, religion, national origin, sexual orientation, gender identity, disability or status as a protected veteran. Surf the Department of Labor OFCCP’s website to get a good overview, or contact your attorney if you have received noticed of an investigation.
  2. Know your management.  If you are the owner of your company, set the standard for integrity and character.  Get to know, really know, your key executives, managers and project supervisors, and how they are treating employees and laborers.  Conduct training sessions at all levels.  It does not have to be a stuffy, legal presentation—it can be entertaining, exciting and thought-provoking. Just ask me!
  3. Know your employees.  As an employer, the best way to avoid a disconnect with your employees is to connect with them.  You will get greater rewards on their efforts, and you will create an environment of trust in the event a racial and discriminatory allegation arises.  They will feel comfortable coming to you (…as opposed to a federal investigator…) before a real issue arises.

While treating employees equally, fairly and in a non-discriminatory matter is the right thing to do, it is also the law.

Image: Elvert Barnes