I have been thinking of launching a leadership mastermind for construction professionals.  And this idea came to me over the past month as the world basically came to a complete halt—except for the construction industry, which has instead been on a roller coaster ride.

You see, most of the states and cities have enacted various “stay at home” orders with various exceptions for construction work, depending on the locality, the type of construction work, or the status of the project.  Executives, management and office personnel are working from home, while project managers, superintendents and field workers are clocking in at the jobsite on a daily basis.  There are stresses in the new “home” office, as well as new challenges on the project site.

And so I started to have more and more people asking me how to respond to the changes in the construction industry and how to adjust professional and personally. If you have seen me speak or if you have read of any of my articles, you know that leadership is just as important as construction accounting or risk management to your project and company’s successes.

My solution is a small, intimate group of construction professionals and leaders who are really focused on adapting and rebuilding through this global pandemic—to come out stronger, more financially secure, and risk ready for their companies and families. This will be a group of like-minded individuals, working with each other, helping each other, sharing different strategies and tactics with each other.  It’s going to start with this first group of founding members, but it is going to evolve into a group of industry leaders committed to rebuilding for success.

And I’d like to invite you to join me as a Founding Member. Again, this isn’t something that has been created yet and I am gauging the level of interest.  But, as a Founding Member, you get to participate in a six-week program. We will have weekly calls, where we will be given a challenge at the end of each and will report back our successes the following week.  We will develop content together for a workshop that will be given to your business or group. Finally, as a Founding Member, your only commitment is that you will show up and do the work. If you do so, I will cover the cost of this first 6-week mastermind.

If this sounds interesting to you and you’re interested in being considered to join as a Founding Member, simply send me a private message or email to mdevries@burr.com.

Many jurisdictions have allowed construction activities to continue through the COVID-19 pandemic. But the “stay at home” restrictions have varied from a state to state. Restrictions vary depending on whether the project is public infrastructure, to commercial, to health care, to multifamily and residential. (Make sure that you confirm your particular jurisdiction’s orders to see what restrictions are in place.)

When the Center for Disease Control (“CDC”) initially released its guidelines on social distancing in late March (for workplace, school and homes), it would be weeks before construction-specific guidelines were released.  Even then, the CDC did not give a clear answer for how to conduct construction activities when the work required closer proximity of workers.  On April 20, 2020, the CDC released new guidelines for “critical infrastructure workers,” and on April 21, 2020, the U.S. Department of Labor’s OSHA released an alert that basically adopted the CDC guidelines.

Remember, words matter.  In the following OSHA Alert, I have highlighted the terms that I believe continue to give contractors leeway in continuing to work during this pandemic as long as training and safety precautions are taken:

Measures that can help protect employees working in construction include:

      • Encouraging workers to stay home if they are sick;
      • Training workers how to properly put on, use/wear, and take off protective clothing and equipment;
      • Allowing workers to wear masks over their nose and mouth to prevent them from spreading the virus;
      • Continuing to use other normal control measures, including personal protective equipment, necessary to protect workers from other job hazards associated with construction activities;
      • Advising workers to avoid physical contact with others and directing employees/contractors/visitors to increase personal space to at least six feet, where possible. Where work trailers are used, all workers should maintain social distancing while inside the trailers;
      • Promoting personal hygiene. If workers do not have immediate access to soap and water for handwashing, provide alcohol-based hand rubs containing at least 60 percent alcohol;
      • Using Environmental Protection Agency-approved cleaning chemicals from List N or that have label claims against the coronavirus; and
      • Encouraging workers to report any safety and health concerns.

The crux of any safety policy or training program involving construction workers is to “avoid physical contact” and implement physical distancing protocols.  If the work requires multiple crew members in close proximity, then steps should still be taken to avoid physical contact, as well as making sure the other hygiene recommendations are followed to minimize risk.

I am not going to even attempt to describe what has occurred over the past week.  You’ve read it online. You’ve watched the daily news reports. You’ve listened to the radio. And you’ve even had to adjust your own schedule to accommodate school closings. While working remotely myself, my mobile phone has been constantly pinging me with calls, emails and texts—all asking substantially the same question: How do we response to this mess?

After four days of answering client inquiries (that’s my favorite part my job as a construction attorney), I decided to write an ebook addressing: (1) the most important legal issues facing contractors in this time of uncertainty; (2) the practical day-to-day issues involving site access, safety, wages, unemployment and other benefits; (3) tips for documenting impacts and delays related to supply chain interruptions, work stoppages, and labor/material cost increases; and (4) the top ten contract issues in dealing with this pandemic.

You can download a complimentary copy here: Best Practices – COVID19 and Construction Claims, but please do me a favor and subscribe to the blog on the sidebar to the right.  Just enter your email, and you will receive regular updates. And feel free to pass on the book to a friend or colleague with same request…subscribe to the right!

Contractor licensing violations raise serious concerns for all parties. For an owner, an unlicensed contractor may affect financing options on one end and the contractor’s entitlement to recover profits on the other end. For contractors, a licensing violation can have a crippling effect on all projects, the ability to perform, and the ultimate ability to recover amounts owed under a contract. For subcontractors and suppliers, an alleged licensing violation can be used as leverage to secure payment for labor and materials.

In Mississippi State Board of Contractors v. Hobbs Construction, Inc. (Mar. 6, 2020), the Supreme Court of Mississippi recently held that the Board’s decision to revoke a contractor’s license violated its Due Process rights because the Board had based its decision, at least in part, on prior complaints and allegations—grounds which the contractor had not been provided notice.  In this case, the Board revoked the contractor’s certificate of responsibility (“COR”), and the contractor sought a preliminary injunction enjoining the Board from revoking the COR pending appeal.  The trial court granted the injunction and ultimately reversed the Board’s decision.

The original complaint to the Board had been filed by a supplier who had not been paid approximately $13,000 for materials on a commercial project.  Although the contractor and supplier had reached a settlement agreement for less than the disputed amount, ultimately the contractor did not pay the supplier the settlement payment. The Board proceeded on its hearing for the alleged licensing violation, and neither the contractor nor the supplier appeared.  The Board’s investigator presented evidence about the failure to pay the supplier, which formed the basis for the Board’s revocation of the contractor’s COR.

Although the contractor was not given notice that prior closed matters would be considered, the investigator testified about the contractor’s history before the Board, including eight prior complaints for failure to pay a subcontractor. While all of the prior complaints had been resolved in the contractor’s favor, a review of the hearing transcript demonstrated that Board members considered the contractor’s prior alleged licensing violations and its reputation in the contracting community.  One Board member commented, “We’ve seen this guy every meeting.” Another Board member stated, “We know this guy is irresponsible. You know, if we let him continue doing business like this, it’s just gonna be a matter of time before we see him again.”

The Board voted 5-1 to revoke the contractor’s COR.  Both the trial court and the appellate court found that a contract dispute between a prime contractor and a subcontractor or supplier is outside the Board’s authority to regulate.  In addition, both courts found that the Board’s decision violated the contractor’s procedural due process rights because the contractor was not given notice that the Board would consider the prior complaints in the revocation decision. The appellate court noted: “But the Board’s minutes reflect that its members decided, after learning from the investigator that [the contractor] had eight prior complaints, that they were tired of dealing with him and that his license should be revoked.” Following a lengthy analysis of due process, the appellate court affirmed the trial court’s reversal of the Board’s revocation.

A couple of practical lessons emerge from the Hobbs Construction decision. First, as a contractor, it is imperative for you to stay up to date with your licensing requirements, whether you are contracting within the state of your principal office, or acting as a foreign entity performing work in another state.  Next, recognize that each state may have a different complaint process and you should cooperate fully and truthfully with investigators.  Finally, and perhaps most importantly, understand that many state licensing boards are not interested in investigating payment disputes that can be brought in civil court, so you are well advised to address those disputes as quickly as possible to avoid a regulatory licensing violation.

They say that hindsight is 20/20.  Who is they, anyway?  The old proverb means that it is easy to understand something after it has already happened. In the world of construction contracts, preservation of claims made in hindsight does not always get you what you want.

In Appeal of Matcon Diamond, Inc., ASBCA No. 59637 (Feb. 20, 2020), the Armed Services Board of Contract Appeals recently denied a claim for Eichleay home office overhead delay damages  because: (1) the contractor failed to show there was a critical path impact or that the Government’s actions impacted the critical path; and (2) the claim was barred because it was not presented prior to final payment. The opinion in Matcon Diamond is a good read for government contractors wanting to understand delay claims, critical path schedules, contractor delays versus Government delays, Eichleay formula for quantifying damages and understanding the difference between work stoppages and standby or idle periods of time. You can get a copy of the decision here.

As to the preservation of the contractor’s claim, the ASBCA held that the contractor submitted its claim for delay damages after receipt of final payment. The Government’s final payment defense is an affirmative defense on which the Government bears the burden of proof.  Final payment does not bar a claim where the contracting officer knows that the contractor is asserting a right to additional compensation, even though a formal claim has not been filed.

Based upon the record, the Board concluded that the contractor never presented, let alone formulated, a claim for extended home office overhead.  At the time the contractor submitted its final invoice (which was five months after completion), the contractor did not inform the contracting officer of its intent to seek additional compensation.  Nonetheless, the contractor argued that an email sent ten days after final payment had properly and timely put the government on notice.  The Board disagreed: “This email, however, does not establish that, at the time of final payment, [the government knew the contractor] was asserting a right to additional compensation.”

So what?  Again, the opinion is a good refresher on delay claims and the required proof for a contractor to support its claims.  But more importantly, contractors are advised to adhere to all notice provisions in the contract and applicable regulations, and especially, to submit notice of an intent to seek additional compensation before submitting a request for final payment.  Given the language in the Board’s opinion, it is also likely that a mere “reservation of rights” statement will be insufficient to actually put the government on notice of a claim.

I missed it by less than an hour. I was working late last week and left my office right before midnight … which happened to be right before a Category 5 tornado ripped through the outskirts of downtown Nashville and then proceeded to East Nashville and Putnam County.  The next morning, the skies were clear as the sounds of sirens and wreckage hummed throughout the city.

It has not been a week since the catastrophic events in Nashville and surrounding areas.  Whether you are a developer, contractor or subcontractor/supplier, you undoubtedly understand that severe weather can add cost and time to project completion.  Indeed, that’s why force majeure clauses are generally included in parties’ contract.  While there are legal implications related to pursuing a claim for additional time or money, there are also practical considerations for both job site and the workers when a severe weather event occurs.

The following list was prepared by Jake Guimond at Assurance, and it gives nine steps to create a severe weather plan to protect your construction site and employees:

  1. Do this BEFORE a storm occurs; don’t wait until a storm is imminent, or worse, surprises you.
  2. Evaluate site-specific risks.
  3. Include emergency response, securing the jobsite, clean-up and trained personnel to assist with mitigating the damage.
  4. Make sure the plan covers all types of severe weather you may encounter in your area (e.g. strong winds, tornadoes, heavy rain, lightning, storms, etc.).
  5. Make sure all employees know and understand your jobsite severe weather plan.
  6. Have a process to notify all jobsite workers of impending severe weather or jobsite evacuation.
  7. Assign a jobsite foreman to perform a worker headcount during storm refuge and post-storm.
  8. Conduct post-storm job site evaluations.
  9. Identify and clearly mark locations for severe weather refuge.

In short, a risk management plan requires that you do it, you put it in writing, you train your leaders about it, and your practice it.

As a single dad of a handful of kids, my evenings and weekends are always a joyful ride. Just last weekend, I had a mini trial with one of my Littles who, get this, wanted to spend the night at a friend’s house, but also wanted to go to the movies with her other siblings.  My verdict: “You can’t have it both ways!”

In Goes v. Vogler, 937 N.W.2d 190 (2020), the Supreme Court of Nebraska recently reached the same conclusion when it considered whether a particular contract was a cost-plus contract with a guaranteed maximum price or a lump sum contract.  The owners argued that the contract was a fixed fee despite the language to the contrary.  Paragraph 47 of the contract stated that it was a “cost plus contract” with specific fees for overhead, warranty and profit to the contractor, while another part of the contract included language that the “agreed upon price is $282,000.00.”

During performance, the owners raised concerns about how the money on the project was being spent and requested that the contractor provide an accounting.  Ultimately, the contractor terminated the contract alleging lack of payment.  In consolidated lawsuits by the contractor and various subcontractors, the court held that the owners had withheld payment because of concerns about the quality of the work and fears that the project would not have been completed for the price stated in the contract. The court wrote: “The justification for the [owner’s] failure to make timely payments hinges on their assertions that the parties had a fixed-price contract and that the contract required written change orders.” Ultimately, the trial court and appellate court both concluded that the contract was not ambiguous and that it contained a cost-plus contract price, not a fixed contract price.

The owners also claimed on appeal that a contractor in a cost-plus contract has an additional fiduciary duty to a homeowner as a matter of law.  The owners argued that a contractor must provide prompt, detailed accountings of the actual costs incurred and must inform the owner of potential cost overruns. The appellate court refused to find a special fiduciary duty of a builder under a cost-plus contract.  Specifically, the court held that the contract between the owners and the contractor did not explicitly contain language creating any special fiduciary relationship and it was not going to impose such a duty on contractors as a matter of law.

So what? It goes without saying that in the world of construction contracts … words matter! There is language in the Goes decision that a cost-plus contract imposes upon the contractor an implied duty to incur reasonable and proper costs. However, the court went on to analyze the parties’ agreement as to what costs made up the “cost of the work” and whether certain documentation was required to support those costs. Construction documents like the AIA A103 and ConsensusDOC 235 contain much of contractual language that would impose such a duty upon the contractor—whether talking about reasonableness of cost or auditing and documentation supporting the costs.

I have been blogging for over 10 years now. I have spoken at construction and leadership conferences all over the country. Do you want to know my favorite place to speak?

My favorite place to speak is wherever I am. That’s right, I enjoy people-meeting, story-telling, and especially problem-solving. Best Practices Construction Law is about all of those.  As a recipient four years in a row of the JD Supra Readers Choice Award in Construction Law, the blog focuses on problems and solutions facing all players in the construction arena..

And now I am ready to jump off the pages of the internet to hold the first-ever Best Practices Construction Law Summit, where we will spend a day with industry leaders talking about complex problems that occur on construction projects and identify best practices to help avoid pitfalls and succeed. Just a few of the speakers include:

  • A former U.S Attorney and high profile litigation attorney specializing in white collar crime and high profile cases;
  • A former National Champion wide receiver for the Florida Gators who is now a construction industry leader, and
  • One of the top expert speakers in the county on the preparation of bids and proposals.

Here is where you come into the equation.  The inaugural summit will be by invitation only, which means I need to hear back from you requesting more information about the event and, more importantly, sharing with me what additional topics you may want to hear.  Click Here To Email Me About the Summit. Before you make a decision about whether this is the right conference for you, e-mail me for more information. And remember, it will also be an opportunity for you to visit the vibrant city of Nashville, Tennessee, where you can come for the conference on Friday and stay for the fun through the weekend!

 

 

You know that I have a lot of kids.  But what you may not know is that our family went through a major change last year—their mom and I got a divorce.  And so … like a construction project sometimes riddled with uncertainty … we each have a choice about how we are going to adjust to change.  But let me first tell you a story.  Yesterday was the first morning in 18 years that I woke up without my kids in their beds anxious to get up to open their stockings and presents.  Here is how I handled it:

Why is change so difficult? As a construction attorney for over twenty years, I have realized that the industry is always in a state of flux.  During strong economic times, I have a lot more contract drafting and project administration work.  During hard economic times, I have a lot more construction litigation and mechanic’s liens.  I’ve learned to adjust to the circumstances to meet the needs of my clients.

Whether you are dealing with a new safety policy on the site,  a difficult personality on the design team, an estimate error that is going to affect the bottom line, or even a change in your family dynamics, here are a few things you can do to adapt to change:

  • Understand that change is going to happen.  Whether you are talking about your professional career or your personal life, there will be change.  You can count on it.  I can guarantee it.  Most of the time, those people who fail to recognize change have the hardest time adjusting to it.
  •  Understand that change and your responses will come in stages.  Consider a fatal workplace accident.  Undoubtedly, your construction company will go through numerous changes in response to this incident, including the initial shock of the accident, feelings of potential guilt, assessment of safety measures, analysis of liability, and the transition of duties and potential change in policies.  Change of any sort comes in stages.
  • Understand that communication leads to success.  Communications is always important, but it is especially important when you face change.   Practically speaking, you need as much information about the change as possible, so that you can make an intelligent decision. Talk to your boss, your boss’s boss, and your co-workers to get their understanding of the situation. Be honest in all your discussions and deal with the problems when they arise.
  • Understand that flexibility is good.  Change requires flexibility and the ability to adapt.  The better able you are to respond to change, the more likely you will succeed. Make an assessment of the situation, identify potential outcomes, plan and develop a response strategy, and then begin to ride the wave.  Maybe your current job isn’t what you expect?  Perhaps the new workplace policy strains the ingenuity of your employees? Try to be flexible with an understanding of the potential outcomes.  Part of the fear of change often involves dealing with the unknown.

In my situation, communication and flexibility on everyone’s part has enabled a good transition.  I love my kids and would do anything for them, which may include building a fireplace on the side of the interstate so they can get their stockings on Christmas morning!  Merry Christmas to all and Happy New Year!

If you saw the Netflix thriller Bird Box last  year, you know that what you see does not always lead you down the right path.  As a construction litigation attorney, the “claim” is often about telling the story of a breach of contract, or failed expectations, or unforeseen delays, all through the testimony of individuals or the introduction of documents.

In a recent case, Wollaston Industries v. Robert E. Ciccone d/b/a Ciccone Door Services, (U.S.D.C. Mass) (Dec. 16, 2019), the court evaluated a sub-subcontractor’s claim on a construction contract dispute arising from the renovations at the Longfellow Bridge and the Hatch Shell in Boston, Massachusetts. Although the projects involved different prime contractors, the same specialty door subcontractor was claimed to have failed to pay the sub-subcontractor, who sued for approximately $140,000.

The defendants filed a motion to dismiss a number of the sub-subcontractor’s claims, including one for fraudulent inducement.  Under Massachusetts law (like most states),  in order to prevail on a claim for fraudulent inducement, a plaintiff must allege a false representation, material to the negotiations, upon which the plaintiff reasonably relied in entering into an agreement with the defendant. Here, the sub-subcontractor’s fraudulent inducement claim was based on the theory that the subcontractor submitted false documentation (i.e., certifications and/or lien waivers) to the prime contractors to obtain payment. Specifically, the sub-subcontractor alleged that the subcontractor represented to each of the prime contractors “that no subcontractors were owed money for their work, which was a prerequisite to the prime contractors paying [the subcontractor].”

Now, remember, this is at the motion to dismiss and/or summary judgment stage.  The court was not deciding on the credibility of the evidence or whether the allegations were true.  Instead, the court focused on whether the plaintiff sufficiently alleged a cause of action against the defendants.  The court concluded that any false statements about pay apps or lien waivers were not relevant to the claim for fraudulent inducement:

This is not enough for [the sub-subcontractor] to state a claim for fraudulent inducement against Defendants. [The sub-subcontractor] nowhere alleges that Defendants made false representations of material fact to [them]. Nor does [the sub-subcontractor] allege that it acted in reliance on any false statements made by Defendants.

Accordingly, the court granted the motion to dismiss the fraudulent inducement claim.

So what?  The opinion is silent about whether there was a breach of contract claim alleged by the sub-subcontractor.  But the real lesson for contractors is to make sure the payment provisions expressly address the use of conditional and unconditional lien waivers.  In other words, if you are a subcontractor, you want to make sure your lien rights are conditionally waived only upon payment.