Just this weekend, after breaking up a Minecraft dispute among four my young children, I sent them back to the world of digital building. Within minutes, they were fighting again. Makes you wonder about whether you have really settled the dispute after you have settled the dispute?

The Court of Appeals of Tennessee recently addressed this issue in McNeese v. Williams, No. 2014-CV-30, which involved two adjoining landowners who had a dispute over an easement.  Right before trial, the parties reached an agreement and notified the court that the trial was unnecessary. The attorney for the Williams drafted a short letter agreement and sent it to opposing counsel.  An agreed order of dismissal was also submitted to the attorney for McNeese. When Williams was “unable to obtain” a signature on the agreed order from opposing counsel, they filed a motion to enforce the settlement agreement.

construction hand

Following the hearing, the trial court found that the parties, through their attorneys, had entered into an agreement to resolve all matters of controversy between the parties. The trial court found that the agreement was fair and equitable, and that it would be enforced, despite the fact that Mr. McNeese no longer consented to the agreement.

On appeal, the Court of Appeals found that the trial judge lacked the power to enter the agreed order when he knew that Mr. McNeese had withdrawn his consent to the oral settlement agreement reached by the parties’ attorneys.   In other words, Mr. McNeese may have “had” a settlement agreement with the other party, but he repudiated that agreement prior to the hearing on the motion to enforce the settlement agreement.  Accordingly, the appellate court ruled that the trial judge should have granted the motion to set aside the agreed order.

So what?  While the issue in this case generally is one for attorneys, it also provides guidance to businesses about how to treat their settlement discussions via email.  Whether you are talking about a change order, outstanding payment application, or claim for delay damages, your agreement on a dispute may be binding depending on the circumstances. First, your written contract may have a provision that requires all changes and modifications to be in writing. Therefore, an oral agreement to resolve the dispute may not be sufficient. Second, even if you agree to resolve the dispute in writing, the outcome may be dependent on whether you have timely repudiated the agreement.

In the McNeese case, it was a matter of whether the attorney for McNeese had the authority to approve the settlement agreement and whether he had provided the final agreement by his client. Mr. McNeese ultimately repudiated the agreement, which the court found important in its decision. In this situation, the best way to confirm an agreement on a dispute is to make sure you add appropriate language at the end of your communication such as, “This agreement is final and binding until a formal change order (or settlement) is signed by the parties.”  That way, the other side will have an opportunity to object. If they do not object, you will have evidence of their agreement.

When walking through the mall or the grocery store with my children, I inevitably get asked, “Are they all yours?”  Depending on my mood, I may or may not claim them all.  As a general contractor, you will want to know the law on whether laborers hired through a staffing company will be considered “yours” for purposes of the Fair Labor Standards Act (“FLSA”).

workers

It is very common in the construction industry that general contractors and trade contractors will hire workers through third party management companies, independent contractors, staffing agencies and labor providers.  Consequently, traditional employment relationship lines are blurred in determining who is the real employer?

What is a joint employer? On January 20, 2016, the U.S. Department of Labor released its Administrator’s Interpretation (“AI”) No. 2016-1 (PDF), which addresses these type of situations involving joint employment determinations.  Whether an employee has more than one employer is important in determining employees’ rights and employers’ obligations under the FLSA.  When two or more employers jointly employ an employee, the employee’s hours worked for all of the joint employers during the workweek are aggregated and considered as one employment, including for purposes of calculating whether overtime pay is due. Additionally, when joint employment exists, all of the joint employers are jointly and severally liable for compliance with the FLSA.  However, not every subcontractor or labor provider relationship results in joint employment.

What test applies?  The AI discusses two different scenarios—horizontal joint employment and vertical joint employment.  Horizontal joint employment exists where the employee has employment relationships with two or more employers and the employers are sufficiently associated or related with respect to the employee such that they jointly employ the employee. The analysis focuses on the relationship of the employers to each other.  Vertical joint employment exists where the employee has an employment relationship with one employer (typically a staffing agency, subcontractor, labor provider, or other intermediary employer) and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work.

What about the construction industry?  While the AI address all workplace scenarios, it specifically outlines the following example with the hiring of construction laborers through a staffing agency:

A laborer is employed by ABC Drywall Company, which is an independent subcontractor on a construction project. ABC Drywall was engaged by the General Contractor to provide drywall labor for the project. ABC Drywall hired and pays the laborer. The General Contractor provides all of the training for the project. The General Contractor also provides the necessary equipment and materials, provides workers’ compensation insurance, and is responsible for the health and safety of the laborer (and all of the workers on the project). The General Contractor reserves the right to remove the laborer from the project, controls the laborer’s schedule, and provides assignments on site, and both ABC Drywall and the General Contractor supervise the laborer. The laborer has been continuously working on the General Contractor’s construction projects, whether through ABC Drywall or another intermediary.

According to the AI, “[t]hese facts are indicative of joint employment of the laborer by the General Contractor.”

So what? As a result of changes throughout the various workplace industries, it is possible that a worker is jointly employed by two or more employers. In determining whether an employee has joint employers, the following two factors should be considered: (1)  whether the employee works for two employers who are associated or related in some way with respect to the employee; or (2) whether the employee’s employer is an intermediary or otherwise provides labor to another employer.   In the end, general contractors may be responsible for FSLA compliance over laborers who are the employees of staffing companies.

 

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?

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.

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.

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.

 

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.
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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.

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.

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.

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.