Two weeks ago, I was scheduled to leave town for an out-of-country trip.  But the snow storms in the Southeast crippled my layover city (Atlanta) on the eve before my travel date.  So when I received a call from my airline indicating that my flight had been cancelled, the only option was to leave earlier than planned.  I had not packed yet and I was forced into acceleration mode.

snow

Many contractors have to deal with unanticipated schedule delays and are required to accelerate their efforts to finish the work on time.  In the arena of federal contracting, constructive acceleration can be considered a constructive change.  Generally, acceleration includes the following elements:

  1. The contractor must be entitled to a time extension for excusable delays.
  2. The contractor must have notified the owner and requested the time extension.
  3. The owner must have either directed the contractor to accelerate work or refused to extend the contract time.
  4. The contractor should have given notice that it intends to claim for acceleration.
  5. The contractor’s cost must increase as a result of the acceleration.

Disputes over acceleration may be avoided by recognizing delays at the time they occur and determining the impact of those delays as early as possible.  To document the claim, the contractor should maintain a good schedule that is updated regularly.

Last week, I received an alert from Deborah Luter, TDOT’s Program Director for the Small Business Development Office (SBDP) regarding DBE participation credits.

CRO_logo_smallMany prime contractors may be unaware that subcontracting to a DBE on a TDOT contract does not necessarily mean DBE goal participation credit will be awarded. To receive credit for utilizing a DBE, the DBE must be certified by the SBDP Office or a TNUCP Partner for the work type for which they are to perform. Once approved as a DBE, each business receives a letter showing each work type they are permitted to perform for credit. Certification may be expanded to other work types at the DBEs request, but may only be granted upon proof of experience in performing the work, proof of ownership of the necessary equipment to perform said work and through an on-site visit (if necessary).*

It should also be noted that DBE Certification should not be confused with Prequalification, which is a function of TDOT’s Construction Office. DBEs may be prequalified to perform many different types of work but may only receive goal credit for those which they have been certified by TDOT’s SBDP Office or a TNUCP Partner. The Uniform Certification Application must be completed for initial DBE certification, while all contractors and subcontractors must complete the Prequalification Form in order to work on a TDOT job. Once the form is completed, approved contractors will be visible on the Prequalified Contractors spreadsheet, which is updated daily by TDOT’s Construction Office.

TDOT encourages Prime Contractors to use DBEs whenever possible, not only for goal projects. TDOT’s Online DBE Directory is available to show the exact work types DBEs are certified for credit and is searchable by name, work type, etc. This is an excellent resource for finding DBEs for projects (not just TDOT) as well as a resource whenever in doubt on the types of work for which a DBE is certified.

Increasingly, two or more contractors may each have a separate contract with the owner for different portions of the work on a single project.

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Interference may arise, for example, from one contractor’s storage of materials on a site where the other has work to perform, or from one contractor’s failure to progress with work that is preliminary to the other’s work.  There is ordinarily no direct contact between the separate prime contractors and the owner may disclaim responsibility for any lack of cooperation between them.

Although an older case, the decision in Moore Construction Co. v. Clarksville Dept. of Elect., 707 S.E.2d 1 (Tenn. 1985), illustrates such a situation.  In Moore, a prime contractor brought suit against a co‑prime claiming the following: defective work by the co‑prime and its subcontractors; co‑prime’s storage of materials on the work site instead of in agreed storage areas; trash strewn by co‑prime; and co‑prime’s false assurances regarding the date when the site would be available to the delayed prime.

The court’s decision laid out very succinctly the facts that support a claim of interference against another prime contractor:

Unless the construction contracts involved clearly provide otherwise, prime contractors on construction projects involving multiple prime contractors will be considered to be as intended or third party beneficiaries of the contracts between the project’s owner and other prime contractors . . .  The courts have generally relied upon the following factors to support a prime contractor’s third party claim:

a.         The construction contracts contain substantially the same language;

b.         All contracts provide that time is of the essence;

c.         All contracts provide for prompt performance and completion;

d.         Each contract recognizes the other contractors’ rights to performance;

e.         Each contract contains a non‑interference provision; and

f.          Each contract obligates the prime contractor to pay for the damage it may cause to the work, materials, or equipment of other contractors working on the project.

In addition to claims against the other contractor, claims may also be made against the owner for failure to coordinate the work.

Question: What do you think are the most important factors supporting a claim like this?

As many of you know, I am heavily involved in the American Bar Association’s Forum on the Construction Industry.   For you non-lawyers, that’s a group (about 6,000) of geeky construction lawyers who get together three times a year for some of the best presentations on construction law, new technologies, risk management, financing, and many others hot topics.  In fact, at the end of the month we will be in the Bahamas learning how to be a better construction lawyer through best practices and technology (pdf).

As the Editor for the Forum Online, I have the privilege of assisting with the release of Construction ADR, a new book published by the Forum.  The book contains a detailed discussion and analysis of all aspects of ADR processes used in the construction industry including mediation, arbitration, DRBs, IDMs, and project neutrals. It provides both practical advice and analysis from experts in construction ADR and citations to case law, treatises, and other publications. The book is directed at the novice as well as the expert and will assist construction lawyers performing legal research as well as those looking for expert advice and analysis.

adrwebsite

For the first time…and this is what is most exciting…the Forum is including real time updates to the book at www.constructionADRbook.com.  The newest cases, concepts, articles, and analysis dealing with each subject will be available immediately online.  The chapter update section will also contain a blog, for commentary by many of the premier authors.

(Full disclosure: I am not an author, but I know many of them.  This is the real deal! Heavy hitters! I am the editor of the website, though.)

Earlier in the year, I made an April Fool’s Day  joke on Twitter about the Supreme Court granting an appeal in a construction dispute. Apparently, the joke was on me…because the Supreme Court did take an appeal in a construction dispute!

On December 3, 2013, the Supreme Court issued its opinion in In re Atl. Marine Const. Co., Inc., which reversed the Fifth Circuit’s decision reported at 701 F.3d 736 (5th Cir. 2012).

Forum selection clause.  The underlying dispute related to a subcontract agreement on a construction project located on Fort Hood in Texas. When the general contractor did not pay the subcontractor for its work, the subcontractor filed a lawsuit in federal court in Texas based upon diversity jurisdiction (…that means a dispute in excess of $75k between parties of different states…).  The general contractor tried to get out of the lawsuit by filing a motion to dismiss or, in the alternative, tried to get the case transferred to Virginia based upon a forum selection clause in the subcontract agreement.

Trial court.  The trial judge did not dismiss the case, nor did he agree to transfer the case to Virginia.  The court held that the project, and most of the project documentation, was located in Texas.  In addition, almost all of the witnesses lived in Texas and would not be able to testify if the case were transferred to Virginia.

The appeals court.  The general contractor filed an appeal to the United States Court of Appeals for the Fifth Circuit in the form of what was called a Petition for Writ of Mandamus in an attempt to reverse the trial court’s ruling. The Fifth Circuit denied the writ petition.  All three panel members agreed that the standard for obtaining a writ of mandamus was not met in this case.  One of the panel members agreed with the result, but wrote a concurring opinion.  In its decision, the majority of the panel concluded that the parties’ contractual choice of forum was not the only factor which should be weighed in a motion to transfer venue.  Stated differently, the majority reasoned that the federal venue statutes, not the parties’ contractual forum selection clause, should govern whether Texas, as opposed to Virginia, was a proper forum for the case to be heard.

The Supreme Court. SCOTUSblog has all of the key documents and dates leading up the Supreme Court’s decision. The issues on appeal were: (1) Whether the Court’s decision in Stewart Organization, Inc. v. Ricoh Corp. changed the standard for enforcement of clauses that designate an alternative federal forum, limiting review of such clauses to a discretionary, balancing-of-conveniences analysis under 28 U.S.C. § 1404(a); and (2) whether district courts should allocate the burdens of proof among parties seeking to enforce or to avoid a forum-selection clause.   In the end, the Court concluded that the forum selection clause was enforceable–the Court also said the parties’ contract should be followed unless extraordinary circumstances exist. The Court found that the proper procedure for enforcement is a motion to transfer venue as opposed to a motion to dismiss.

Practical implications.  While the issues in the case were not construction-specific, such as whether pay if paid clause is enforceable, the ultimate decision affects the contracting process for parties to a construction project.  This case provides a little more guidance to the construction contracting process, including the following:

  • Forum selection clauses will generally be enforced as written. As demonstrated in the Atlantic Marine Construction case, a court should enforce the agreement absent extraordinary circumstances.
  • When drafting a forum selection clause, you should think about all the where questions: (a) where the parties are located; (b) where the witnesses reside; (c) where the contract negotiations took place; and (d) where the project is located.
  • By requiring in your forum selection clause that disputes be resolved in state court, you can eliminate these issues from the dispute.  For example, the majority panel in Atlantic Marine Construction noted dismissal would have been proper had the parties’ forum selection clause required the case to be heard only in state court since federal courts may only transfer cases to other federal court.

Question: Have you read the decision? What are some additional practical implications?

My good friend and mentor Cordell Parvin once suggested that planning done by contractors for a successful construction project is not unlike the planning done by football coaches for a successful season. He is right!

Coaching football.  Successful football organizations consist of specialized teams or units: (a) the offense; (b) the defense; and (c) and special teams. Within those teams there is often a further specialization. For example, the defensive team consists of linemen, linebackers and secondary. All of these specialized units must plan and work together in order to be successful. In construction, the specialized units consist of crews headed by project engineers and/or foremen.

Successful coaches spend a great deal of time preparing for a season…so should contractors! Tweet this! In fact, they spend a great deal of time planning the team’s practices. Good coaches simply out-plan and out-prepare their competitors.

Planning the project. After a contract is awarded, the contractor’s first task is to put together a project management team. The makeup of the team will obviously depend on the size of the project and the contractor’s field personnel. On a big project constructed by a large company, there may be project engineers. On a smaller project, there may only be foremen. The team may or may not have been involved with estimating the project. Once the team has been assembled, the project engineers and foremen must study the plans and specifications in great detail. The project engineers must consult with the estimators to learn how the estimators conceptualized and bid the project. Taking the estimators’ concepts, the project engineers and/or foremen develop a detailed, coherent work plan for constructing the project.

Image: DH Parks

You probably saw last month’s report about a second work-related fatality at the construction site of the San Francisco 49er’s new football stadium. Police and fire investigators have determined that the truck driver’s death was a workplace accident and not a crime. 

The delivery truck driver was reportedly crushed by a bundle of rebar being unloaded from his truck. It’s the second worker death at the construction project. Examples like this are good reminders of the lessons to learn when investigating or handling an accident on a construction site. These include:

  • Prepare before the accident. It is important to prepare before the accident by having a checklist or best practices protocol to follow if an accident should occur.  This should include identifying chain of command for notice purposes, identifying internal investigation team members, identifying who will be a company spokesperson, and identifying your risk management team (insurance and legal).
  • Act diligently when an accident occurs.  Don’t waste all that preparation time before the accident and then not follow your protocol.  Make sure medical issues are resolved immediately and lock down the site for evidence preservation.  Make a list of all witnesses. Photograph and video the conditions.
  • Organize post-accident activities.  There may be contractual obligations, regulatory requirements and public relation issues that will come after the accident occurs.  Make sure that you review your contract to comply with any notice requirements that may need to be given.  If OSHA becomes involved in the workplace accident, then prepare for the investigation with your safety team and risk management team.
  • Manage the accident documents.  While on the job site, an investigator may ask to see certain records such as the OSHA 300 logs, safety manuals, first aid / medical records, training records, safety meeting minutes, inspection records, and accident reports. In order to keep track of what has been requested and provided to the investigator, make a list of all requested documents and keep a transmittal log of how various documents were transmitted.
  • Understand privileges.  Please note that accident reports should be reviewed by your attorney prior to production to any investigator.  Accident reports should be limited to the facts and should not contain any speculative theories or guesses as to why an accident occurred. If your attorney has directed the preparation of the accident report, that report is privileged and should not be produced to the inspector.

Most construction companies, at some point in their life, will experience a job site accident. It is important for your company to have a plan in place for the day.  What lessons learned can you share?

A flurry of American Disabilities Act (ADA) lawsuits have been filed in federal court in Nashville since the 2010 ADA rules took effect March 15, 2012. More than 40 of these lawsuits have been filed by enterprising lawyers because it is often easy to show a violation. So, what is the ADA Public Accommodation Law, and what are the challenges facing business and property owners?

My partner, Clark Spoden,wrote a post for the Nashville Biz Blog about these lawsuits:

The ADA law provides disabled persons the right to equal access to all private businesses that are open to the public. The purpose was "to provide clear, strong, consistent, enforceable standards addressing discrimination against individuals with disabilities." "Discrimination" under the ADA includes subtle forms of discrimination, such as difficult-to-navigate restrooms and hard-to-open doors that interfere with disabled individuals’ "full and equal enjoyment" of places of public accommodation. This includes any business open to the public and commercial facilities.

Many businesses and property owners are under the false impression that they are exempt or "grandfathered" because of the age of their building. All places of public accommodation are subject to the ADA, but the age of the facility does determine the level of required compliance. ADA requirements include: removal of architectural and structural communication barriers in existing facilities; design and construction of new facilities; alteration of existing facilities; and furnishing auxiliary aids to ensure effective communication.

Barrier removal measures include installing ramps, curb cuts at sidewalks and entrances, rearranging tables and chairs and vending machines, widening doorways, installing grab bars in restroom stalls and adding raised letters or Braille to elevator control buttons.

Recent lawsuits in Middle Tennessee have focused on shopping centers and restaurants, hotels and ATMs at financial institutions. Most of the shopping center and restaurant cases were against facilities built prior to July 1992 and were covered by the ADA’s "readily achievable" standard defined as improvements "easily accomplishable and able to be carried out without much difficulty or expense." Most of the violations were found in restrooms and parking lots.

A group of cases were filed against financial institutions because the voice guidance features at their ATMs failed. These "auxiliary aids" in the ATMs are voice-guidance software-driven technology that is susceptible to periodic failure. These failures appear to be fairly common and have helped fuel lawsuits in Nashville.

Next week, on November 14, 2013, Clark and a few colleagues will be giving a free seminar on the 2010 ADA Rules and what businesses and property owners can do to protect and defend against a lawsuit. The seminar is from 4:30-6:30 p.m., at Stites & Harbison, 401 Commerce St., Suite 800, Nashville. RSVP here.

We have all read about the consequences of the recent government shutdown,  including postal services ,  the housing market , and even OSHA investigations.  Thanks to my partner, Mark Leach, for sharing an example of how the shutdown has affected the transportation and road building industry.

Last year, the Department of Transportation issued a notice of proposed rulemaking for changes to the Disadvantaged Business Enterprise (DBE)  regulations. Based on the number of comments received, the proposed changes were revised to be classified as “significant,” which required a cost-benefit analysis. A public “listening session” was scheduled for October 9, 2013 to take comments to inform the cost-benefit analysis, with the time for submitting comments extended to October 30, 2013. However, because of the shutdown, the listening session did not take place.

The American Road and Transportation Builders Association (ARTBA) and the Associated General Contractors of America (AGC) recently asked for an extension for public comment because the listening session was expected to be rescheduled. 

It was just announced that the listening session will be rescheduled at a later date not yet specified. In the meantime, the AGC and ARTBA are asking its members to complete an on-line survey to gather information on how the proposed changes may impact contractors. The link to the survey is here: 

The survey will be open until the end of this week, November 1, 2013.

Image: Marina Noordegraaf

When parties to a construction project find themselves in a dispute, there are a few options to help find a resolution. These can include: engaging in informal settlement discussions, taking the dispute to an initial decision maker identified in the contract, or hiring a third-party mediator to help the parties find a resolution. If the dispute does not settle at that point, the parties can turn to the courts and engaged in litigation.

Alternative to Litigation. One alternative to litigation is arbitration, which is a quasi-formal hearing where the parties present their case to a neutral arbitrator or panel of arbitrators that issues a decision which the parties may or may not be required to abide by. Think of picking your own private courtroom and hiring your own judge or jury to decide the case.  Arbitration may be required by contractual provision, by statute, or by court order as a prerequisite to litigation. Additionally, parties may voluntarily submit to arbitration when they find they cannot resolve a dispute through negotiation. Once a decision is rendered, the party seeking to enforce an award by arbitration may petition the courts to confirm the award. Once confirmed, the award has the same enforceability as a judgment rendered by the courts.

The Demand. The process begins when one party makes a demand for arbitration, in writing, upon the other. In cases where arbitration is required by contract, statute, or court order, the consent of the other party is not needed. The demand letter serves as notice that the serving party wishes to exercise its legal right to arbitration. The parties may choose to employ an organization specializing in alternative dispute resolution to coordinate the proceedings or they may handle the process themselves. Using an organization usually entails payment of an administrative fee, in addition to hourly fees for an arbitrator.

Arbitrator Selection. The parties get to choose their own arbitrator or panel of arbitrators. If an organization is employed, the parties are given a list of available arbitrators with pertinent biographical information. Each party then excludes a given number of arbitrators from the list as a matter of right and the panel consists of those remaining. Arbitrators are usually experienced in the construction, engineering or contract administration areas. Frequently, arbitrators are either practicing or former attorneys although the nature of the proceedings do not require this, especially where the dispute involves no legal issues.

The Proceedings. An arbitration proceeding generally resembles a court proceeding in that both parties make opening statements where each summarizes its theory of the dispute. The petitioning party presents its case first, calling witnesses who are then cross-examined by the responding party. The responding party follows with its case in the same manner. Each party is generally represented by legal counsel although in cases involving purely factual issues, for example, where only the quality of the work is in question, parties frequently choose to represent themselves. The proceeding concludes with each party making a closing statement. At the end of the proceeding, the arbitrator either issues a ruling which is later followed up by a written opinion and award, or decides to take the matter under submission. In the latter event, the arbitrator may require written briefs from the parties if there are legal questions involved. The final ruling is usually issued in a period ranging from a few days to at most a month after the hearings are concluded and briefs received.

Arbitration versus Litigation. Even though the arbitration hearing closely parallels a typical courtroom trial, it is much less formal and yields results which are much less likely to be overturned by the courts than a trial court ruling. For instance, arbitrators do not follow the rigid rules of evidence that are strictly adhered to by the courts. Generally, most evidence a party desires to present is admitted unless it is redundant, excessive, or cumulative. Normal relevancy and hearsay rules are relaxed in favor of permitting the evidence to be presented, but appropriate weight is given to the accuracy or reliability of such evidence in the deliberation process. When in doubt, arbitrators will side with admitting evidence so as not to infringe upon a party’s due process rights. Also, documents admitted into evidence in an arbitration hearing are not subject to authenticity requirements unless the opposing party objects and provides a legitimate basis for concerns over authenticity. Sometimes, the arbitrator may visit the project when observation of the site will aid the arbitrator in resolving factual issue.

So What? Because arbitration can be started much sooner and concluded in less time than litigation, some feel it is more economical. Additionally, discovery is limited, which eliminates the need for lengthy depositions, interrogatories and document production. Critics argue that disputes are not justly decided by arbitration because discovery is so limited and relaxed rules of evidence and procedure admit testimony whose prejudicial effect greatly outweighs its probative value. These shortcomings have merit which parties to a contract should consider prior to including mandatory arbitration provisions. Before agreeing to arbitration provisions in a contract, parties should weigh the advantages and disadvantages of the arbitration process with that of litigation.

Image: William & Mary