One of the basic, yet most important, aspects of project documentation includes effective use of an on-going and detailed set of daily reports. Too often, daily reports are submitted to the contractor’s office merely noting the date, the weather, a broad description of the work being performed, and sometimes, a listing of employees and equipment present. This type of report will usually prove insufficient to support a request for additional compensation or change order claim.

Even on a perfect day, when no problems arise and production is favorable, effective project management principles require more detailed reporting.  Here are some tips when training your project team about daily reports:

  • Report the normal and the abnormal. Construction personnel are often–erroneously–led to believe that daily reports should be long and detailed only on those days when owner-caused problems are encountered. Admittedly, contractors can claim success when they devise a system that provides detailed reporting on days problems occur. But frequently, daily progress reports are used as a means of proving what happens on the project when things are normal. For example, suppose a utility crew’s daily progress is adversely affected by an unexpected obstruction, the risk of which you did not contractually assume. To prove the obstruction slowed the crew’s production, you may present: (a) your original estimate showing anticipated production; (b) notes on each daily report estimating how much additional production could have been achieved for the day but for the obstruction; or (c) daily reports indicating actual production for the same work when it was free from interruption.
  • Other projects may be relevant.  Being able to produce daily reports detailing other projects with similar conditions and degrees of difficulty will place the contractor in a better position than merely presenting the project estimate. At the very least, the daily reports from another project will add legitimacy to the estimate and remove some of the owner’s skepticism of paying out claims based on the total cost approach.
  • Include work categories and/or cost codes.  Daily reports should include the hours each employee and piece of equipment worked on the project by work category or cost code. In addition, the locations where the work was performed should be recorded. For larger companies with payroll or personnel departments, the daily report should be a multi-copy form so it is not tied up routing through various departments. If the project is large, or if work is being performed by crews, each crew should complete a separate daily report. Reports should be designed to operate as checklists. The checklist format prompts supervisors in every category of information desired.

Finally, contractors should demand that daily reports remain just that: daily! Allowing supervisors to fill reports out at the end of the week leaves too much to memory and is certain to result in inaccurate and brief reports. When supervisors are allowed to fill out reports from personal diaries, the mental prompting so important to accurate reporting is lost. In addition, after-the-fact reporting may result in a court refusing to admit such reports as evidence.

Image: Dan Moyle

One of the largest groups for construction lawyers is the American Bar Association’s Forum on the Construction Industry.  In the weeks leading up to to the Forum’s 2012 annual meeting in Las Vegas, Nevada last month, a number of construction attorneys and I were feverishly reviewing submissions for Division 10’s annual Construction Law Update.  The document is a compilation of cases and legislation affecting the construction industry.  The updates are provided throughout the year by attorneys all over the country.  This year, Division 10 released its 6th Annual Update.

The following are examples of the types of information that you will find in the Construction Law Update: Cases and Legislation Affecting the Construction Industry (2011-12):

  • Senate Bill Number 59, Alabama 2011 Regular Session. The bill amends §§ 6-5-221, 6-5-222, 6-5-225 and 6-5-227, Code of Alabama, 1975, reducing the statute of repose for actions against an architect, engineer or builder from 13 years to 7 years from the substantial completion of the construction of an improvement on or to real property. This Bill will become effective upon signature and approval by Governor Robert Bentley.
  • In William Smith v. Krishna Pinnamaneni et al., 2011 Ariz.App. LEXIS 59, 607 Ariz.Adv.Rep. 35, (2011), the Arizona Court of Appeals held that the defense of lack of licensure could be waived if not timely and appropriately raised in an arbitration proceeding. Accordingly, the Court rejected defendants’ claims that the plaintiff contractor was not appropriately licensed and therefore was precluded by statute from pursuing its affirmative claim when defendants first raised the defense after plaintiff moved to confirm the arbitration award. The Court noted that contracts executed by unlicensed contractors are voidable, not void, and that unlicensed contracting constituted an affirmative defense that could be waived like any other affirmative defense.
  • In Midwest Asphalt Coating Inc. v. Chelsea Plaza Homes Inc, 45 Kan.App.2d 119, 243 P.3d 1106 (Kan.App. 2010), the Court reaffirmed that claims for breach of contract and quantum meruit are mutually exclusive and a quantum meruit claim is permitted only if the contract is unenforceable. Additinally, pursuant to Kansas Fairness in Construction Act (K.S.A. §§ 16-1805 and 16-1806) attorney fees and costs are recoverable only if “undisputed” sums are not timely paid. Here there was a dispute if the work was completed and thus the amount owed was disputed. The Court also reasoned that even if it was a quantum meruit claim the amount was not liquidated or still in dispute until an award was made and thus fees are not recoverable.
  • In Voigt Consultants, LLC v. Plymouth Crossroads Station, LLC, 2011 WL 1119697 (Minn. Ct. App. March 29, 2011), the court held that, in order for a mechanic’s lien to have priority, a mortgage holder must have actual notice that the lien claimant had not been paid. Moreover, the mortgage holder has no affirmative duty to inquire about whether the mechanic’s lien claimant has been paid in full.

There are updates from all over the country.  In addition, we have included references to recent federal legislation that affects the construction industry. If you would like a copy of the Construction Law Update, all you have to do is the following:

  1. First, go to the ABA Forum’s main website
  2. Then,  look to the left column and connect with the Forum via Facebook LinkedIn, or Twitter
  3. Finally, send me an email saying which you did.

If you would like copies of the past year’s updates, please see my Resources, Articles, Presentations page.

You will rarely find me advertising on this blog.  However, since I have received numerous inquiries about my presentation at the AGC National Conference in Honolulu last month, I am pleased to announce that I will be doing a similar Webinar tomorrow, Wednesday, May 2, 2012 at 1:00pm EST. 

You can learn best practices for documentation and record management in this 90-minute webinar — From Paper to Paperless: Controlling Construction Documentation, Improving Record Management and Identifying Risk in an Electronic Age. This interactive program will provide you with guidance to help you develop effective procedures for documenting your projects, including the transformation to the paperless project. You’ll get answers to your pressing questions about electronic evidence on a construction project, including the legal issues surrounding social media. This course will explore:

  • Why are proper records so essential for claims and disputes?
  • “Putting it in writing” rule – what should you record?
  • What is the hearsay rule?
  • Critical project documentation – what you absolutely need to document; and non-critical documentation – what you don’t need to document
  • How to use project management software and Web-based capabilities to move towards a paperless project, establish good audit trail and consolidate project documentation
  • Are electronic documents subject to the same discovery rules as paper documents?
  • Is a written instruction via e-mail the same as a change order?
  • How do social media platforms (Twitter, Facebook, MySpace) affect your project? Do you need a social media policy for your employees?
  • AND MUCH, MUCH MORE!

To register and receive a special blogger’s discount, follow this link.

A recent ENR headline caught my attention: “Structural Engineers Learn Lessons From Failures Through Digital Databases.” The article by Nadine Post discussed a new digital database—similar to YouTube, SharePoint and Wikipedia—being developed by structural engineers to “harness knowledge” to avoid future loses.  

As noted in Post’s article, “[w]ith global engineering research, knowledge and failure data at their fingertips, designers are able to connect the dots as never before.”  Whether it is a post-construction meeting, survey or other analysis, construction industry players are wise to understand the legal implications associated with harnessing knowledge of lessons learned.

Is this type of information discoverable in subsequent litigation? Any lawyer worth his weight in gold would give you the only correct answer: It depends!  The key question is whether a “self-critical analysis” can be used by the opposing party as evidence of liability, breach of contract or violation of some standard of care. The courts have treated the issue differently—a few of which hold that these type of documents are “privileged” and are not discoverable. The self-critical analysis privilege should not be confused with attorney-client communications, which as a general rule are privileged and not discoverable.

The Majority Rule.  Most courts have rejected the self-critical analysis privilege entirely or defined it vary narrowly. Examples of project documents where courts have rejected application of the self-critical analysis privilege include:

  • Safety review and meeting notes
  • Quality control documents
  • Audit documents and other information
  • Environmental assessments and analysis
  • Internal communications and corporate reviews

Ultimately, you need to be concerned that any document containing your company’s self-critical analysis is generally not privileged and, therefore, will be subject to discovery in the event of litigation. However, this should not dissuade you from using “lessons learned” or “best practices” to ensure future successes and to avoid future losses.

Image: Paul Garland

I just received an email this morning from ConsensusDocs, announcing that they will be offering a new and significantly improved new technology platform for ConsensusDocs contracts within the next two weeks that will improve the contract process.  

I have been involved in some of beta-testing and I am really excited about this platform for attorneys, contract managers, and anyone dealing with the construction contract process.  Below are just a few of the many new features that are included in the new system:

  • 24/7 Access – Access your contracts anytime from anywhere via our new secure cloud-based system.
  • Easy to Edit – If you know how to use MS Word®, you know how to customize ConsensusDocs contracts.
  • Easy to Collaborate – Invite anyone to collaborate on your contract for free – you control editing rights.
  • Create Favorites – Create “Favorites” from ConsensusDocs contracts that have been modified to meet your unique needs.
  • Convert & Compare – Comparison tools allow you to easily see changes from one document version to another. Upload and convert your own documents.
  • Free Guidance – User instructions are embedded within the contracts and reference the free ConsensusDocs Guidebook.

Question: Have you used any of the ConsensusDOCS?  What about other online platforms?

Noted author and business attorney, Peter Siviglia, once said: "In this world, … there are two forms of writing: creative (such as novels, plays, and poetry) and expository (such as treatises, letters, memorandums, and briefs).  I’ve tried both and prefer a third: contracts, which do not entertain, do not convey information or ideas, and do not try to persuade."

In the world of commercial real estate and construction contracts, Siviglia hit the nail on the head.  Using some of Siviglia’s tips in Courses on Drafting Contracts, 12 Scribes J. Legal Writing 89 (2008-09), here are a few items to think about when drafting contracts:

  • A contract is about defining transactions and relationships.  This more more than the definition that we learn in law school (i.e., "An agreement between or among two ore more parties for the purpose of …").  According to Siviglia, the contract will help define: (1) a transaction, such as the purchase of real estate; (2) a relationship, such as a partnership, or (3) a combination of both, such as a partnership to purchase and develop real estate.
  • A contract is a set of instructions.  Just like the building plans and specifications instruct the contractor how to build the water treatment plant, commercial condo or new hospital, the written contract instructs the parties on their course of conduct in the transaction.  And when problems arise … and they will … the written contract instructs the parties on how to perform in such circumstances.
  • A contract should include standard provisions.   Although each contract is different, there are a number of terms and conditions that are part of the "A Player" list, including: 
  1. Termination, which defines the parties’ rights to terminate the contract;
  2. Assignment, which outlines whether the parties are allowed to assign their rights to another party and the terms in which they are allowed to do so;
  3. Governing law, which defines the law (i.e., Tennessee, Virginia, New York) that will apply to the parties’ contract in terms of both substance and procedural issues;
  4. Disputes, which defines whether the the parties will litigate in court, mediate, or arbitrate;
  5. Notice, which identifies where legal notice of disputes, claims, changes, etc. are directed;
  6. Modifications, which outlines the procedures for modifying or amending the contract terms (not to be confused with a "changes" clause);
  7. Changes, which outlines the procedures for modifying or changing the scope of work by one of the parties (not to be confused with a "modification" or "amendment" clause);
  8. Claims, Rights and Remedies, which describes the method for submitting claims and may also include rights to recover or limit certain types of damages (consequential damages, liquidated damages for delays, attorneys’ fees, interest); and
  9. Indemnification, which describes the circumstance in which one party may have to indemnify (or pay the losses or claims) of the other party for some legal purpose.

Of course, each transaction or relationship should have a written contract tailored to its own project or development needs. In other words, while standard form agreements can be used on successive and multiple transactions, each project should nonetheless be reviewed for the applicability of particular standard form provisions to the particular project.  On occasion, circumstances dictate the necessity of revisions to your standard agreement.

A week does not go by without a friend, colleague, or new acquaintance asking me, "How do you do it all?"  The short answer: "It’s tough … very tough … but I have some help.  For home and family issues, I have my lovely wife.  For unloading the dishwasher, I have seven children.  For getting out letters, I have an outstanding legal assistant.  For researching legal issues, I have a number of associate attorneys who can help.  And for blogging and staying current with the construction industry, I have Google Reader." (…Okay, so my answer was not that short…)

I use Google Reader to track and scan hundreds of blogs, news sources and Twitter feeds relating to the construction industry, leadership, marketing and social media.  Rather than try to explain how it works, check out the following short video:

Now, let’s see how Google Reader has helped my blogging efficiency for an actual blog post.  Last month, I read an article in my Google Reader about a skull and human bones found at a San Carlos construction site. Since the article highlighted what I thought was an instance where "best practices" can help a contractor in such a situation, I blogged about the incident, as well as some construction management tips. 

How can Google Reader help you? The tool can be used:

  • To track your "go to" websites that you regularly check
  • To track certain terms in the mainstream media (i.e. "construction bids Tennessee" or "green incentives for developers")
  • To follow certain Twitter feeds for people or terms

Since words have different meanings to people, there may be problems with some of the initial feeds you set in Google Reader.  It may take time to determine whether the inquiries you set are returning useful information.  Overall, this is a "must use" for anyone who wants to be a leader in their industry.

Today’s guest post is written by Joe Hardesty, who handles complex litigation in construction and business disputes. He has defended and prosecuted claims for clients arising from major construction projects throughout the country, surety disputes, commercial real estate disputes and a variety of disputes arising from business transactions. He also advises clients on matters related to government contracting and compliance.

 

Does a construction manager have a duty of care to employees of contractors and subcontractors to provide a safe project site? This was the question that the Indiana Supreme Court addressed in its opinion issued on March 22, 2012, in the case of Hunt Construction Group, Inc. v. Garrett.

The Facts.  Hunt was the construction manager agent for the construction of the Lucas Oil Stadium in Indianapolis and had contracted with the owner, the Indiana Stadium and Convention Building Authority. Baker Concrete Construction, Inc. had also entered a contract with the Stadium Authority to perform concrete work on the stadium. Shannon Garrett, an employee of Baker, was injured while removing forming material from concrete. Garrett pursued a workers compensation claim against her employer, Baker, but also sued Hunt, the construction manager, for negligence in not providing a safe job site.

The Opinion. The Indiana Supreme Court addressed the issue of whether a construction manager has a legal duty of care for job site safety to employees of contractors and subcontractors. The Court held that a construction manager has a legal duty of care to workers on the job site for job safety in only two circumstances: (1) when such a duty is imposed on the construction manager by a contract to which it is a party; or (2) when the construction manager assumes such a duty, even gratuitously or voluntarily.

In this case, the Court found that there were no provisions in the construction manager’s contract under which Hunt contractually accepted the duty to maintain safety on the project. The Court noted that the contract provided that the contractors, not the construction manager, have the responsibility for project safety and the safety of their employees. The Court found no safety provisions in Hunt’s contract that imposed any specific legal duty to or responsibility for the safety of all employees on the construction site. Therefore, the Court held that Hunt’s contract did not create a duty to employees for job site safety and that Hunt’s only responsibilities for safety were owed to the Stadium Authority.

The Court next considered whether Hunt had assumed a legal duty for job site safety through its conduct beyond that required by its contract. The Court stated that a construction manager could be responsible for job site safety to individual employees where it specifically agrees to take on specific safety responsibilities beyond those set forth in its contract. Examples of such conduct are appointing a safety director, initiating weekly safety meetings, directing that certain safety precautions be taken and inspecting the job site for safety. Garrett argued that the fact that Hunt’s safety representative conducted safety committee meetings every Monday and inspected the site daily for violations of the project safety program demonstrated that Hunt had assumed responsibility for job site safety and owed a duty to workers for job site safety. The Court found that these activities were activities required by Hunt’s contract with the owner and, therefore, these were not additional duties voluntarily assumed by Hunt to job site workers. Hence, the Court found that Hunt did not assume specific supervisory responsibilities for job site safety beyond those set forth in its contract and, therefore, there was no duty owed by Hunt to Garrett or other workers for job site safety.

Lessons Learned.  This case focused only on the issue of whether a construction manager owes a duty to workers for job site safety such that individual workers would have a claim against the construction manager. It found that a construction manager’s duty for job site safety is normally only owed to the owner rather than to individual employees of contractors and subcontractors. Construction Managers should note, however, this case did not address what liabilities a construction manager might incur to OSHA for job site injuries. Construction managers must assess not only its duties to owners and workers for job site safety but also its legal obligations under OSHA.

The NCAA college basketball tournament is not the only exciting game in town.  The American Arbitration Association (AAA) recently announced a game changer called Arbitrator Select.

Although potential mediators have always been available prior to disputes being filed, the AAA will now assemble potential lists of arbitrators without a case filing or case fee payment.  While it would be nice if this service were free, there is a refund of the case is ultimately filed with the AAA.  The charge for the service is based on the number of names requested.  Under this new Arbitrator Select service, the AAA will also get conflicts run by the potential arbitrators.

Why would this be helpful for the construction lawyer, contractor or developer?  For as long as I have practiced law, arbitration has been touted as "the cheaper, quicker method of dispute resolution."  And for just as long a period of time, there have been critics to that statement.  By allowing parties to begin the selection process on the front end to check the availability of an arbitrator or panel of arbitrators before investing in the process, AAA is cutting some of the time and investment cost.  It will be interesting to get some feedback from those who have used the new service.

You can read more about the Arbitrator Select service in this AAA brochure.

Image: The West End

(Bonus Questions: Who’s in the picture above?)

In June of this year, one of my partners Greg Young and I will be speaking at the AGC Environmental Conference in Washington, DC.  Our panel discussion will focus on the dangerous intersections between construction law and environmental law.  One of those crossroads is the applicability of the Clean Water Act to construction projects.

Yesterday, the United States Supreme Court handed down a unanimous decision in the closely watched case of Sackett v. Environmental Protection Agency. Reversing the courts below, the Supreme Court held the Sacketts have the right to challenge an EPA decision that their property contained wetlands:

“[T]here is no reason to think that the Clean Water Act was uniquely designed to enable the strong-arming of regulated parties into ‘voluntary compliance’ without the opportunity for judicial review—even judicial review of the question whether the regulated party is within the EPA’s jurisdiction. Compliance orders will remain an effective means of securing prompt voluntary compliance in those many cases where there is no substantial basis to question their validity.”

The Clean Water Act does not preclude judicial review under the Administrative Procedures Act (APA) and, thus, the Court remanded the case to allow the Sacketts to bring a civil action under the APA to challenge the issuance of the EPA’s order.

For transportation and other development projects, which frequently have to deal with issues of wetlands jurisdiction, this decision will hopefully lead to a process where EPA jurisdiction can be challenged up front and early in the planning process rather than waiting for the EPA to assert a violation after the fact, as it did with the Sacketts. No doubt, the decision will also have a dramatic impact on EPA’s actions to demand administrative compliance.