Tweeting Supreme Court DecisionsA fellow Twitter friend, @danielschwartz, promoted a technology symposium on his Connecticut Employment Law Blog yesterday.  In order to spread the word about the symposium, he challenged his readers and fellow Twitter followers to tweet about their favorite Supreme Court case in less than 140 characters.  

As I thought about the construction industry, there was only one decision that kept coming to mind.  It involved a contractor who agreed to build a dry-dock in the Brooklyn Navy Yard.  In order to build the dry-dock in the site selected for it, the contractor was required to relocate a portion of a sewer that ran through the specified site. The owner (the United States) provided the plans and specifications for the sewer that was to be relocated.  The contractor completed the work according to the plans and specifications.  The owner approved and accepted the work.  But wait … about a year after the relocation of the sewer, a dam in a connecting sewer caused flooding in the area excavated for the dry-dock. This dam was not shown on the owner’s plans and specifications.  That’s the background and here is my tweet: 

US v. Spearin: Owner designs. Contractor builds. Owner accepts. Work sucks. Owner sues. Contractor absolved. Owner loses.

If you live in the government contracting world, don’t start sending me emails about how wrong I have described the Spearin Doctrine above.  Let me expand my statement beyond 140 characters and give you some more information about the 1918 decision in United States v. Spearin:

  • The Rule. The Spearin Doctrine is legal principle that holds that when a contractor follows the plans and specifications furnished by the owner, and those plans and specifications turn out to be defective or insufficient, the contractor is not liable to the owner for any loss or damage resulting from the defective plans and specifications.
  • Exceptions to the Rule.  In 2007, the Ohio Supreme Court rocked the construction law world by significantly limiting the application of the Spearin Doctrine.  In Dugan & Meyers Construction Co. v. Ohio Dept. of Administrative Services, the trial court applied the Spearin rule in favor of the contractor based upon alleged damages from the impact of an excessive amount of design changes.  On appeal, the Ohio Supreme Court reversed, holding that the Spearin Doctrine did not apply to cases involving delays due to design changes. Rather, the court focused its decision on the “no damages for delay” and “written requests for time extension” clauses in the contract.  Specifically, the court concluded: “We observed that the Spearin Doctrine does not invalidate an express contractual provision.” 
  • Applicability to Green Construction.  Last year, fellow blogger Chris Cheatham suggested that there could be a green Spearin Doctrine.  I am confident that the Spearin Doctrine would be applied equally to non-green construction projects and LEED certified projects, As noted by Chris, a guarantee by the contractor could invalidate any Spearin Doctrine defense by the contractor.  Sounds like the Ohio Supreme Court, right?  The Spearin Doctrine cannot invalidate an express contractual provision.

Any Spearin tid-bits that you would like to share? 

As you may be aware, one of the greatest risks on a construction project involves the payment process. Particularly in these economic hard times, a contractor and its subcontractors and suppliers expect to be paid on a timely basis once the work has been performed.

Pay When Paid Clauses: Enforceable?

Contractors have a means of shifting the risk of non-payment by the owner to the subcontractor by including a “pay when paid” or “pay if paid” provision in their subcontract.The enforceability of these types of clauses may be limited by your particular state or jurisdiction.

In Universal Concrete Products Corp. v. Turner Construction Company (pdf), the U.S. Court of Appeals for the 4th Circuit concluded that a “pay if paid” clause in a subcontract was not ambiguous and, therefore, enforceable against the subcontractor.  The work involved the construction of the Granby Tower Project in Norfolk, Virginia. The subcontract between the general contractor and the concrete subcontractor contained the following clause: 

“The obligation of contractor to make payment under this agreement, whether a progress or final payment, or for extra or change orders or delays to the work, is subject to the express condition precedent of payment therefore by the owner.”

The owner ultimately lost its construction financing on the project and abandoned the development. Since the contractor had not been paid for its work, it refused to pay the subcontractor’s work.  In a payment dispute between the subcontractor and contractor, the contractor argued that the “pay if paid” clause provided an absolute defense to payment. (Again, it should be noted that some states limit the enforceability of these clauses by either statute or case law. However, in Virginia, these types of clauses are enforceable so long as they are clear and unambiguous.)

The subcontractor argued that the prime contract between the owner and the contractor defined the cost of work to include “payments made” to subcontractors. Accordingly, the subcontractor argued that the contractor would, under the normal scenario, be paying its subcontractors and submitting the invoice to the owner as a “payment made” by the contractor. Both the trial court and the Court of Appeals disagreed, finding that payment from the owner was a condition precedent to payment from the contractor to the subcontractor.

 Courts across the country vary in their treatment of these issues. For example, in the Universal Concrete Products case, the 4th Circuit reasoned that Virginia courts favor the freedom to contract and that parties are freely able to negotiate and draft these types of provisions. However, in Thomas J. Dyer v. Bishop International Engineering, the 6th Circuit refused to enforce a “pay when paid” clause because the court determined that the clause was sufficiently ambiguous. In that case, the contract stated that “no part of payment shall be due until 5 days after the owner shall have paid the contractor.”  Other jurisdictions, such as California, New York and Nevada, have expressly ruled that the “pay as paid” clauses are unenforceable as a violation of state public policy.

So, what should your contracts provide?  What should you do to determine the enforceability of a “pay if paid” clause in your state?

  • Contact an attorney within your jurisdiction to determine whether there are any limitations of the enforcement of these type of clauses.  Since each state differs dramatically, it is in your best interest to determine the applicable standard in your state or the applicable law where the project is located or the governing law of the contract to determine this information.
  • Determine as between the parties who should bear the risk of non-payment. If you are a general contractor, you should make sure that your subcontracts include clear and unambiguous language placing the risk of loss for non-payment on the subcontractor. In addition to putting a timing mechanism on payment of funds to the subcontractor following a certain number of days after payment by the owner, it is also advisable to include a clause that “payment by the owner to the contractor is a condition precedent to payment by the contractor to the subcontractor”. In addition, you can make your subcontracts explicitly clear by stating that “the subcontractor assumes the risk of non-payment by the owner due to insolvency or other inability to pay”.

For the contractors out there, Universal Concrete Products is a good reminder of the importance of drafting clear and unambiguous contact terms between the parties.  It is worth the effort to seek legal advice on these issues prior to drafting and executing contracts with other parties.

For the legal practitioner, Universal Concrete Products again reminds us of the importance of legal research in our profession.  It is imperative that we, as a legal advisor, stay up to date on the case law within in our jurisdiction, as well as check other jurisdictions to help guide our clients through legal risks.

As I was flipping through the Wall Street Journal this morning, I saw a full page advertisement featuring C-SPAN’s Video Library with over 160,000 hours of video and over 115,000 political people.  I immediately hopped online and searched the word "construction" in the archives.  Below is the Washington Journal feed for February 17, 2010, where the guests are talking about the President’s commitment of $8.33 billion in loan guarantees for the construction and operation of two new nuclear reactors at a plant in Burke, Georgia:

http://www.c-spanvideo.org/videoLibrary/assets/swf/CSPANPlayer.swf?pid=292124-4&start=8&end=65

You can also search for transcripts and biographies of every person who has made an appearance in a C-SPAN covered event.  For example, you can search for all appearances involving representatives of the Associated General Contractors of America and get a number of results.

So, how might this unofficial government YouTube be helpful to you?

  • As a lawyer, it is a great resource for tracking the legislative history of certain Federal laws. You will have access to both hearings and transcripts.  If you want, you can view the entire hearing for free or you can purchase a DVD copy.
  • As a construction industry player, you can follow the legislative hearings that will affect your company.  For example, if you are road builder, you can track the stimulus funding on transportation projects.  In this November 19, 2009 hearing, witnesses testified about management and oversight of economic stimulus funds, particularly how recipients accounted for use of the funds, maintaining transparent accounting practices, the pace of federal spending, and projects and programs that had received funding.
  • As a lay person, you can watch the White House Daily Briefings, the Tea Party Convention in Nashville last month, or (if you are so inclined) the Tulane University Commencement Address featuring Ellen DeGeneres.

Let me know if you find any interesting tid-bits in C-SPAN Video Library.

You have a captive audience for 45 minutes.  You’ve worked hard on your presentation: slides, transition, talking point, and animation.  You are introduced.  You click on the first slide.  Nothing.  Your computer locks and you feel the sweat trickle on your brow as you hit, ctrl-alt-del.

This exact scenario occurred this afternoon as I was speaking at the Nashville Chapter of the Construction Specifications Institute.  The worst part was that my talk, Lessons from the Movies: Negotiating and Drafting Construction Contracts, absolutely required the use of a Powerpoint presentation.  So, there I stood, with two locked computers, a presentation that focused exclusively on movie clips, and a captive audience.

What should you do?  Here are some tips when your presentation goes bad:

  • Prepare for the "bad" before the presentation.  Since I had problems with a similar presentation, I thought I was prepared by bringing two computers.  Little did I know (or expect) that the second computer would not work either.  Luckily, I printed out my presentation earlier in the day and had some written notes on the slides.  I was able to adjust the presentation based upon my written notes.
  • Implement "humility" in your presentation.  When the first laptop went down, I chuckled.  When the second laptop went down, I smiled.  (I admit, I was not too happy on the inside!)  Although I had some written notes, this mishap gave me an opportunity to show the real me.  Rather than movie scenes, I talked about my marriage and children, which provided some good examples of negotiating and drafting contracts.  I talked about my move from Washington to Nashville, which provided some good talking points about reputation and integrity.  In other words, you can turn a bad situation into good by opening your own "book of life" and sharing some experiences.  Be humble.  They will understand. 
  • Remember the "point" of your presentation.  Of course, a presentation that has embedded video clips may be "more polished" than the previous speakers at this event.  However, you are presumably speaking because you have something to say … some words of wisdom … some advice.  Understand that "you" are the presentation, which may help prepare you for those occasions when the laptop fails.

Question:  What tips do you have for when the presentation goes bad?

A More Accurate Story?On Friday, I read a press release by the USGBC and blogged about the new International Green Construction Code (ICCG).  In my haste to avoid the traffic from the SEC Basketball Tourney in downtown Nashville, I quickly posted and jumped into my car to escape.  With all candor, my post was incomplete . . . I did not hit the bull’s eye!

This morning, I received a kind tweet from @AIAStateAffairs, the arm of AIA that supports government and community relations.  According to the AIA, here is a link to the more complete story.  Some of the more important facts and dates include the following:

  • The public version of the ICCG will be available today.
  • The public and AIA Members will be able to submit comments on the document through May 14, 2010.
  • In mid-August, comments will be considered in public hearings, with a view toward the issuance of an updated version of the code in early November.
  • Another round of hearings will be held in May, 2011 with the final action hearing occurring in the fall of 2011.
  • The final version of the code will be published in 2012.

According to the AiA article, architects must advocate for adoption of the IGCC as it is revised by building officials during the next stages of the code development process.  When the first public version of the IGCC is published in 2012, states and municipalities will be able to use the IGCC as a baseline for their own sustainable construction codes.  The IGCC is written in mandatory, legally enforceable language, which is unlike voluntary green building rating systems.  Finally, the IGCC includes post-occupancy building commissioning, as well as prescriptive versus performance-based metrics. 

@AIAStateAffairs, thanks for the sending me a note!

I know its late on Friday afternoon.  The SEC men’s basketball tourney is a few blocks away.  No one wants to talk about green building right now.  Most people around here only want to talk about BLUE!

But if I wait unil Monday, then I may forget to share this news and it might be too late! Four major organizations representing building safety professionals, energy and lighting engineers, green building practitioners, architects and technical standards developers have come together to establish the nation’s first model green building code (pdf) designed to rapidly advance green building practices across the United States. The four groups are: the International Code Council (ICC), the American Society of Heating, Refrigerating and Air Conditioning Engineers (ASHRAE), the U.S. Green Building Council (USGBC), and the Illuminating Engineering Society of North America (IES).

According to the announcement made yesterday, the groups are launching the International Green Construction Code (IGCC), which seeks to provide "the building industry with language that both broadens and strengthens building codes in a way that will accelerate the construction of high performance green buildings across the U.S."

The official launch date of the IGCC is March 15, 2010, when the groups will release the model language.  Of particular importantance to the release is the inclusion of Standard 189.1, which is described as follows:

Standard 189.1 is a set of technically rigorous requirements, which like the IGCC, covers criteria including water use efficiency, indoor environmental quality, energy efficiency, materials and resource use, and the building’s impact on its site and its community. Standard 189.1 was written by experts representing all areas of the building industry, who contributed tens of thousands of man hours. Developed in a little over three years, the standard underwent four public reviews in which some 2,500 comments were received.

It is great to witness the collaboration of these huge players in the green building industry.  But only a focused review of the new IGCC provisions and time will tell whether the stated goals will be met. Have a great weekend!

On Thursday, I will be joining a panel of construction attorneys and consultants to address the issue of aging infrastructure in America and, in particular, how to finance all the work that needs to be done.

Aging Infrastructure: Collapse at I-35

Our panelists include:

Christopher Montez, Thomas, Feldman & Wilshusen, LLP, Dallas, TX
Kenneth R. Baker, Hill International, Poway, CA
Sarah Biser, McCarter & English, LLP, New York, NY
Robert Rubin, McCarter & English, LLP, New York, NY
Dennis Staats, Navigant Consulting, Boston, MA

You can still register for the short webinar on the Forum’s website. Here are a number of answers that our panelists will try to answer:

  • What is the problem? Where are the major failures? 
  • What are the sources of funding?
  • How much money does the Federal Government want to pitch in?
  • What can contractors do to maximize their changes to win Federally funded work?
  • How may Public Private Partnerships help solve the problem?
  • What does it take for a PPP to be successful?
  • What can construction counsel do to help his/her clients in this arena?

If you have any questions that want answered in the webinar, it’s not too late.  Send me an email and I will make sure that one of the panelists addresses it.

The construction industry is one of the hardest hit in this down economy.  From the top to the bottom, from executive to business development and sales to project management, you may find that you have to dust off your resume to look for new opportunities. 

Can You Teach an Old Dog New Tricks?

An article by Joann Lubin in the Wall Street Journal yesterday highlighted a networking pro, George Landis, who had to learn some new tricks as his executive job ended last November.  Landis was described as a "deft conventional networker" who once relied on the traditional handshake.  Times are changing … and Landis realized it.  He agreed to learn networking in the 21st century. Here are the top tips from his informal advisors, as well as a few of my comments:

  • Develop a stronger online identity by revamping your resume.  For Landis, this meant changing his work summary from "a seasoned executive" to "I make sick companies significantly better for owners and employees."  From my perspective, it is also good to create an electronic version of your resume that contains hyperlinks to your work experience, notable projects, published articles and speaking gigs. (Here is an example of my electronic resume.)
  • Make better use of LinkedIn, a professional networking website.  For Landis, this meant reviving his inactive LinkedIn account.  You may already have hundreds of contacts in your old, dingy address book.  Now’s a good time to search those contacts for their online presence.
  • Create a more visible personal brand.  For Landis, this meant finding a new way to position himself as a thought leader in business management.  For the construction player, this means finding opportunities to speak and write.  There are local associations like AGC of Middle Tennessee that enjoy new faces at their lunches. You are also bound to find a local educational institution like MTSU that has a concrete management program that always needs guest lecturers. 
  • Get a bigger payoff from industry events.  For Landis, this meant joining the Turnaround Management Association and offering to assist in program development.  When you participate in the event organization, your start to become known as a good helper and volunteer.  Your name recognition and reputation builds.

At the executive and business development level, some of these tips may be easier to do than at the project management level.  But I think it comes back to identifying your passion and making that your job.  Former-construction-attorney-turned-marketing-coach Cordell Parvin shares 5 Keys to Success and Fulfillment and the second one is about finding your major definite purpose.  Perhaps your current circumstances allow you to look for new opportunities. And remember, you may be like Landis in your archaic networking ways, but even a pro can learn new tricks.

You don’t have to click too many times through your channels on your television set without finding a reality television show. There is one for finding the right man, losing weight to the extreme, rebuilding a destitute home in five days, and even eating spiders and beetles.

Earlier this week on the evening news I witnessed a reality show of sorts in the green building arena: an investigative report by a local news station about the construction of the new Music City Center in Nashville, Tennessee.

Location: A demolished building in downtown and a dumping site out of town.

Protagonist: Ben Hall, an investigative reporter from Channel 5.

Antagonist: A local demolition subcontractor involved in the project.

Plot: In a project committed to sustainable and green construction methods, will the subcontractor take the easy way out and simply dispose of the demolition waste rather than carefully pick through the recyclable materials?

Conclusion: See the video for yourself. [Cannot see the video, click here.]

This green building reality show illustrates one of the tensions between sustainable building practices and certified sustainable building practices.  Where a project is simply committed to sustainable building practices, conceivably there is no oversight.  The end product may contain energy-saving features or other green components, but the building methods may not change.

Where a project seeks LEED certification, as does the Music City Center, there should be requisite protections in place to monitor the reuse of recyclable material and the disposal of waste material.  "We’re going to try to keep as much out of the landfills by recycling it," said Larry Atema, Senior Project Manager for the Center. ". . . [F]or example, the steel to a steel recycler, the brick to a brick recycler."

So, where did checks and balances fail at the Music City Center?  According to Atema, "It should not have happened. . . . I think what is important at least to us, when we first learned of it, we went out and less than 12 hours later we had the steel picked out of the debris." According to the article, Atema said crews will have to do a better job of sorting. He said that the crews are now looking more closely at what leaves the demolition site.

It will be interesting to follow this project through construction, as well as the LEED certification process, to see whether the Music City Center wins its green building reality show prize.

Olympic Park Going GreenFor the next couple of weeks, the only thing you will see on our living room television is the Winter Olympics.  Luge…daring!.  Freestyle moguls…awesome!  Snowboard cross…cool!  Figure skating…good time to surf the Internet!

Last night, while watching figure skating surfing the Internet, I stumbled upon this article about the Olympic and Paralympic Village in Vancouver having received the highest certification for sustainable community development from the U.S. Green Building Council.  The LEED Platinum certification was announced Mayor Gregor Robertson on Tuesday morning.  According to the article, the Olympic village is the second development in the world to receive Platinum certification. 

Platinum certification was awarded to the $1-billion, 32 hectare South East False Creek neighbourhood development project based on a variety of factors including its proximity to the downtown core, affordable housing, green buildings and habitat restoration. . . .

“If we want to stand up and make Vancouver the greenest city in the world we are going to need some serious resources and aspirations,” said Roger Bayley, design manager for Merrick Architecture, the architects behind the project. “But I have no doubt that [the Village] is going to be profitable.”
 

The sustainability website inhabitat.com had a great overview of the sustainability features of the Olympic Village almost two years ago.  These included:  solar panels, green roofs, rain water harvesting systems, in-slab hydronic system for heating and cooling of the buildings, and all underground parking.

It is good to see that the Olympic Village attained its goal for LEED certification . . . a Platinum medal in the Olympics of green building.  Local community leaders want to use the Olympic Village as model for sustainable development to help Vancouver become the "greenest city in world."  

The problem? It came at a significant cost.  A $700-million bailout was required from the City in order to finish the construction of the Olympic Village, generating concern for the profitability of future LEED development projects.

The answer? As with many other green building issues, only time will tell.  First, we will have to wait until the end of the Olympics to see how Vancouver transitions Olympic Park into affordable housing for downtown residents.  Next, we will have to watch the performance of the sustainable buildings.  If private development can do it cheaper and faster with the same or comparable performance data, then there may not be the green community development anticipated by local leaders.