Smith Currie Newsletters:
- Alternative Dispute Resolution "ADR"
- Arbitration Clauses
- Attorney Fees
- Bidding & Procurement
- Construction Connection
- Construction Finance
- Construction Law
- Construction Lawyer
- Corps of Engineers' Permits
- Design Professional Liability
- Design versus Performance Specifications
- Differing Site Conditions
- Disputes and Litigation
- Entitlement to Payment
- Ethics and Compliance
- False Claims
- Ferris Doctrine
- Government Contracts
- Hurricane Flood Disaster Cleanup
- Indoor Air Quality
- Labor & Employment Law
- Labor Inefficiency Claims
- Liquidated Damages
- Miller Act
- No Damages for Delay
- Non-Lienable Costs
- Past Performance Evaluations
- Payment Issues
- Performance and Payment Bonds
- Practical Documentation
- Project Labor Agreements
- Public Private Partnerships
- Redesign Services
- Reverse False Claims Exposures
- Scope Changes
- Sick Building Syndrome
- Small Business Procurement Process
- Time Extensions
- Understated Size of Project
- Effective Negotiation of Construction Claims
- Default Termination: Construction Contract's Death Penalty
- Effective Use of Email for Construction Project Communications and Documentation
- Agency Evaluation of Past Performance of Joint Venture
- Architect's "Final" Decision May Not Be Final
- Contract Notice Requirements
- Spearin & Design-Build Contracts
- Waiving Bid Requirements on Private Projects
- Agency's Denial of Construction Permit May Be Impermissible Taking
- Resolving Conflicts in Design Criteria
Claims and disputes in the construction industry are commonplace and often result in protracted and contentious litigation. The reality, however, is that most construction lawsuits settle before trial. Regrettably, settlement usually comes after much pain, suffering and expense. A prolonged and expensive legal battle is not likely to change the outcome; it will merely delay it. So, when a significant construction claim cannot be avoided, consider negotiating an acceptable settlement of the dispute before litigation ensues. If the parties can successfully negotiate a settlement of the dispute, then the parties remain in control of the result. How you approach the negotiation of a construction claim will determine your effectiveness in achieving a good or acceptable result. In developing your approach, consider the following points.
Most well-drafted construction subcontracts expressly recognize the general contractor’s right to terminate the subcontract upon the default of the subcontractor. Typically, the specific events and circumstances that constitute a default are enumerated in the subcontract. A typical subcontract, for example, may provide that the subcontractor shall be deemed in default if the subcontractor (a) fails to prosecute the work with promptness and diligence, (b) fails to prosecute the work in a workmanlike, skillful, cooperative, safe, and careful manner, (c) fails to supply sufficient, adequate or competent supervision, (d) fails to furnish a sufficient number of properly skilled workmen, (e) fails to supply sufficient materials and equipment of the proper quality and quantity, (f) fails to promptly correct defective or deficient work, (g) fails to promptly pay its sub-subcontractors or suppliers or otherwise fails to faithfully discharge its financial obligations on the project, (h) fails to maintain the project schedule or otherwise materially delays the work of the contractor or other subcontractors, or (i) fails to submit any required progress, procurement, and man-hour completion schedules.
Most well-drafted construction subcontracts also provide the subcontractor with an opportunity to cure a default before the contractor is allowed to exercise its right to terminate the subcontract. Termination is an option not to be invoked lightly. Given that a termination for default is the construction industry equivalent of capital punishment, it is important that the subcontractor be given an opportunity to cure a default. Similarly, alternatives to termination should be carefully considered in advance and addressed in the subcontract. The extreme act of termination should not be the contractor’s only option in dealing with a subcontractor’s default.
From the fountain pen, to fax machines, to email, profound advances in technology have brought us to an era where instant messaging is the norm. Technology has dramatically changed the way and speed in which we communicate. Not surprisingly, modern construction contracts frequently acknowledge that the parties will communicate electronically, and many contracts provide specific protocol for the transmission and sharing of electronic information. The electronic exchange of project information can provide substantial benefits to the project team in terms of efficiency and productivity. Whether by email or by computer-to-computer File Transfer Protocol, electronic transmission of submittals, shop drawings, applications for payment, RFIs, field instructions, notices, meeting minutes, and routine project correspondence can result in significant time and cost savings.
In Glenn Defense Marine (Asia) PLE LTD v. United States, 720 F.3d 901 (Fed. Cir. 2013) Glenn Defense Marine (Asia) (GDMA) protested the award of a contract to Multinational Logistic Services Ltd. (MLS) for maritime husbanding support for Navy ships visiting ports in South Asia. The solicitation for proposals for the contract stated that the Navy would evaluate three factors: Technical Approach, Past Performance, and Price, with the combined nonprice factors weighted “significantly more . . . than price.” The Navy indicated that it would engage in a trade-off process and award the contract to the offeror with the best value proposal. Read More ›
In Caddell Construction Co., Inc. v. United States, 111 Fed. Cl. 49 (2013) the Court of Federal Claims addressed an agency’s evaluation of a joint venture offeror’s past performance. While recognizing that an agency typically has discretion when evaluating proposals, the court held, even when reconsidering its initial determination, the agency must, however, have and state a rational basis for its decision. Read More ›
An architect specified as Initial Decision Maker (“IDM”) in an AIA contract wears many hats: independent design professional, owner’s agent on the construction site, and impartial decider of disputes. But is the architect also the judge and jury? Read More ›
When an issue arises that will adversely impact the project’s budget or schedule, most contract forms require the contractor to provide the owner notice of the issue and its expected impacts within a stated period of time. Depending on the facts and circumstances, failure to do so may result in the contractor waiving its right to additional compensation or time. That is exactly why a subcontractor’s $1,136,608 claim for delays, extra work, and the resulting need to accelerate its work was denied in Central States Mechanical v. Agra Ind., Inc. (D. Kan. 2012) 2012 WL 3896940. Read More ›
How does the Spearin doctrine apply in a design-build context? A design-build contract can transfer the risk of faulty design from the owner to the design-builder. To the extent that the contractor supplies the plans and specifications, it, not the owner, impliedly warrants their adequacy and sufficiency. Thus, an owner may assert that it is shielded from any Spearin liability when the design results in cost overruns or does not work.
Recently, the Civilian Board of Contract Appeals rejected this very argument in Drennon Constr. & Consulting, Inc., v. Department of the Interior, CBCA No. 2391, 13-1 BCA ¶ 35,213. The decision highlights that even within the context of a design-build project, the contractor may recover based on the Spearin doctrine’s implied warranty of plans and specifications and the owner’s control over elements of the design.
The procurement of construction services by public entities is a closely regulated process as local, state, or federal laws and regulations establish the procedures that public entities must use. These seek to avoid corruption, favoritism, and other ills that may lurk behind expenditures of public funds.
Private owners and contractors on private projects are not held to the same strict laws. Instead, contracts for private projects can generally be awarded using whatever selection process the owner or contractor chooses. Even then, there are few rules that obligate a private party to award to a particular contractor. The federal district court decision in Central Masonry Corporation v. Bechtel National, Inc., 857 F. Supp. 2d 1160 (D. Colo. 2012) is a good example of the discretion afforded to private owners and contractors, even to the point of waiving bid requirements for some bidders while mandating strict compliance from others.
It is not unusual for a general contractor/CM firm to assist an owner/developer to obtain an environmental permit for a project or find itself exposed to risks related to the permitting process. This permitting process can be both time consuming and costly. Accordingly, an appreciation of the limits on the public agency’s discretion to require concessions before issuing a permit is essential.
In Koontz v. St. John’s River Water Management District, 570 U.S. ___, 133 S.Ct. 2586 (2013) the U.S. Supreme Court addressed a permit denial by a state agency after a developer refused to pay for off-site remediation of state-owed wetlands. The Court ruled that the situation is subject to the same Fifth Amendment constitutional “taking test” that governs an agency’s demand that a developer relinquish an interest in real estate as a condition for issuing a permit. In practical terms, this means that an agency’s demand for a monetary payment as part of the permitting process must be related to and be roughly comparable to the cost to remediate the impacts that would be caused if the project were permitted.