2011 – Construction Law

The Federal Prompt Pay Act Does Not Create A Private Right Of Action

Oct 24 2011

United States of Am. ex rel. IES Commercial, Inc. v. The Continental Ins. Co., Inc., Civ. Action No. 11-0985 (ESH), 2011 WL 4526018 (D.D.C. Sept. 30, 2011)

In this case, the court ruled that the Federal Prompt Payment Act (31 U.S.C. §§3901 et seq.) (the “PPA”) does not provide a subcontractor with an independent cause of action or an implied right of action against a Prime Contractor (or presumably its surety).

A prime contractor was awarded a contract by the United States Architect of the Capitol to perform certain design/build work on utility tunnels connecting the U.S. Capitol Power Plant to the Capitol. Included was electrical work which was, in turn, subcontracted to the Plaintiff, IES Commercial, Inc. (“IES”) in the sum of $118,600.00. Following disputes relating to certain changes and delays between the Prime and IES, IES sued the Prime’s Miller Act (40. U.S.C. §§3131 et seq.) payment bond surety. Thereafter, the Prime intervened and IES sued the Prime for (a) breach of contract and (b) violation of the PPA.

Building Information Modeling (BIM): Special Contract Issues

Oct 05 2011

By Gregory R. Andre, K&L Gates, Chicago

Building Information Modeling (“BIM”) is the use of a digital database to integrate the work of all of the design and construction project team members and generate two-dimensional and three-dimensional models, plans and reports. Cost and scheduling can be added to create fourth and fifth dimensions. It is a tool that facilitates design collaboration and is intended to avoid conflicts and errors in the plans. Simply stated, BIM makes design a group effort, and it raises special contract issues as discussed below. BIM can be used under all of the delivery methods, and is especially encouraged under Integrated Project Delivery (“IPD”).

Instead of each design professional (architect, steel fabricator, HVAC subcontractor, etc.) producing multiple separate and independent plans for one building, BIM allows a team of architects and engineers to all contribute their respective plan and specifications data to one computer model for one building. BIM provides the technology to not only coordinate various building component designs, but also to understand how design changes will impact the cost and timing of the project. The design of one building component, say the HVAC ductwork, can be changed, and BIM will automatically change the other building components to accommodate it and present the overall economic effect and schedule impact due to the change.

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Standards Applicable to Construction Site Safety, Conditions and Injuries

Oct 01 2011

Cain v. Bovis Lend Lease, Inc., 817 F. Supp. 2d 1251 (D. Or. 2011)

A subcontractor employee fell from a ladder at a hospital renovation site and suffered injuries. The injured worker sued the hospital, the renovation general contractor, the ladder fabricator (a subcontractor) and the architect. The worker’s direct employer was statutorily immune from liability. The case is the review of summary judgment motions by all parties resulting in a recommended series of decisions by a federal magistrate.

Appellate Court Upholds Contract Requirement For Arbitration of Disputes

Sep 25 2011

Gemstone Builders, Inc. v. Stutz, 261 P.3d 64 (Or. Ct. App. 2011)

Contractor sued homeowners, who had hired contractor to build a home for them. Contractor sued for breach of contract, unjust enrichment and fraud. The parties disagreed regarding the interpretation of their contract as it pertained to arbitration. The contractor argued that the terms were irreconcilably contradictory, making the arbitration provisions unenforceable. The homeowner sought to compel arbitration. Addressing the issue, the trial court denied defendants’ petition to compel arbitration and defendants appealed.

Recent Third Circuit Decision Provides Insight into Pennsylvania’s Approach to CGL Coverage for Faulty Construction Claims

Sep 23 2011

By: Richard F. Paciaroni & Amy Ream, K&L Gates, Pittsburgh

Despite substantial uniformity in language among commercial general liability (“CGL”) policies, the extent of coverage can vary depending upon which state’s law applies. One contested issue among the states is whether CGL policies should extend coverage for property damage caused by faulty construction, and what the extent of any such coverage should be. This article discusses a recent opinion reflecting the current status of Pennsylvania law with respect to CGL coverage for faulty construction claims, and briefly touches on the policy behind Pennsylvania’s existing approach.

A recent Third Circuit decision applying Pennsylvania law, Specialty Surfaces International, Inc. v. Continental Casualty Co., addressed the scope of an insurer’s duty to defend and indemnify a contractor for faulty workmanship claims under a CGL policy. In Specialty Surfaces, the source of the defective construction allegations stemmed from a project to install synthetic turf fields and drainage systems for four schools in the Shasta Union High School District (“Shasta”). Empire and Associates, Inc. (“Empire”) was hired as a subcontractor to provide and install synthetic turf fields manufactured by Specialty Surfaces, Inc., (“Specialty Surfaces”) as well as to install drainage systems. Empire and Specialty Surfaces, working together as “Sprinturf,” provided an eight-year warranty for each of the fields.

To continue reading and to view footnotes, click here.

Integrated Project Delivery: A Teamwork Approach to Design and Construction

Sep 16 2011

By Gregory R. Andre, K&L Gates, Chicago

What is Integrated Project Delivery?

Integrated Project Delivery (“IPD”) is an evolving, bold innovation in construction delivery. It generally contemplates the owner, the architect or engineer and the contractor all entering into one contract and functioning as a cooperative and collaborative team to design and construct the project with shared risks and rewards in the ultimate cost, schedule and quality of the overall project.

In simple terms, IPD is like a joint venture approach to design and construction. IPD represents a radical departure from traditional delivery methods that isolate responsibilities, liabilities, communication, risks and rewards with contracts that often lack incentives to cooperate and work toward the common goal of a successful project overall for everyone. Parties to an IPD team have incentives to do what is best for the project, rather than what is best for themselves. To motivate the design and construction team and get the best performance out of them, IPD generally favors a “carrot” approach; whereas, traditional delivery methods generally use a “stick” approach.

To read the full article, click here.

Kuwait and see

Sep 15 2011

As investors target Saudi and Qatar, it is still possible that Kuwait may turn to a hybrid PPP model involving outsourcing and privatisation, write Paul de Cordova and Patricia Tiller at K&L Gates.

While western economies blow hot and cold over the merits of PPPs, many Middle East countries are embracing this alternative to conventional government procurement. Kuwait is prominent among the first movers in this emerging sector. Kuwait introduced its own PPP law in 2008, with guidelines administered by the Partnerships Technical Bureau (PTB) and developed in consultation with the World Bank. Kuwait is taking a professional approach to bringing projects to market. Unlike some of its neighbours who have announced PPP schemes with little advance planning, Kuwait is endeavoring to approach projects in a methodical manner. Every project must undergo a feasibility study stage and be approved by a ministerial higher committee under the chairmanship of the Ministry of Finance before entering the procurement stage. Furthermore, the PTB is required to engage professional advisers to ensure, as far as possible, that projects are structured to attract the international investment community.

To read the full article click here.

This article originally appeared in PPP Bulletin International on September 14, 2011.

GAO Report Finds Flaws in Davis-Bacon Act Prevailing Wage Determinations

Sep 02 2011

By: Lawrence M. Prosen & Andrew R. McFall, K&L Gates, Washington DC

Over the past several years, the current business conditions have had an impact on all areas and aspects of the economy. Recent reports indicate that no industry has been harder hit than that of construction, an industry possessing one of the highest national levels of unemployment. Unemployment in the construction industry has spiked from 7.1 percent in 2000 to around 20 percent in early 2011. Tied to this issue is the fact that the commercial and private construction and real estate markets substantially dried up as a result of the economy and underlying bank crises. This, in effect, resulted in government construction and real estate projects being the predominant area in which work was available; forcing contractors to enter the federal market, often for the first time, and ‘‘learn on the fly.’’

The current economic problems have also resulted in Congress increasing or maintaining spending levels for a number of years on construction and related projects to try and bolster the economy. These expenditures and stimulus efforts have led to an increased curiosity and concern for how government monies are being spent. Coupled with the inauguration of President Obama in 2009, there has been a significant uptick in the amount of government regulation and oversight regarding government contracting and the construction industry. As part of that effort, the United States Government Accountability Office and other governmental organizations have conducted investigations and released reports dealing with government expenditures and budgeting. This article discusses one such report.

On March 22, 2011, GAO released a report (the ‘‘Report’’) raising several issues and concerns with the U.S. Department of Labor’s (‘‘DOL’’) methodology for making Davis-Bacon Act wage determinations. The Report is noteworthy, in that the Davis-Bacon Act plays a significant role in federal and federally funded construction projects throughout the United States. This article provides a brief background on the Davis-Bacon Act, a description of the Report and its recommendations, a discussion of the potential implications of the Report on the Service Contract Act, and a list of practical tips that construction contractors should consider in light of the Report.

To read more and to view footnotes, click here.

K&L Gates’ Partners Found Illinois Chapter of Construction Owners Association of America

Jul 26 2011

Chicago partners Greg Andre and Dan Rosenberg have co-founded an Illinois chapter for the Construction Owners Association of America ("COAA"). An inaugural program is scheduled for October 6th at which Greg will lead a panel presenting on Integrated Project Delivery. Greg chairs the chapter’s Executive Committee and Dan chairs its Program Committee. Officers must be owner members and consist of representatives of the University of Chicago, University of Illinois, Exelon Corporation and Northwestern Memorial Hospital. COAA is national organization dedicated to providing education, information and networking for real estate owners with ongoing construction work. Its members consist primarily of educational and health care organizations, both of which are active in construction today.

For more information, please visit the COAA website, here, or contact any of the following people:

Preparing for Flying Blind: The Possible Effects of a Government Default on Government Contracts

Jul 08 2011

By: Lawrence M. Prosen, Joel S. Rubinstein, Tim L. Peckinpaugh, James T. Walsh, Andrew R. McFall & Christopher M. Smith, K&L Gates, Washington DC

Government shutdowns, while very uncommon, are no longer a completely unknown beast to government contractors (or at least the threats of them are not). Much has been written about their causes, effects, and the ways contractors can prepare for them. The current discussions about raising the debt ceiling, however, present a completely different, and unknown, challenge to government contractors. There is a very real fear that the gridlock in Congress may prevent a raising of the debt ceiling, forcing the government into default on its financial obligations. This would be a novel occurrence, a first for the U.S. government, with unknown consequences. The best-prepared contractors, however, will be the ones to weather the storm successfully and come out the other side better positioned in the marketplace, and in all possibility with significantly fewer competitors.

This Legal Insight is intended to make you aware of some of the unique aspects of a U.S. government default and its effects.

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Archive:2011