What Should Owners Look for in a Contractor Schedule (Hot Topic Presentation - 8/9/2017 at noon EST)

Please join us as we welcome our new Division Chair, Suzanne McSorley, and hold our monthly meeting with a great Hot Topic presentation:

What Should Owners Look for in a Contractor Schedule, presented by Jesus Schuldes of Spire Consulting Group LLC

 

What Should Owners Look for in a Contractor Schedule

Project Controls, particularly scheduling, set the foundation for project success. Our Hot Topic presenter for our next call is Jesus Schuldes, MS, PSP, Senior Consultant with Spire Consulting Group, a multi-disciplined construction engineering consulting firm. The program will address the cornerstones of construction scheduling and provide pointers on how to write an appropriate specification. The industry expert will offer insights into your contractor’s schedule, the applicable standard AIA contract clauses, and recommended clauses to help you identify, prevent, and mitigate potential project risks and costly delays.

 

About the Speaker

Jesus Schuldes, MS, PSP has many years of project controls experience for complex construction projects across the globe. He is an expert in Critical Path Method (CPM) scheduling, and is also well-versed in dispute resolution involving schedule delays. He specializes in performing time impact and windows delay analyses to apportion delays and validate construction claims. He is also a certified Planning and Scheduling Professional (PSP) by AACE International (AACE).

Here's how to join the call:

Dial-In:  866-646-6488; Passcode: 613 577 4053#

A Perspective on Building Enclosure Consulting and Peer Review Process (November Hot Topic Presentation)

On November 9, 2016 at 12 pm EST, Ken Lies, AIA, a Principal at Raths, Raths & Johnson, Inc., will present the following: 
 
A Perspective on Building Enclosure Consulting and Peer Review Process 
 
Engaging a qualified design professional to perform building enclosure consulting and peer review services for a construction project has become more and more common.  The demand for these professional services is often driven by building owners, architects and/or contractors that recognize the inherent risks of design and construction and the potential negative impacts (financial, scheduling, legal, etc.) that defects all too often have on a project.  The presentation is from the perspective of a licensed architect whose firm provides building enclosure peer reviews, consultation and quality assurance testing services.   

Learning Objectives

1.    Gain an appreciation of client motivations and objectives for engaging a building enclosure consultant.

2.    Understand various roles and objectives for a consultant and the potential impact of the peer review process on the project team members.

3.    Acquire knowledge of typical building enclosure consulting services.

4.    Understand the differences between building enclosure consulting vs. building enclosure commissioning (BECx).

5.    Recognize potential legal and liability issues associated with engaging a consultant.

6.    Understand the importance of firm and individual qualifications and possible professional licensing issues.

ABA Forum on Construction Law Members may call into the conference line at 866-646-6488, conf. ID 613-577-4053.

Customizing the Proper ADR Process for Your Project

Last month, Mike Marra and Rod Toben of the American Arbitration Association gave a Hot Topic presentation on Customizing the Proper ADR Process for Your Project – So little time now . . . so much effort later. In case you missed it, here are a few highlights from their presentation to remember when drafting your next ADR clause.

When drafting, adopting, or recommending a dispute resolution clause in a construction contract, parties or their attorneys do not always spend the time needed to make sure the dispute resolution clause works for their particular client or project.  A little time spent at the contracting stage can go a long way toward saving time and money should a dispute arise.

Construction Industry standard form documents have included ADR clauses for more than fifty years and most of them provide what is needed to get you into the process: agreement to arbitrate, administrator, a set of rules and judgment language.  But what should you think about when you want to draft an ADR clause that is unique to a particular client or project?  Below are some examples of items to consider when drafting your next ADR clause:

Rules:

First and foremost a good set of ADR rules will help move the process in an efficient manner because of their self-executing nature.  The AAA Construction and Commercial Rules provide parties a time tested roadmap for both arbitration and mediation. 

Step Clauses:

Mediation prior to arbitration is a condition precedent in most construction industry form contracts but in the interest of saving time consider whether both processes could move in conjunction with each other.  Think about including project meetings, project neutrals and other steps prior to mediation and arbitration.  While these steps can be effective, it is important to have a mechanism, such as time limitations, in place to keep the process moving to final disposition. 

The Simple Things in Life made complicated:

Keeping the clause simple should be a priority.  Locale, Time Limits and Arbitrator qualifications are examples of simple items that can be made complicated.  

Rule 12 of the AAA Construction Rules give parties guidance on where the hearings will take place, but is that enough?  What if there are multiple locations in a single contract?  Specifying the locale in the contract can undoubtedly save time and money should a dispute arise. 

Time limits, if they are drafted into contracts, should also be thought through.  While parties may want a quick resolution, having unrealistic timeframes may have the reverse effect and not allow each party to effectively present its case. 

Arbitrator expertise is something that can certainly be drafted into the clause, but how specific should you be?  If parties to a complex project are looking for specific expertise, an engineer, architect or contractor for example, how detailed should they be?  Thought should be given to specifying only the broad category of expertise, whenever possible, as getting too specific may limit the number of qualified arbitrators and become yet another argument in the dispute.

Another important issue to think about when drafting an ADR provision is joinder of parties and consolidation of cases, which can greatly delay the process.  If you are the lead drafter you should think about how the issue of joinder and consolidation are dealt with by all project participants.  When one set of contracts has a joinder provision and others do not, it creates great delay and expense because of the argument that ensues.  Making sure all downstream contracts are in line with the main project document will save all involved the pain of resolving yet another conflict in an arbitration. 

These are just some examples of the things to consider when drafting your dispute resolution clause.  Even the most experienced lawyer can surely benefit from following a basic checklist of items to consider at the contracting stage.  For additional information and sample language, feel free to build your ADR clause online at www.clausebuilder.org.

Avoid Disputes Over Your ADR Process (September Hot Topic Presentation for Division 12)

On September 14, 2016, at 12 p.m. EST, Mike Marra and Rod Toben, Vice Presidents in the AAA Construction Division will present the following:

Avoid Disputes Over Your ADR Process

The purpose of an alternative dispute resolution (ADR) clause is to resolve disputes, not to create them, but a poorly drafted ADR clause can cause delay and expense if parties disagree about the meaning of the clause. Planning early for possible disputes, and taking the time to draft and negotiate an ADR clause that addresses the particular needs of the parties, will save time later and allow for the most time-and cost-effective dispute resolution process.

This Hot Topic will highlight the essential issues that parties to a construction contract should carefully consider before the contract is executed.

ABA Forum on Construction Law members may call into the conference line at 866-646-6488/613-577-4053.

Mike Marra

Rod Toben

The Owner’s Project Audit: Critical Considerations for Success

Patrick A. McGeehin and Mark J. Malengo of FTI Consulting, Inc. recently gave an interesting presentation concerning project audits from the Owner's perspective, pointing out ways an Owner can reduce costs and improve the audit's effectiveness:

There are several important factors that an Owner should consider for its project-audit needs.  With proper planning and strategy, an Owner can reduce costs and improve the effectiveness of an audit.

First and foremost, an audit should be viewed as a key component that can contribute to the overall success of a project and the Owner.  In addition to identifying potential savings on a cost reimbursable contract, use of an auditor can improve the cost/pricing language of the Owner’s contracts and develop process procedures that can be used to benefit future projects.

An audit can also measure the success of the project compared to various metrics, identify non-compliance with Owner contract provisions, and determine amounts of asset purchases and any related salvage value.  This is true whether an audit is required to meet the Owner’s compliance requirements, to meet its fiduciary duty to other partners/investors, to determine a savings amount, or to improve selected processes. 

Selecting an auditor with the appropriate experience can assist the Owner in defining and achieving the agreed-upon audit objectives efficiently and effectively.  The “right” auditor should perform a focused-objective review.

Further, there are several actions that an Owner can take to improve the productivity of the audit with the help of the auditor. They include performing up-front procedures, such as developing contract definitions, establishing pre-determined Contractor rates, improving contract-review processes, and requiring the production of essential records.  In addition to improving the productivity of future audits, this pre-contract involvement can minimize misunderstandings between the Owner and Contractor.

In summary, an audit should be much more than a “ticking and tying” exercise, if the Owner engages an auditor with the appropriate expertise and develops a focused review plan.  This approach can lead to better project results, savings, and other process improvements.

Massachusetts Decision Limits Spearin Doctrine in CM-at-Risk Contracts on Public Projects

On September 2, 2015, the Massachusetts Supreme Judicial Court issued a long-awaited opinion in Coghlin Electrical Contractors, Inc. v. Gilbane Building Company et al., SJC Docket No. SJC-11778.  Among other issues decided in the case, the Court held that the scope of a public-awarding authority's implied warranty of adequacy and sufficiency of the plans and specifications is more limited in the context of a construction-management-at-risk contract than a traditional design-bid-build contract.  

This case represents the first time that the highest court in Massachusetts has looked at the Spearin Doctrine in the context of the CM-at-Risk delivery method under the state's relatively new CM-at-Risk statute (M.G.L. c. 149A, Sections 1-13).  Under this law, public awarding authorities are permitted to retain construction managers early during the project's design phase in order to involve them in project planning and design development.  

In Coughlin, the Court recognized the the relationship between the awarding authority and a construction manager at risk is different from the traditional relationship in the design-bid-build context, insomuch as a construction manager may be engaged to participate extensively in the design phase and, therefore, has an opportunity to influence the final plans and specifications. However, despite several noted differences between CM-at-Risk and design-bid-build delivery, the Court was not persuaded that the implied warranty should not apply. In construing the relevant statutory language, the Court determined that "the legislative intent in providing the construction management at risk alternative [to design-bid-build] was to permit the [construction manager at risk] a greater consultative role regarding the project's design, not to eliminate the owner's responsibility for design defects."  The Court concluded that the proper scope of the implied warranty in the CM-at-Risk context should be limited to instances where the construction manager acts in good faith and acts reasonably in light of its design responsibilities.  Therefore, on projects where the construction manager's design responsibilities are greater, the construction manager will have a higher burden to show that its reliance on the defective design was reasonable.

Links to more information regarding this case, including the text of the opinion, all appellate and amicus briefs, as well as video of the oral argument, are below.

Full Text Opinion

Oral Argument Webcast

Link to Docket and Appellate Briefs

The Basics of Litigating the Typical "Multifamily" Construction-Defect Case

Sanjay Kurian contributed the following post concerning the basics of litigating a typical "multifamily" construction-defect case on behalf of a property owner:

In this blog post, I wanted to touch on some basics of the typical “multifamily” construction defect case. Whether the project is a condominium, apartment, assisted-living facility or hotel, disputes concerning multifamily properties share many of the same issues.  There are six primary considerations in bringing these claims but each of those has many subparts which depend on specific facts of the project.

The first consideration is to identify the true owner and determine whether that entity is able to recover for the defective construction.  Is there a condominium association or building owner? Maybe it is the hotel or facility operator that is the aggrieved party or is the developer of the building?  Knowing who has the rights to make the defect claims is a critical first step.

The second consideration is to determine against whom any claims may be asserted.  Is there a claim against the developer of real property who designed, built, and sold the units or buildings in question? Or maybe there are claims against the general contractor and subcontractors who coordinated and performed the work?  What about the design professionals who designed the building improvements?  The reality is that all of these entities could be responsible for defects in the improvements.  How much each of them is responsible for is dependent upon the warranties, contracts and legal theories at play where the property is located as well as any contracts that may exist between the parties.

The third consideration is what types of claims available, which depends greatly on the jurisdiction you are in.  There may be contractual express warranties that arise out of the contracts negotiated between the parties. There could be implied warranties pursuant to the common law at play.  In some jurisdictions and depending on the type of property, Florida condominiums for example, statutory implied warranties may exist that protect the owner.  Most states still allow claims for negligence in the construction or design of the structures.  An important note is that not every claim can be made against every party. Careful consideration is needed as to what claims should be asserted against whom.

The fourth consideration is the type of recovery available.  Generally the cost of repairing the defective condition is the damage that can be recovered.  In the event that such repair would be economically wasteful, courts may consider diminution of value to be a valid damage.  In addition, depending on the type of property there may also be claims for lost rents other lost profits for the time that the property was not able to be used for its intended purpose in whole or in part.  Attorney's fees are often not recoverable in defect claims in most jurisdictions. The exception to the "American Rule" is where the fees are awarded to the prevailing party through contract or statute, or what is called a "proposal for settlement" or "Offer of Judgment."  The question of recovery is maybe the most important one for owners because no one wants to spend money on experts and lawyers where the damages do not warrant such claims.

The fifth consideration is the defenses available.  I have never handled a defect claim where there was no claimed defense by one of the parties identified above.  The typical defenses are that the owner failed to maintain the condition, that the damages were not mitigated, lack of notice of the condition, failure to comply with a statutory notice procedure, the proposed repair is a betterment, the repaired items consist of first costs that the owner would have incurred anyways.  The determination as to the validity of a given defect claim or defense rests with the trier of fact, whether that be a judge, jury, or arbitrator.  The applicability of a defense is based upon the specific facts of each case.

The sixth consideration is the cost in moving forward with such claims and the prospects of recovery. Given the complicated nature of these cases they often settle.  Driving settlement is the cost of moving forward in the litigation as well as likelihood of recovery from the named defendants or their sureties or insurance carriers. Not evaluating these items at each step of a case is a trap for the unwary client or counsel.

I have represented numerous owners, condominium associations, contractors and developers in these types of cases and I can guarantee that none of them wanted to be in this type of litigation.  However, sometimes construction projects go wrong and everyone bears some of that eventual cost.