Construction Law Blog
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As was stated in Part I of this article, whether you negotiate your own subcontracts or rely on your lawyer to do the heavy lifting at contract time, a savvy subcontractor should understand the basic purpose of common subcontract provisions, and be prepared to negotiate for fair and commercially reasonable terms. While most sophisticated subcontractors are skilled at negotiating the core terms of a subcontract—scope of work, price, and time—a few simple but less obvious tweaks to common subcontract terms and conditions can go a long way to protect a subcontractor from unfair results when a dispute arises.
From the desk of an experienced construction lawyer, below are the last two of the top five “boilerplate” provisions that subcontractors too often overlook during contract negotiations, along with tips on language to include and to avoid. Follow this link if you missed Part 1 covering Delay/Liquidated Damages, Payment Terms, and Indemnity provisions.
A New AAA Study Confirms that Arbitration is Faster to Resolution Than Court – And the Difference Can be Assessed Monetarily
There has been a perception among some litigators that arbitration is more expensive than court due to several factors. Among them:
- The “upfront” costs are higher in that filing fees for arbitration exceed those in court. Arbitrators are paid, whether hourly or a flat rate, and the three arbitration panels can become very expensive.
- Some arbitration clauses preserve statutory discovery rights, basically defeating the advantage of a simplified arbitration process. Discovery wars are extremely expensive. Depositions are the most costly of discovery, and in arbitration, as opposed to court, depositions are limited or do not exist.
- Some arbitration clauses integrate the statutory rules of civil procedure, making arbitration almost equivalent to litigation. These types of clauses do the parties no favors
Generally, contractors choose arbitration because it is a cost-effective method of dispute resolution, and primarily because an award issued in arbitration is final. Vacating an arbitration award is only permitted on very narrow grounds. A party must demonstrate that the award was procured by corruption, fraud, or undue means, or that an arbitrator exceeded his/her power (very high burdens). Arbitration rules in other states are similar to the Washington statute. Stated simply, it is very difficult to reverse an arbitration award—or is it? These two cases do not indicate a trend but do remind us that an arbitrator’s power is limited to that power granted to him/her by contract.
The Prompt Payment Act Obligation is Not Triggered When the Owner Holds Less Retention from the General Contractor
Most states have laws known as “prompt payment” statutes which govern the timing of payments on public works projects from project owners to general contractors, and from general contractors to subcontractors. The purpose of these statutes is to ensure that contractors and subcontractors who may have less leverage than the project owners and prime contractors, respectively, are paid for their work on a timely basis.
Early this month, the three-member Board appointed by the Washington State Department of Transportation (“WSDOT”) and Seattle Tunnel Partners (“STP”) to assist in resolving contractual disputes on the Alaskan Way Viaduct Replacement Project issued its latest recommendation. The question before the Board was narrow in scope: was an eight-inch steel well-casing within the work zone adequately identified in the contract? The Board determined that the well-casing was clearly identified in the contract, but the contract documents did not clearly identify that the casing was made of steel. The DRB’s recommendation was that the contractor encountered a differing site condition.
Litigating and arbitrating construction cases is extremely expensive. By the time the procedural rules are complied with and the discovery process is done, even the smallest of construction cases with the most cost-conscious legal counsel will run $300,000. Larger construction cases are vastly more costly. For example, the 2012 King County Bright Water Tunneling dispute (VPFK v. King County) cost taxpayers over $10 million in attorneys’ fees alone. For more information, read our blog article, King County Scores a $155.8 Million Victory Against Contractor on Brightwater Tunneling Project.
A recent Southern District of New York ruling addressed the issue of public access to arbitration awards. The case involved a motion to confirm an arbitration award and a joint request from the parties to “seal” various documents relating to the arbitration. Sealing of court records prevents public access and ensures the proceedings remain confidential.
Dispute Review Boards ("DRB") - sometimes referred to as Dispute Resolution Boards - are creations of the construction industry. DRBs were developed by predominantly non-lawyer construction professionals who were dissatisfied with the use of arbitration and litigation to resolve construction disputes.
Ways to Make the Construction Dispute Resolution Process More Efficient and Less Expensive - Part II
This post is Part II of our discussion on resolving construction disputes less expensively and more efficiently. Read Part I here. Arbitration is a form of dispute resolution that is particularly well suited to construction disputes. Here are some tips on how lawyers and stakeholders can make things move quicker in arbitration: