Construction Law Blog
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Today, we can almost always communicate immediately in some way, shape, or form because we are always connected with our electronic devices. We can tweet, text, or email a "running a little late" note at any time and having that ace up our sleeve, with no consequences to using it, has led to more delayed meetings than I care to count. New York Giants' head coach, Tom Coughlin, is notorious for his insistence that his players show up punctually. If his players showed up to a meeting "on time," they were actually late. Coach Coughlin wants his players arriving to the meetings early, prepared, and ready to go at the start of each meeting. If players failed to adhere to this philosophy, there were consequences. Government contractors might be wise to adopt Coach Coughlin's "if you're on time, you're late" philosophy when submitting bids and proposals.
This post primarily pertains to federal government procurement, however, many of the practice pointers and issues apply to state public works contracts as well.
On January 9, 2014, the Washington Utilities and Transpiration Commission ("UTC") announced that it has fined two utility companies, Pacific Power and Light Co. ("Pacific Power") and Frontier Communications Northwest, Inc. ("Frontier"), under Washington's new Underground Utility Damage Prevention Act (the "Act"). These are the first two penalties issued by the UTC since the Act took effect on January 1, 2013.
Recently, Division II of the Washington Court of Appeals held that a Pierce County contract with a son's proprietorship was illegal, void, and unenforceable when the project was competitively bid by the father's proprietorship and awarded to the father by the County. Bankston v. Pierce County, 174 Wn.App. 932, 301 P.3d 495 (Division II, May 21, 2013).
Small businesses are the economic engines of job creation and essential to strengthening our national economy. President Obama, Governor Inslee, and a whole gaggle of politicians are committed to helping America's small businesses grow and prosper. The US government has cut taxes for small businesses, and helps them get access to the capital they need to expand and create jobs that the US needs now and for decades to come.
In the first case of its Winter 2014 term, the Washington State Supreme Court is considering whether an employee benefits trust may use the Washington public works bond and retention statutes to pursue claims for unpaid worker benefits against a third party (i.e. one other than the worker's employer). Read more, here. Specifically, the court in W.G. Clark Construction Co. v. Carpenters Health & Security Trust of Western Washington, et al. is being asked to decide whether the federal law governing employee benefits, ERISA, preempts the state's bond and retention statutes, RCW 39.08 and 60.28, and therefore prevents a trust from collecting a subcontractor's delinquent employee benefit payments from a general contractor's bond or retention fund.
WSDOT Makes a Drastic Move by Publishing its Intent to Exclude Non-Minority Women-Owned Businesses from DBE Participation Goals for 2014
On the eve of the holiday season, the Washington State Department of Transportation (“WSDOT”) published its intent to submit a proposal to the United States Department of Transportation (“USDOT”) with two striking and drastic changes to the Disadvantaged Business Enterprise (“DBE”) Program in Washington. These changes will have a radical effect on non-minority women-owned DBEs. Women-Owned Businesses (“WBEs”) should take swift action to halt WSDOT’s proposed changes, which will have lasting detrimental impacts on small businesses in Washington and the construction industry as a whole.
In response to reports by the U.S. Government Accountability Office and Wartime Contracting Commission highlighting weaknesses in the suspension and debarment (S&D) offices of civil agencies, Congress has pushed for a significant overhaul of the suspension and debarment procedures applicable to federal contractors.
New National Defense Authorization Act of 2013 Removes Contract Thresholds for Women-Owned Small Businesses (WOSB).
Recent Unpublished Washington Court of Appeals Opinion Concludes that Absent Waiver Language, Failure to Comply with a Contractual Claim Procedure Will Not Result in Forfeiture
This blog has frequently addressed contractual notice and claim procedures and the Mike M Johnson[i] line of decisions (for example, see blog articles from January 2, 2008, February 15, 2011, July 10, 2012). A recent unpublished decision by the Division I Court of Appeals is noteworthy because it holds that if a contract has a mandatory procedure for resolving claims, but does not state that the failure to follow that procedure will operate as a waiver of such claim, then a forfeiture will not be found despite lack of compliance.
Shepler Construction, Inc. v. Leonard,[ii] involves a residential construction dispute over a project performed in 2000 with an incredibly long litigation history dating back to 2002. The decision that is the subject of this article is the Court of Appeals’ third decision in the matter!
In 2001, the Contractor (Shepler) sent the Owner (Leonard) a letter recommending that the Owner should initiate the contractual dispute resolution process with respect to the Owner's allegations of construction defects. The Owner admittedly failed to respond and did not initiate the contractual process. The Contractor then filed a lien and brought a foreclosure action. In 2008, the Contractor obtained a Summary Judgment Order precluding the Owner from asserting counterclaims for construction defects on the grounds that the Owner failed to initiate binding arbitration as required by the parties' contract in order to resolve allegations of construction defects. That order is the subject of the appellate decision that is the subject of this article.
In dismissing the Owner's claims for construction defects, the trial court was persuaded that the Owner's breach of the agreement by failing to seek arbitration required dismissal of all of the Owner's claims for construction defects that should have been arbitrated. The Contract clause at issue provided:
If a dispute arises between owner and contractor as to the performance of contractor's obligations under this agreement, such disputes shall be resolved as follows:
Each party shall employ a contractor of his or her choice to evaluate the work completed. The contractors then will select a third contractor to act as an impartial arbiter. This contractor shall, likewise, inspect the construction to determine if the work has been performed in accordance with this agreement, applicable building codes and in a good workmanlike manner as provided hereinabove. If two of the three contractors determine that the work is not in conformity with the provisions of this agreement, then they shall state in writing the work in need of repair or replacement and contractor shall undertake to perform same as soon as reasonably practical. Contractor shall be responsible for owner's fees and costs associated with this arbitration as well as the impartial contractor's fees and costs. If no remedial work is recommended by the contractors, then the owner shall pay for the costs of the arbitration. The owner shall forthwith pay the amounts due to the contractor as established by a majority of the arbiters.
The Contractor argued to the Court of Appeals that under Absher Const. Co. v. Kent School District,[iii] and Mike M. Johnson v. County of Spokane, that the Owner's admitted failure to arbitrate its construction defect claims operated as a waiver of those claims. Division One, however, disagreed, on the grounds that unlike the contract language at issue in Absher and Mike M. Johnson, the contract between the Contractor and Owner did not explicitly provide that the failure to follow dispute resolution procedures constituted a waiver of claims. Division One ruled:
Shepler relies on Absher and Mike M. Johnson, Inc. v. Spokane County. This reliance is misplaced. Absher and Mike M. Johnson are distinguishable from the contract at issue here, because the contracts in those cases explicitly provided that failure to follow dispute resolution procedures constituted a waiver of those claims.
In addition, Division One held that waiver of the right to arbitrate does not mean the underlying claims are waived:
...Washington courts have long held that the contractual right to arbitration may be waived through a party's conduct if the right is not timely invoked. The right to arbitrate is waived by conduct inconsistent with any other intention but to forego a known right. Simply put, a party waives a right to arbitrate if it elects to litigate instead of arbitrate. The [Owners] filed their counterclaims in 2002. [The Contractor] did not assert arbitration as a defense or move to dismiss the [Owner’s] arbitrable claims on that basis until 2008. Both parties waived the dispute resolution clause by conduct.
Comment: This unpublished case provides guidance that the failure to comply with a contractual claim procedure may not give rise to forfeiture of the underlying claim if the contract clause at issue does not include language stating that the failure to comply will operate as a waiver of the claim. In addition, the decision reinforces that a mandatory contract provision can be waived by the party it benefits, which is another basis to defeat an argument that the failure to comply results in forfeiture.
[i] 150 Wn.2d 375, 78 P.3d 161 (2003).
[ii] Shepler Construction, Inc., v. Leonard, 68227-0-I (unpublished 2013).
[iii] 79 Wn. App. 841, 917 P.2d 1086 (1996).