Construction Law Blog
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Historically, a major factor preventing small businesses from participating in the government contracts was “bundling.” Bundling occurs when two or more contract requirements, previously provided or performed under smaller contracts, are consolidated into a solicitation for a single contract that is likely to be unsuitable for award to a small business. Attempting to increase efficiency and decrease administrative costs, Congress passed the Federal Acquisition Streamlining Act in 1994, encouraging the consolidation of certain contracts. As a result, between 1992 and 2001, 44.5% of all reported prime contract dollars were in bundled contracts.
Washington Supreme Court Overturns 30-Year Law Protecting General Contractors From Trust Fund Liens on Public Works Projects
Under Washington’s Public Works Statutes (RCW 39.08 and 60.28), general contractors who perform public works are legally required to post payment bonds and have retainage withheld from progress payments. The purpose of these laws is to protect the public entity (owner) from subcontractor and supplier claims against the public project, while preserving the interests of mechanic’s lien rights (subcontractors and suppliers are provided bond claim and retainage rights, but have no lien rights in the public property).
A problem that often arises with respect to change orders concerns the nature and amounts of compensation that the change order payment is intended to provide. While the contract documents will commonly set forth specific methods for determining the direct cost of extra work, the contract documents may not address whether the issue of impact costs is to be included in the change order or not. It is important to ascertain if the extra work provisions in the contract provides for such coverage, especially in preparing an impact claim after the extra work price has been accepted. Generally, the contractor should make a careful review of the contract documents and follow the methods set forth in the contract for change order pricing.
Washington State Supreme Court Justice James Johnson is retiring at the end of this month, which creates an opening on this State's highest bench. Under the law, Governor Jay Inslee will appoint a jurist to fill that vacancy. This firm is very proud and excited that our good friend and partner Douglas R. Roach is being considered for that exalted and honored position. Douglas has met with the members of the Governor's staff tasked with finding a replacement for Justice Johnson.
A differing site condition is a condition other than weather, climate, or other act of God, discovered on or affecting a construction site that differs in some material respect from what was reasonably anticipated.[i] The conditions must be physical; changes in political or economic conditions, or labor issues are not differing site conditions. It may surprise some contractors that in the absence of a contract clause providing otherwise, the risk of any cost or difficulty associated with unexpected subsurface conditions are generally borne by the construction contractor.
Barely a day goes by without a major newspaper article speculating on the shutdown of Big Bertha, the tunnel boring machine presently stuck underground only 1,000 feet into the two-mile long SR 99 Alaskan Way Viaduct Replacement Project. It now appears that Big Bertha will be inactive until September 2014. The tunneling crews are digging a 120-foot deep pit to fix the bearings and seals on the cutter head of Big Bertha. In the meantime, much of the work on the project has come to a halt. Before Big Bertha can be rescued, dozens of boring probes need to be made to see if ancient Native American artifacts or other archaeological items exist in the area where the 120-foot deep pit is being excavated.
Discussion of Changed Work Results in Waiver of Contract's Written Change Order Requirements - Contractor Can Lien for Extra Work
On March 10, 2014, Division I of the Washington Court of Appeals held that a contract's written change order requirements had been mutually waived when a contractor and owner encountered issues that necessitated changes to plans and specifications, then usually (but not always) discussed the changes and associated costs, and then the contractor performed the extra work. The Court of Appeals further held that recovery for the extra work where the parties had not agreed on price would be based upon the equitable doctrine of quantum meruit, and that the amounts recovered for extra work were subject to a RCW Ch. 60.04 lien.
From 1888 through 2007, general contractors and architects met and agreed on the standard construction terms and conditions that are in the American Institute of Architects' ("AIA") "family" of documents.[i] The AIA documents are probably the most commonly used construction forms for building projects in the United States. The AIA, through its forms, seeks to strike a balance between the interests of the owner, contractor, and the design professionals. Borrowing a phrase from Fox New anchor Bill O'Reilly (Bill did not coin this phrase), the AIA documents seek to be "balanced and fair." The AIA contracts shift and allocate risk with three philosophical tenets in mind: (1) controllable risk is allocated to the party best able to control the risk; (2) preventable risk is allocated to the party best able to protect against an unexpected cost (sometimes through insurance); and (3) if neither party can control or prevent the risk, it is shifted to the owner.
Design-Build Contractor Held to Same Different Site Condition Standard as Design-Bid-Build Contractor
In September 2012, we reported on the case of Metcalf Construction Co., Inc. v. United States, in which the U.S. Court of Federal Claims held Metcalf Construction Co., Inc. ("Metcalf"), a design-build contractor, to a very high standard of proof to demonstrate a differing site condition. Read our blog article about the Federal Claims Court's decision here. In that decision, the court took the position Metcalf had assumed the risk of subsurface conditions because it was a design builder and thus, was obligated to prepare a design that would accommodate conditions that differed significantly from the soils that were described in the government's RFP report. The court relied heavily on the disclaimers in the RFP soils report, which stated they were for "preliminary information only."
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.