ConstructionAdvisorToday

The Knee-Jerk “Notice” Defense

Construction contractors face many requirements to provide the project owner or owner’s representative with notification of certain conditions or occurrences. Timely notice is frequently a contractual prerequisite to any adjustment of the contract price or schedule. Consequently, owners routinely raise lack of notice as a defense to contractor claims - even when the owner was fully aware of the event.

IAPMO President Reports Several New Developments for Improving Water Efficiency

The International Association of Plumbing and Mechanical Officials (IAPMO) has made several recent strides in its quest to improve water efficiency in buildings. IAPMO President Dan Daniels shared the news at a conference that the High-Performance Building Congressional Caucus Coalition sponsored this week in Washington, D.C.

One of the developments involves the Green Plumbers training and accreditation program, which IAPMO recently acquired. Daniels revealed that the program is expected to train more than more than 5,000 plumbers, contractors, and inspectors within the next 18 months.

Turner Announces Deployment of SketchUp Pro

Turner Construction Co. earlier this month announced the deployment of SketchUp Pro, a Google three-dimensional model authoring tool and platform. Turner is using SketchUp Pro as part of its standard “digital toolbox” to provide building information modeling (BIM)-related services on projects worldwide.

“We use SketchUp Pro as a 3-D modeling tool due to its user-friendly interface and ability to rapidly produce lightweight geometries,” according to Turner. “SketchUp is also able to easily scale up and down based on needs, for conceptual ‘what if’ scenario cost estimating analyses, building systems constructability studies, or whole building and site models for sequencing and schedule analysis and work-in-place monitoring during construction.”

Recovering Consultant Fees as a Change Order Cost

On federal contracts, there is a maxim. Costs incurred by a contractor in negotiating, facilitating, or expediting a government-mandated change are recoverable costs of contract performance. Costs incurred in preparing, furthering, or prosecuting a claim are not recoverable costs. The line, however, is not always easy to draw.

Maryland Adopts International Green Construction Code

Maryland has adopted the International Green Construction Code (IGCC) as an optional requirement for new construction. Gov. Martin O’Malley (D) announced his signing of IGCC legislation into law at the U.S. Green Building Council’s (USGBC) Government Summit earlier this month in Washington, D.C.

Maryland’s new International Green Construction Code Act (H.B. 972), which goes into effect next March, will apply to all commercial buildings as well as residential properties that are more than three stories high. The measure authorizes the state’s Department of Housing and Community Development to adopt the IGCC while allowing local jurisdictions to make amendments to the code under certain conditions as long as the local amendment is adopted in accordance with applicable local law.

Groups Release Version 5 of National CAD Standard

The American Institute of Architects (AIA) and two other groups have released a new edition of the United States National CAD Standard (NCS). NCS Version 5, which is available online, is designed to help architects, constructors, and operators coordinate efforts by classifying electronic design data consistently and making information retrieval easier.

Version 5 improves communication among owners and project teams, cuts or eliminates costs of developing and maintaining company-specific standards, and reduces the expense of transferring building data from design applications to facility management applications, according to AIA, which unveiled the new NCS in partnership with the Construction Specifications Institute (CSI) and National Institute of Building Sciences (NIBS).

Crashing the Line for Construction Loan Proceeds

Capital is hard to come by in today’s constrained credit market. This is encouraging parties to grab a share of the construction loan proceeds as quickly as possible, leaving less money for construction and compromising the positions of those parties downstream. Two recent cases illustrate this phenomenon.

A California lender wrote a construction loan agreement in a manner which reserved the right to take interest and fees out of the loan proceeds. The bank promptly took more than $1.6 million in interest and fees out of the loan proceeds and then disbursed the balance to the property developer over a period of time. When an unpaid contractor served the bank with a stop notice – a lien on the construction loan proceeds – the bank responded that there were no more proceeds.

A Texas developer created an “architectural firm” even though the developer was not a licensed architect. The developer then paid his firm over $881,000 in design fees from a construction loan insured by the federal government. The drawings proved to be useless and the project was not constructed.

Have you seen situations where parties have crashed the line and taken construction loan proceeds on the front end? What are the ramifications of these practices? As always, I welcome your comments.

Featured in Next Week’s Construction Claims Advisor:

• “Good Faith Dispute” Determined Objectively under Prompt Payment Statute
• Contractor May Have Received Delay Damages Prohibited by Disclaimer
• Court Distinguishes Direct and Consequential Damages

Navy to Build to LEED Gold

The Navy has adopted a policy of building to the Leadership in Energy and Environmental Design (LEED) Gold standard for new construction. Navy Secretary Ray Mabus announced the new policy at the U.S. Green Building Council’s annual Government Summit May 10 in Washington, D.C.

Beginning in fiscal 2013, LEED Gold will be required for every new Navy and Marine Corp. military construction project, Mabus said. For every new building that is going to bid in fiscal 2011 and FY’12, the department will require a LEED Gold option package whereby “if we can get it in in the contract price and it doesn’t involve a significant delay, we will execute the LEED Gold option as part of the normal design and construction process,” he noted. 

Autodesk Announces Buzzsaw Mobile App for iPhone, iPad

Autodesk Inc. earlier this month announced an app for iPhone and iPad that provides Buzzsaw collaboration software users with “more secure, remote access and exchange of building project information.” Buzzaw Mobile enables users to view DWF files and standard office documents and images as well as upload project photos to a designated Buzzsaw project site.

“With support for mobile viewing of DWF files, one of the most widely used design exchange formats, Buzzsaw Mobile app users can collaborate across teams,” Autodesk stated. “When used in conjunction with the AutoCAD WS mobile app, iPad and iPhone users can view and edit AutoCAD DWG and DXF files and save the changes to a Buzzsaw project site directly from AutoCAD WS. Buzzsaw Mobile is considered a key component of the Autodesk BIM 360 (building information modelling) strategy for collaboration and data management for the architecture, engineering, and construction (AEC) industries.

The Concept of a “Good Faith” Dispute

The concept of a “good faith dispute” arises in several situations in construction contracting. For instance, a contract or statute may call for recovery of attorney fees or other sanctions if a claim was not submitted in good faith. Prompt payment laws typically call for payment of subcontractors within a stipulated number of days unless there was a good faith dispute regarding the amount owed. But what is this concept of good faith? It does not necessarily require that a party prevail on the merits of its position. So how is it measured or determined?

A California court recently grappled with the question. A trial court ruled that a prime contractor had breached a subcontract through wrongful termination. The sub was awarded contract damages but denied a two percent per month penalty under a prompt payment statute. The prime contractor had believed in good faith that it did not owe the subcontractor the invoiced amount.

An appellate court said this was the wrong standard. It is not the sincerity or subjective belief of the prime contractor that establishes good faith. There must be objective, extrinsically observable evidence to support the prime contractor’s belief. In this case, however, there was such support. The prime contractor had taken a consistent position with regard to a scope of work dispute and had paid another company to come in and perform work not performed by the subcontractor. The prime believed in good faith that the subcontractor had not completed the work for which it had billed.

How do you measure “good faith” in the context of a claim or dispute? Do you apply the same standard to your own operation as you do to others? Do you feel a lack of good faith is a significant problem in construction contracting and construction disputes?

As always, I invite your comments below.

Featured in next week's Construction Claims Advisor:

• Architect’s Uncertainty Results in Constructive Change
• Compliance with Government Specs Relieved Contractor of Continuing Obligation
• Builder Disqualified as Expert Witness