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01/06/2012

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I run into this every day and it makes me cringe. The term "Industry Standard" is too often used by those who have know clue what they are writing. It's a cop out rather than providing the detailed specifications a contrator needs to perform the work and more importantly, defend themselves in court. "Industry Standard" incorporates a general idea based on multiple cases but each of those cases has their own unique aspects that define them. "Industry Standard" should never be permitted in a contract. You will always be safer by defining what you want, even if it takes more time and effort up front.

What was once an established basis for measuring the performance of a contractor has become whisked up, blown around and relocated to a distant land that has different rules for the evaluation of a contractors’ performance in construction defect claims. The term: “Industry Standard” no longer has a uniform definition or an understood reference. Many judges and arbitrators as well as many in the construction industry have been bulldozed into believing that anything a “Testifying Expert” calls an “Industry Standard” must, in fact, be a widely held belief. The fact is: The standards for contractors are only defined in writing.

This issue of “standardization” is not unique to the construction industry; we deal with “standards” every day of our lives and we have come to rely on the accuracy of measured commodities that we purchase. We expect that the pumps at the service stations are actually giving us a true gallon of gas, that the supermarkets are selling us a pound of pastrami and that a yard of fabric is, in fact, 36 inches long. The test and validation of all of these measurements is the actual comparison to a recognized and established international standard verified by the International Organization for Standardization, also known as the ISO. Every state in the country has a Bureau of Weights and Measures which certifies the accuracy of scales and measuring devices for volume, weight, length and time. They do this, for example, by maintaining a weight that is the standard for one pound, a measure for one yard, one gallon, etc. The bureau also conducts evaluations on new commercial weighing and measuring devices as part of a national certification program. This is how we know, as consumers, that we got exactly what we paid for.

In construction, it is a little different. We do not have physical standards; our “bureau of weights and measures” is actually a collection of written product specifications and laws that are known as the “Building Codes.” In California it is Title 24 of the California Code of Regulations that incorporates all of the various codes and standards that are enforced by the numerous agencies. Similar to the physical standard for a gallon or a pound, the building standards are in the form of written codes and the standards that are incorporated by reference within the codes. That’s it; plain and simple. All standards within the construction industry are written; they are the rules that contractors must follow. Most importantly, there are no unwritten “standards.”

When the courts began to see an increase in the number of construction defect lawsuits in the 1980’s, plaintiffs were scrambling to define industry standards to bolster the validity of their claims. The use of the term “Industry Standard” came into use without any solid definition; just the assertion of an appointed “expert” who emphatically stated that “…this work falls below industry standards.” Quite often, the only validation of such an expert’s opinion was the statement: “This is just not how it is done!” Since then, many experts have been mixing true standards with these illegitimate measures and packaging them all under the mantle of “Standard of Care.”

Although some construction defect complaints also deal legitimately with the contractual issues, many of the claims of defective workmanship are alleged to have violated some undefined and unpublished standard of care. Clearly claims for breach of contract represent a failure on the part of the contractor to perform in accordance with the terms and conditions of the written agreement and all of the documents that are incorporated by reference into that agreement. Resolution of contract issues are left to the evaluation of a trier of fact, judge or arbitrator to interpret, but regardless, the language in any given contract is not considered an industry standard.

It is this arena of “Industry Standards” where the terrain has become rocky and uncharted. Consider the various allegations that have historically been included in construction defect complaints seeking damages for alleged deviations from industry standards which are asserted as a measure of a contractor’s performance:

1. Violation of the Regulatory Laws; the building codes and local building ordinances.
2. Failure to Adhere to Local Customs and Practice; a collection of unwritten standards that all contractors in a given area are expected and required to comply with.
3. Disregard of Trade Associations Preferred Practices; a collection of recommendations for higher levels of workmanship that are created by and for the members of private trade associations.
4. Deviation from the Standard of Care; unwritten, but recognized obligations that apply to contractors during the process of construction.
5. Manufacturers’ Written Specifications for Listed and Non-Listed Products; the precise requirements for the installation of listed and non-listed products specified by the manufacturer.

To adequately evaluate the merits of the various allegations involving a contractor’s performance in a construction defect case, consider the legal effect of the alleged industry standards at issue:

1. REGULATORY LAWS: This standard for compliance is based upon the building codes that have been adopted by the state and the ordinances that have been created by local communities. When any state adopts a body of codes to regulate building activities, methods and materials, it can only be superseded by local communities that create more restrictive provisions than the state adopted codes. In California the body of law that comprises the building codes is known as Title 24 of the California Code of Regulations. Although acknowledged as the minimum requirements for construction performance, it is a collection of formidable requirements that must be complied with and are the only enforceable standards that contractors must adhere to. The operative word is “enforceable.”

2. LOCAL CUSTOMS AND PRACTICE: Many experts and attorneys have attempted to make this concept stand up as a recognized “standard.” Customs and practices are similar to when an employer will allow its workers to come to work on Fridays in casual clothes. For that company, “Casual Fridays” has become a local custom and practice. If a worker did not want to dress down on Friday, there is no adverse consequence; it is unenforceable. The concept that in certain communities all of the contractors have universally established informal practices that then become enforceable within their locality is simply a fabrication of wishful thinkers. There are no practical examples of when this ever takes place. If local conditions require regional variations, special action or attention, the governing authority incorporates the requirement into a local ordinance…a law, and that becomes the enforceable standard. Local customs and practices are not standards.

3. TRADE ASSOCIATIONS PREFERRED SPECIFICATIONS: There are numerous professional construction associations that solicit contractor membership in order to establish a more elite group of practitioners. Typically, the trade associations will establish higher standards of performance for their members as a “value added” reason to hire a member contractor over another. The concept is similar to General Motors’ “Mr. Goodwrench.” And even though a contractor might be a member of a “roofers’ association” or a “plumbers’ association” that has preferred practices for its members, there is still no legal requirement for any member (or non-member) to adhere to that association’s standards. Consequently, private association practices are not industry standards.

4. STANDARD OF CARE: Standard of care claims have no application against contractors. Typically, these claims are based upon the legal doctrine of negligence and apply and refer to professionals performing design services for clients. Within the construction industry, a standard of care complaint is usually brought against the project engineer or architect. Violation of the standard of care is defined as negligent conduct required by law for the protection of persons or property from foreseeable risks of harm. Such claims might include failure to consider the bearing capacity of the soil for the intended structure or specifying a window system that did not meet the wind load conditions at the site. Architects and other design professionals are held to this standard by virtue of their education, knowledge, training and experience. The problem for all that assert this claim (or even defense) is that the “standard” is often a subjective issue upon which reasonable people can disagree. The application of this standard to design professionals can only come from expert testimony since, as a custom and practice, it is not committed to writing.

a. In light of the above definition, contractors are not considered “professionals” in the sense of registered architects and engineers and cannot be held to a standard of care for construction activities. In many cases, contractors lack the education and certification to perform any service other than the mechanical process of construction. (Some states do not even require that contractors be licensed. California has no education requirement for license applicants and no continuing education requirements for licensees.) For the most part, every direction or instruction that a contractor needs to execute the specifications for a given project is provided in writing. Prior to bidding a job, contractors are given drawings, specifications, project manuals, schedules of fixtures, appliances, windows and doors. They are even told what size nails to use and how they are to be spaced. Additionally, they are given a copy of the contract, general conditions of the contract, a sample of the invoice to be used and a list of insurance coverage to be provided. Contractors are even given instructions on the process of how to fill out the bidding forms. Nothing is left to the discretion of the contractor.

b. During the course of the project other professionals including the architect, the building authority, public utility inspectors, lenders, manufacturers’ representatives, OSHA agents and others inspect and verify that the written instructions are faithfully adhered to. In this environment, construction contractors are little more than mechanics of the process adhering to the only standards that applies – the adopted building codes and manufacturers’ specifications. It might be argued that a general contractor has the responsibility to manage the execution of the various trades contributing to the project. The only foreseeable consequence to the failure to properly manage the work is the nonconformance of the work with the plans, building codes or manufacturers’ specifications. That takes the claim back to the written laws and rules. Consequently, the standard of care doctrine does not apply to contractors.

5. MANUFACTURERS’ PRECISE SPECIFICATIONS: The manufacturers of appliances, equipment, fixtures and devices that are used in the construction of a building create specific installation instructions that guarantee compliance with the building codes or are requisites for a warranty. Prior to distribution of products, manufacturers must secure an International Code Commission Evaluation Service (ICC-ES) report and certification. ICC-ES is a nonprofit, public-benefit corporation that does technical evaluations of building products, components, methods, and materials. The evaluation process culminates with the issuance of technical reports that, because they directly address the issue of code compliance, are used by both regulatory agencies and building-product manufacturers. Additionally, numerous accrediting agencies, working under the authority of OSHA establish accepted standards that are incorporated into the body of the building codes by reference. These standards can be found in the appendices of the code volumes. Building authorities use evaluation reports to help determine code compliance and enforce building regulations; manufacturers use reports as evidence that their products meet code requirements and warrant regulatory approval. All of these entities look to the various agencies’ evaluation reports for evidence that products and systems are code-compliant. Consequently, the manufacturer’s specifications for use, installation and configuration are incorporated within the codes as enforceable industry standards.

There are also products used in construction which do not require certification but nonetheless, have very precise specifications for the proper use and installation. Quite often, the manufacturer will withdraw their warranties if their instructions are not followed. Solid wood or wood product doors, for example, carry a manufacturer’s warranty for stability and assembly. That warranty is voided if the contractor does not paint all six sides of the door as indicated in the product literature that comes with the door. The application of elastomeric paint, for example, is not a code issue, but the manufacturer will withdraw its warranty for longevity if the contractor does not apply the product in strict conformance with the instructions on the container. Even though this product specification is not enforceable under the code, it is a standard that universally applies to every contractor who installs a particular product; listed or not. Most often, this type of claim falls under the breach of contract complaints for failing to perform the work in a “workmanlike manner.” Thus it is a contract issue, not a standard issue.

ALTERNATIVE CODE COMPLIANCE: The building codes are always subject to challenge and interpretation from numerous parties. Even though the written building codes represent the standards to which contractors are held, there is one higher authority that can overrule or approve a modification of the written codes: the local building official. Quite often, when a particular provision of the code cannot be met, the building official will approve an alternative method of compliance if, in their judgment, the provisions of safety are being met by the alternative. The time to secure the approval for an alternative to the code is when the project is under construction and prior to the installation or construction of the alternative. That does not preclude the building official from approving an alternative modification after the project has been completed and before the certificate of occupancy has been signed. This is an important issue to be considered during litigation; seeking a post-construction approval from the building official can effectively dismiss an issue from the litany of complaints of violation of industry standards.

Quite often, contractors, when being challenged on issues of code compliance, fail to consult with the local building authority for acceptance of a literal violation of the code when, in fact, the as-built feature satisfies the intent of the code. Plaintiff’s experts in construction defect litigation will invariably argue the merits of the written code and not investigate the alternative compliance approval that could be granted by the building official.

MULTIPLE STANDARDS: It has been argued in countless mediations and litigations that multiple standards apply to the evaluation of a contractor’s performance. The sheer force of the arguments does not add sufficient validity to the claim of failing to meet multiple industry standards. The introduction of subjective standards causes confusion and the possibility that a contractor following one standard may be held to have breached another. Since the contractor’s only construction standard of a project is the current adopted building code, the introduction of other nebulous and non-applicable standards only tends to confuse a trier of fact and cloud the primary claim that the work does not meet the requirements of the written code.

CONCLUSIONS: Lessons learned over the past 30 years of evaluating construction defect litigation have revealed a few things about the process. Some of the more evident lessons are:

1. The only industry standards that universally apply to and are enforced concerning construction activities performed by contractors are written laws and specifications; the building codes and the listed product-specific requirements for installation and use (as incorporated into the codes).
2. Local Customs and Practices are not industry standards.
3. Professional associations’ lists of preferred practices are so-called standards created as a marketing tool for members of the association as a “value added” feature and are not enforceable by any government authority.
4. The contract, project plans and specifications are not industry standards; however, they are enforceable between the parties of a specific project as a component of their contractual obligations.

When evaluating construction defect claims, lawyers on both sides of the dispute will be better able to represent their clients by keeping in mind the fallacy of claims based upon violations of inapplicable industry standards. Likewise, the courts and arbitrators must clear the decks of the debris of multiple, inapplicable and contradictory standards so that a contractor’s work can be fairly and uniformly measured. Certainly a broader knowledge of the codes by contractors is a requisite toward higher levels of compliance. Likewise, a higher level of understanding by contractors, construction experts, arbitrators and judges of the applicable laws and standards might significantly reduce the inordinate amount of time and extraordinary expense of construction defect litigation, which might lead to an efficient adjudication of claims of defective workmanship – which may not be at all defective under the applicable industry standards.

I believe that, when used properly, "Industry Standard" is very useful for both the designer and the contractor. The pluses for the designer include focusing on the challenging or unique details of the project instead of regurgitating well known standard details that are precisely delineated by organizations like UL. The pluses for the contractor include the latitude to use the industry standard detail with which he is most familiar. If the designer can state that all fire stopping shall comply with UL listed assemblies, it is counter-productive to literally include the details in the set. Plus, if all but ONE or TWO of the applicable details are in set, the contractor will claim that that gave him license to "invent". I think the main contractor objection to this that it limits his ability to scour the documents for change orders. The larger and more complicated the documents, the more likely errors and conflicts crept in.

I work in a speciality field where standards of installation are often not understood by end users. I find it useful to reference our national trade association as a standard for inspection when I write contracts or proposals.

I found Bill Dexter's post to be well thought out and clear. I take exception to one point -- holding contractors to standards set by a trade association of which they are members. If a contractor is using that membership as part of their marketing materials, I think it is appropriate that customers would expect work to conform to the standards set by that association, even when those standards not explicitly stated in contract documents.

This is a confusing, and unnecessarily complicated area of design and construction practice. I have worked professionally on all sides of the process, (owner, architect and builder), and can attest that we have an industry rife with misunderstanding.

One of our biggest issues is that the parties seldom want to take responsibility for their work, and their role. This may be a consequence of our legal system, but the inability of the parties to take responsibility is dysfunctional for the building process.

Owners need to to accept that building is complicated and imperfect - but has to be paid for anyway. Architects and engineers need to adequately research and describe what they they really mean to be built. Two areas that Owners and architects rightly rely on Contractor's for is management and workmanship. Also, with respect to some subcontractors, there is reliance for expert knowledge of equipment, such as HVAC, controls, telecom and the like.

Management and workmanship require effort, expense and investment on the part of the builder. Nobody has really been able to codify "industry standards" for these qualities, but I will always look for them in a GC just the same.

The same can be said of what the designers have to do. "Standard of Care" is indeed the sphere of licensed professionals. You can choose to rely on a published standard, but ask these questions:
1. Do you really know exactly what the published standard describes?
2. Does what the standard describes mesh perfectly with the design?
3. Is there enough information directly on the drawings and in the specifications the the project cost can be accurately bid?
This also requires, effort time and investment.

Owners need to recognize that that there own practices, knowledge and actions (or inaction) play a powerful role in design and construction - and I reiterate, no industry standard will succeed in making design and construction a perfect art.

I believe the answer is "confusion." I am aware that industry standards are sometimes brought into conflict resolution, but isn't "performance to industry standards" assumed unless otherwise specified?

Citing specific industry standards has tremendous value in reducing the bulk of project specifications, as well as developing standardized methods of producing or performing certain work. Citing "acceptable industry standards" is a specification writing cop-out likely resulting from either laziness or failure to be competent in that portion of the work.

One highly technical segment of the construction industry has recently undertaken an evaluation of the specification writing aspects of that industry. They concluded that there are at least two components to the qualifications of the specification writer for that industry, and this is likely to be the case for all technical specifications, i.e. those delineated by CSI Specification Sections 2-48. One component is competency in general specification writing such as described in the CSI Project Resource Manual (PRM), or other qualification that meets the facility owner's needs. The second component is competency in the work being specified.

Many architects and engineers are competent in general specification writing, and in some portions of the technical work requirements of general construction, but some areas of construction are much too complex for general treatment and should be subject to more stringent technical qualifications for writing specifications in that area. This extra qualification might be an industry certification, experience, etc.

Citing such potentially vague requirements as "acceptable industry standards" will almost certainly ensure that the contracting process for that project will not result in a level playing field since there is likely to be considerable disparity in the interpretation of requirements by potential bidders. This will also put up a red flag to bidders on subsequent projects by this facility owner, as the level playing field is a function of an owner's actions across all projects.

In any event, we will eventually figure out that discussing detailed procedures among all parties in the planning stages, rather than during conflict resolution, is beneficial to all.

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