Category Archives: Contract Review & Negotiation

Improving the Odds for a Jackpot Year for Your Commercial General Contracting Business

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Wednesday’s Powerball drawing promises the winner a $1.3 $1.5 billion (yes, that’s “billion” with a “b”) jackpot.  Unfortunately, your odds of picking the winning numbers are about 1 in 292 million, or roughly the same odds as an architect acknowledging a deficiency in construction plans & specifications (I kid!).  Buying a few extra tickets might “improve” your chances, but they’ll remain infinitesimally small.

Fortunately, there are some steps you can take to improve the odds your commercial general contracting business will have a jackpot year in 2016.  These five tips spring to mind:

  1.  Know who you’re doing business with.  One bad project can spoil the gains from ten successful ones.  Do your homework on the owners who want you to build their projects.  Avoid owners who insist on oppressive contract terms, have a history of problem jobs, and/or just don’t seem to know what they’re doing.  Sometimes the best contracts are the ones you don’t sign.
  2. Buy out subcontracts thoughtfully.  Just as you need to be careful picking & choosing the jobs you bid, you should be equally careful about selecting your downstream dance partners.  First-tier subcontractors offering you a price advantage might not necessarily be reliable team players down-the-road.  Balance price with dependability. 
  3. Cultivate a culture of jobsite safety.  Having a track record for operating safe jobsites makes your company more attractive to the best owners, keeps your workers’ compensation mod rate in-check, and decreases the chances you’ll be spending time & money this year defending against claims.  Safety first, every day.
  4.  Secure your payment rights.  In North Carolina, that means filing a Notice to Lien Agent as your work begins, informing suppliers of the identity of the lien agent, guarding against double payment liability through the Notice of Contract procedure, and enforcing your lien rights timely, when necessary.  If you’re unaware of how any of these tools work, call your construction attorney immediately.  Speaking of construction lawyers…
  5. Rely on your lawyer for more than just dispute resolution.  Construction attorneys do more than resolve claims.  We draft & review contracts (as well as construction forms) and provide counseling throughout the construction phase of a project and beyond.  Make an experienced construction attorney your partner in profitability all year long.

Good luck, both with Wednesday’s drawing and with the year ahead.  As always, comments welcome!

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Filed under Construction Risk Management, Contract Review & Negotiation, Lien Law, OSHA

Subcontract Negotiation Is a Question of Leverage. Leverage Is a Function Of . . .

Embed from Getty ImagesTwo tweets touching upon subcontract negotiation dynamics jumped out at me this week.  The first was from zlien founder Scott Wolfe, Jr., who linked to his recent blog post about general contractors who demand that their subcontractors sign away their lien rights:

Money quote from the post:

General contractors scream that relationships are important, but really, it’s relationships on their terms.  …  In reality, however, the subcontractor is likely feeling a bit abused.  They accommodate because of the general contractor’s influence and contracting power.

The second tweet was from good friend and Virginia construction attorney Chris Hill, who linked to fellow Virginia attorney Juanita F. Ferguson’s piece discussing (among other things) forum selection clauses in subcontracts between out-of-state prime contractors and local subs:

Money quote from the post: “local contractors must be savvy in negotiating contracts with out-of-state companies.”

Which, in turn, begs the Friday Forum money question:

What factors impact the relative bargaining power of primes and subs when it’s time to make a deal?

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Filed under Construction Risk Management, Contract Review & Negotiation, Forum Selection Clauses, Subcontractors

4th Circuit: Substantial Completion Occurs When Your Contract Says It Occurs

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There is no milestone more significant to a commercial construction project than substantial completion.  For an owner, it’s the long-awaited moment it can make beneficial use of its investment.  For prime contractors, it’s the moment the owner’s rights to terminate and/or assess liquidated damages is cut off.  For subcontractors, it’s the moment contractual warranties typically begin to run.  The list goes on and on.

Monday MemoIn light of how many legal rights and defenses are tied to the moment of substantial completion, you would think that contracting parties would take extra care to (1) define what constitutes “substantial completion” and (2) ensure that “substantial completion” is achieved in accordance with that carefully crafted contractual definition.

That’s not always the case, as a 2013 decision from the U.S. Court of Appeals for the Fourth Circuit (which includes North Carolina) reveals.

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Filed under Construction Risk Management, Contract Review & Negotiation, Damages, Delay Claims, Federal law, policy & news

Crazy S#!% in Construction Contracts

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It’s springtime in the construction industry, my friends.  Banks are lending again, optimism has returned and the private, non-residential sector is heating up.  Good news all.

But before you mobilize the yellow steel to your next jobsite, the deal’s gotta get done.  And so ’tis the season of contract negotiation — which, if you’re not careful, could lead to the season of your discontent.  That’s because some crazy stuff might be lurking in the document the party above you in the contractual chain wants you to sign.

Just ask Birmingham, Alabama construction attorney Burns Logan, the inspiration behind this post and its cheeky title:

There’s only one way to suss out the crazy in your construction contracts, and that’s by carefully reviewing them, as Sage Construction reminded us this week:

One of the three reasons cited in the linked blog post is “owners are pushing risk to GC’s.”

Tell me about it!

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When More Is Less: The Paradox of Differing Site Conditions Clauses

Wednesday WisdomIf I were to tell you that unforeseen subsurface conditions — for example, wetter-than-expected soils requiring a change to a building’s foundation — resulted in a substantial cost-overrun on a publicly bid project, you’d probably say, “that’s lousy news.”  In the context of that one project, I’d have to agree with you; unexpected cost increases can create uncomfortable financial, PR and political pressures for a public project’s participants, not to mention unwelcome additional costs for John Q. & Jane Q. Taxpayer.

But what if I told you that the contractor’s entitlement to increased compensation on that one project would ultimately save the government much more money on future projects?  “Sounds great,” you might respond, “but I don’t believe in fairy tales.”

You don’t have to.  You just have to believe in the differing site conditions (“DSC”) clause.

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Filed under Change Orders, Contract Review & Negotiation, Differing Site Conditions, Federal law, policy & news, State law, policy & news

When the Well Runs Dry: Seven Tips for Guarding Against a Failure in Project Financing

Photo by inkknife_2000 via Flickr *

Photo by inkknife_2000 via Flickr *

Last Thursday, November 14, 2013, I participated in a webinar hosted by Engineering News-Record® on “The Five Risks You Never Saw Coming,” which is still available on-demand and free to the public on ENR’s webinar page.

The first risk addressed by the panel is the subject of this post: the risk that a private owner’s financial well might run dry.

As one of the panelists, Atlanta construction attorney Gina Vitiello (@GinaVitiello on Twitter), discussed, project funding can fail for a number of reasons.  The owner might run out of capital funds, perhaps because it overestimated the availability of project funding or underestimated the total costs of the endeavor.  Or the owner might lose its financing, for example by defaulting on its loan obligations.  Or the lending institution financing the project might fail.

No matter how or why the financial well might run dry, the consequences for the prime contractor, construction manager at risk or design-builder can be catastrophic.  What can be done to guard against this risk?

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Filed under Construction Risk Management, Contract Review & Negotiation, Feature story

Perspectives from Across the Pond: Contracts, Quality and Payment on UK Construction Projects

David Morrison

David Morrison

It’s a pleasure to welcome the thoughts of David Morrison of the United Kingdom to NC Construction Law, Policy & News.  David has been a contractor, subcontractor, trader and project manager throughout his years in the construction industry.  Beginning life mixing concrete in Hackney, London in the 1980s, David soon began to develop a reputation as the “pen pusher” on-site when he became interested in law and legislation in the industry.  Having experienced both sides of construction disputes, David now enjoys a much more tranquil life on the marketing team at UK Tool Centre.  Admittedly, he does miss the smell of mortar and bacon at dawn, though…

Having a contract properly prepared and signed is the single most important aspect of securing payment for work carried out by tradesmen.  A document that clearly expresses the expectations of both customer and tradesman is invaluable should any dispute arise regarding work carried out and its worth.  Tradesmen in the UK should familiarise themselves with the Supply of Goods & Services Act 1982 and have their contracts and workmanship adhere to its specifications to ensure prompt payment for services rendered and the legal right of entitlement if payment in part or in whole is withheld.

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Filed under Construction Defects, Contract Review & Negotiation, Lien Law, Payment for Goods and Services

10 Big Changes to Bidding, Performing & Making Verified Claims On NCDOT Projects

I represent a number of highway/heavy contractors, all of whom know that doing business with the North Carolina Department of Transportation (“NCDOT” or the “Department”) requires careful attention to the agency’s “Standard Specifications for Roads and Structures.”  NCDOT’s Standard Specs contain both front-end “General Requirements” (what would be called “General Conditions” on virtually any other public or private construction contract) and back-end standards for all aspects of highway work — from earthwork, pipe culverts, subgrade and asphalt pavements to signing, materials, pavement markings and electronic signalization.As my highway/heavy clients also know, the NCDOT’s Standard Specs are regularly revised every 4-6 years.  Last year, NCDOT issued the 2012 version of its highway construction bible, updating the 2006 version.  This post focuses on what I consider to be the ten most significant changes to NCDOT’s front-end “General Requirements.”  As you will see below, these ten revisions affect how contractors obtain, perform and make claims on NCDOT work.

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Filed under Contract Review & Negotiation, Delay Claims, Feature story, Highway Contracts, State law, policy & news

An Ounce of Claims Prevention Worth a Pound of Cure?

I spent last Thursday and Friday at a continuing legal education program offered by the Fidelity & Surety Law Committee of the American Bar Association’s Tort Trial & Insurance Practice Section (“TIPS”) at the Waldorf-Astoria Hotel in Manhattan.

One of the many highlights of the excellent two-day program was a panel discussion on Thursday featuring general counsel and risk managers from five large general contractors: The Walsh Group, Kiewit Corp., Turner Construction Co., Skanska USA and Granite Construction Inc.

During that panel discussion, Mr. Kenneth M. Smith, Assistant General Counsel of Granite, spoke about a topic near and dear to my heart:  in-project claims prevention.  Mr. Smith spoke about how claims prevention begins with the contract review process, which should feature a thorough identification and analysis of key contract clauses to ensure an appropriate allocation of contract risk between the parties.  Legal counsel should follow that review with training of key project staff to ensure that they understand all key contract terms, such as claim notice provisions.

Mr. Smith then spoke about his company’s implementation of monthly impact reports to and/or conference calls with legal counsel to provide a periodic check-up on the health of a project.  Are an excessive number of change orders creating a risk of cumulative impact damages?  Is the project on budget?  If not, in which cost codes can the cost overruns be found?   Is the project falling behind schedule?  Are there personality conflicts on-site that are preventing effective communication between and among project participants?

The purpose of getting answers to these types of questions on a periodic basis is threefold.

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Filed under Contract Review & Negotiation, Feature story, Project Counseling