10. Surety bonds are NOT insurance.
The surety’s role on a project is to guarantee that the contractual obligations the principal has to the obligee will be fulfilled. Ashley Robinson and Douglass Wynne provided
insight into the surety’s perspective when a bond is implicated in a
project. The three main surety bonds on
construction projects are the bid bond (to guarantee the general contractor
will enter into the underlying contract if it wins the bid); the performance
bond (to guarantee performance of the contractor’s scope of work); and the
payment bond (to guarantee payment to subcontractors and suppliers). For all
of these bonds, the surety’s right to be reimbursed by the principal is
fundamental to the surety-principal relationship. If a surety has to make payments pursuant to
bonds, the surety will pursue the principal (and often individuals at the
principal who were required to sign indemnification agreements for the bond)
for those funds. This relationship gives
the surety leverage to encourage the principal to perform its obligations. Arguably one of the more challenging bonds is
the performance bond as it puts the obligation of project completion on the
surety if the principal defaults. Litigation often arises over issues such as whether proper notice was
provided; whether the obligee properly placed the principal in default or
properly terminated the principal; and whether the obligee performed all of its
responsibilities under the contract. It is critical to review the surety bond
and the underlying contract to determine whether all of the proper steps have
been followed and provide the surety with sufficient notice of the
default. Similarly, under payment bonds,
notice and timing are critical to a successful claim.
9. Utilizing a Construction Manager At Risk for project success. Construction manager at risk (CMAR) is a project delivery approach allowing the owner to hire and utilize a construction manager from design through close-out. Because the CMAR delivery method has increased in popularity, likely due to this approach’s ability to streamline design and construction, it is important to understand the benefits, risks, and obligations arising from this delivery method. John Patrick moderated this panel as Christopher Payne and Chantal Fink Mehill discussed the various issues to understand when using a CMAR delivery method. One critical consideration for the CMAR arises from the use of a guaranteed maximum price (GMP). Utilizing a CMAR allows a GMP to be established earlier in the process, shortening the project delivery time. However, when changes in design increase costs, the fight over what is “reasonably inferable” (and, therefore a CMAR risk) are rife. One way to mitigate this risk is a contingency – though that must be carefully contracted as it comes with its own set of risks and disputes. There can be significant advantages to a CMAR delivery method but it is important to understand the particular risks and considerations.
Many projects incorporate an element of delegated design, requiring contractors and subcontractors to engage in traditional design tasks. The best way to mitigate risk when incorporating elements of delegated design is to clearly define expectations and roles, according to panelists Liza Crabtree Akins and Anne Gorham, and moderator Steven Nudelman. Expectations addressing key issues like scope gap, schedules for drawing submittals or model updates, responsibilities for model maintenance, setting out exclusions, clarifying the need for a licensed professional designer, defining standard of care, and making sure the proper insurance is procured to help avoid or mitigate risk.
7. Project delivery method and contracts are key considerations in disputes between contractors and engineers. Panelists Jim Archibald and David Kent, and moderator Chris Anaya, spoke to various ways disputes between contractors and engineers can manifest and be pursued. Project method (e.g. design-build, public-private partnership, CMAR, integrated project delivery, design-bid-build), status of the project and dispute, temperature of the dispute, and owner perspective can all impact how to address the issues between a contractor and engineer and determine whether early resolution is possible or whether a more formal dispute resolution procedure is warranted. The contracts will set out critical considerations such as standard of care, limitations of liability, and insurance requirements that will define much of the dispute. And when dealing with a project delivery method where there is no contract between the engineer and contractor (such as design-bid-build), contractors have to utilize alternative theories of liability such as third-party beneficiary, negligent misrepresentation, professional negligence, or tortious interference with contract to attempt to bring a claim against the design professional directly.
6. Be transparent, be honest, surround yourself with good people, and take care of your family because they are the ones who support you. Luis Spinola of Azteca-Omega Group, LLC spoke about his journey starting in Mexico City and ending in the United States where he established his successful construction company in 1983. Mr. Spinola spoke of the attributes that helped him and his company persevere through challenges and achieve success. Setting expectations. Setting boundaries. Can do attitude. Get things done because only one thing counts – what you got done. Teach. Help others. Always do the right thing. Lessons to live by.
5. Documentation is
critical to support disruption claims. Disruption claims focus
specifically on the efficiency of labor and resources. According to panelists George
McLaughlin and Karen Deshon and moderator Carson Fisk, timely notice, detailed
record-keeping, any mitigation actions, and potentially expert analysis is
important in establishing damages in disruption claims. Because of the challenges of establishing the
calculation of lost labor productivity, it is important to follow the 3 “Rs” –
Recognition, Recovery, Resolution. Legal
and expert assistance are often necessary due to the nature of disruption
claims.
4. Come on ride the train. The Division lunch panel program presented by Stacy Witbeck was focused on the construction of the McKalla Station constructed to provide access to the Austin FC stadium and provided insight into the challenges of constructing platforms on an active train line, as well as handling unforeseen conditions, coordinating work with other contractors, surviving the Austin-summer heat, and delivering a successful project in a timely, cost-efficient manner. Ultimately, the construction of the platforms encouraged growth in the area.
3. Knowing the specifics of mechanic’s lien
oddities is important to secure contractor’s rights. Mechanic’s liens
are state-specific statue-based remedies for protecting the rights of
contractors, subcontractors, and suppliers and it is critical to know the
relevant laws and requirements for the state in which you must file the lien.
Panelists Mark Grzymala and Amy Wolfshol took us one step further and shed
light on some oddities in mechanic’s liens that require special attention. For example, contractors have different rights depending
on whether the project is public or private – so what happens when it is
both? For a public-private partnership
project, it is necessary to determine who is the actual owner or tenant for the
project and where the funds are coming from to determine what type of lien can
be asserted on the project.
2. It is important to navigate
conflicts of interest when an unexpected conflict arises mid-project. Panelists
Samuel Gregory and Matthew Peng highlighted important considerations for
attorneys through use of a hypothetical where the attorney represents the Owner
of a construction project in the creation of development and contract documents
and then, half way through the project, the Owner switches to a general
contractor also represented by the attorney.
Through clever use of swag (YLD fanny packs to be precise), Samuel and
Matthew engaged the audience in fact scenarios to show the necessary analysis
attorneys must undertake to make sure they are not violating any ethical
obligations by representing two parties in the same project.
1. Holy Cow, Batman. Friday
evening saw many from the Forum going to the Congress Avenue Bridge to view the
astounding site of hundreds of thousands of bats fly out from under the Congress
Avenue Bridge to begin their nightly bug feast. A 1980 renovation transformed the Congress Avenue Bridge into an
ideal bat cave. Decades later, Austin's bat numbers have swelled. Starting in late March through early fall,
you can watch this incredible site: Same bat-time, same bat-channel (for those
missing this reference, it was the catchphrase in the classic Batman TV
series).
Author Kendall E. Woods is a construction attorney in Chicago, Illinois where she has been practicing law since 2003. Kendall is a partner at Laurie & Brennan, LLP and represents owners, general contractors, and subcontractors in all phases of project procurement, claim administration, litigation, and arbitration/trial. Kendall can be contacted at kwoods@lauriebrennan.com.
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