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Philadelphia Construction Law Blog

Practical Tips: What Are the Five Most Important Construction Contract Clauses?

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

Reviewing construction contracts is a regular part of my practice as a construction attorney. From limited reviews of specific provisions to preparation of an entire array of form contracts, I have seen many different contract clauses and methodologies to evaluate them. In the end, contracts are about the allocation of risk. While the Rules of Professional Conduct prohibit me from giving legal advice as part of this blog, there are some clauses that commonly draw more attention when time is limited in the contract formation stage. Here are the top 5:

    (1) Payment clauses. No contractor likes to work for free. The payment clauses in the contract determine how quickly you get paid, outline the items that must be submitted to get payment, and set out what happens when the company with whom you are contracting does not get paid. Start here.

    (2) Insurance and indemnity clauses. These do not often come into play if your company generally performs work safely. However, the consequences can be large and the financial impact relating to those problems considerable when they are triggered. Be careful about assuming risk you don't control or can't insure. There are waiver issues to be concerned about in this area as well.

    construction contract.jpg    (3) Change order clauses. Changes in scope are among the most litigated construction issues. This is for good reason. Change order clauses often set out specific criteria that must be met to receive payment for change order work. The failure to comply with these criteria is often relied upon when there is not enough money in the job to pay for extras or there is genuine disagreement about whether something was included in the original scope. Due diligence in advance helps avoid change order problems, but make sure the change order clause is fair and not overly cumbersome.

Could Registry List Be On the Way For Pennsylvania Mechanic's Lien Law?

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

The Pennsylvania House and Senate ended their 2014 session at the end of last week without passing any bills that deal directly with construction related issues. There was one, however, which was under consideration and is worth watching when the legislature returns to Harrisburg.

House Bill 473 has lingered around since 2013. The bill proposes a somewhat radical change to the Pennsylvania Mechanic's Lien Law by creating a statewide notice directory which contractors will be required to use in order to preserve lien rights on certain projects.

The bill begins by deleting the long used definition of "owner" and replacing it with a term called "searchable project owner". Interestingly, this revision seems to dispense with the traditional definitions of an owner and, theoretically, calls into question the entire construct of the Mechanic's Lien Law. It then adds definitions for "searchable project", "construction notice", notice of commencement", and "notice of furnishing" among others.

The heart of the proposed revision is a directory to be maintained by the Commonwealth on the internet. "Searchable projects" - which are defined as erection and construction or alteration and repair work costing a minimum of $1.5 million - would require the filing of notices of furnishing. The failure of a contractor or subcontractor to file the appropriate notices under the statute would result in waiver of that contractor's lien rights.

Hotel Construction 1 .jpg

The Government Cannot Terminate Construction Contracts At Will

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

The Federal Claims Court recently ruled against the United States government on claims that it improperly terminated a metal building contractor on a U.S. Coast Guard project. The claim arose when a plethora of problems out of the control of the contractor, K-Con, Inc., caused it to deliver the project late.

Coast Guard Boat.jpgBy way of additional background, K-Con Building Systems, Inc., was awarded a Federal Supply Schedule contract by the General Services Administration to erect a prefabricated metal building for the Coast Guard. The contract contained a clause which required that an officer of the GSA would have to determine whether the cause of delays put forward by the contractor were "excusable" or not.

K-Con's work was set back on a number of occasions due to a world-wide shortage in steel, weather related issues, and complications in the coordination of specific portions of the building design caused by the Coast Guard according to the contractor. Communication regarding these issues occurred regularly between representatives of K-Con and the Coast Guard and the project completion date was even extended on a number of occasions.

Construction Trivia

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

Skyscrapers have become a normal part of the skyline in many major metropolitan areas.  Many of them are far in excess of 100 floors in the modern world.  Can you name the first building in the world to have 100 floors or more though?  For extra credit, how long did it take to build this building?

Fight Over Fall Protection In Residential Construction

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

A recent Wall Street Journal article highlighted a long standing issue in construction workplace safety circles. The protection of residential contractors - roofing contractors in particular - from falls on the job. While the problem has been relatively quiet in recent years, it is starting to gain more attention as an increase in injuries and deaths from falls correlates with a rise in the new construction housing market.

construction worker on roof.jpgThe Occupational Safety & Health Administration has a plethora of regulations governing fall protection. They include the use of safety harnesses, nets, and guard rails in various different ways depending on the circumstances of the project and the height at which workers are working. In an apparent acknowledgment that compliance with these safety protocols can be expensive, the fall protection rules were relaxed by OSHA for a long period of time while the housing industry struggled. OSHA has started to focus on the issue in the residential construction industry again because of the increased number of incidents. According to the article, the tension over the issue article is particularly acute in the Southwestern United States.

New Federal Minimum Wage For Contractors

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

After Congress refused to pass a new minimum wage law, President Obama signed Executive Order 13658 in June of this year raising the minimum wage on all new contracts or replacement contracts for expiring agreements issued after January 1, 2015, to $10.10 an hour. The Department of Labor's Wage and Hour Division then issued a final rule following that lead on October 7, 2014. This change in the law will apply to construction contractors until at least the expiration of President Obama's term and the entry of a subsequent Executive Order by subsequent President and/or Department of Labor Change in policy.

The new minimum wage rule brings with it several other requirements:

   (1) If a worker is entitled to a rage rate higher than this minimum wage by law, the higher rate applies. This includes Davis-Bacon requirements and begs the question of whether this new rule is even necessary.

   (2) Contractors must include the Executive Order contract clause in any covered lower-tiered subcontract and notify workers of the required minimum wage if it applies.

Construction Trivia

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

One of the most famous buildings in the modern world was designed by Charles L'Enfant and was the largest residence in the United States until the Civil War. Identify the building and it's location.  For extra credit, name the first family to live in the building.

South Jersey OSHA Instructor Guilty of Selling Fake OSHA 30 Certifications

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

The Philadelphia Business Journal is reporting that New Jersey Federal Judge Joseph Rodriguez recently accepted a guilty plea from an OSHA instructor who admits to selling fake OSHA 30 Hour Certification Cards.

Federal prosecutors brought the charges after reviewing documents and taking statements from various witnesses that Frederick Prinz of Marmora, New Jersey was issuing OSHA 30 cards for prices ranging from $150-$250 a card. The payments were made by carpenters to obtain the card without completing the necessary training. Prosecutors estimate that more than 100 false certifications were issued.

Mr. Prinz is set to be sentenced in December. There is no indication as to whether or how the purchasers of the false certifications will be addressed.

Think Practically and Build Contingencies Into Your Bids

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

As a construction lawyer, I deal with cases involving non-payment every day. Sometimes I represent the owner and on other occasions I represent the contractor or subcontractor. I have even represented sureties on payment related issues. No matter which company I represent, however, payment issues often come down to one single common denominator: a lack of practical planning combined with a failure to build contingencies into bids.

dollar bill.pngWhile pay disputes come in different forms and sizes, a common reason for non-payment is a legitimate lack of funds to make the required payment. Insufficient funds problems occur when a party fails to plan for contingencies in the budget and consider likely unknown but foreseeable circumstances. Among the worst mistakes is to budget only enough money to cover the cost of construction as laid out in the construction contracts. Change orders are inevitable, so plan for them.

Wave of the Future? New Ladder Safety App Hits Streets

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

Ladder Fall.pngThe word on the street is that Apple's I-Phone 6 will be released soon. This may even include a "watch-phone" that almost everyone assumed - despite being convinced it was way off in the future - was coming at some point. This is just more evidence that technology is constantly evolving and changing the way we do business every day.

Construction is no different. Among the most recent developments is the release of a ladder safety smartphone app released by the National Institute for Occupational Safety and Health. The interactive tool is designed to provide valuable information to workers in the field by placing an interactive interface in which tools, checklists, and guides can be easily accessed for information. By using safety research and smartphone technology, the app can provide "instant feedback" on things like ladder placement and angles.

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