Revisions to ConsensusDocs® Design-Bid-Build Standard Forms

Business contract detailsEvery construction project has a contract (written, preferably), and they often vary in size and scope depending on the nature and complexity of a project. Many construction industry participants have developed their own contract forms, and others rely on industry standard contract forms such as the AIA and ConsensusDocs standard forms. ConsensusDocs forms evolved from the prior AGC forms.

Recently, the ConsensusDocs Coalition published revisions to its prime and subcontractor Design-Bid-Build standard contracts. Many of the changes are attempts to clarify provisions, create consistency across forms and are generally editorial in nature. However, several of the revisions have a substantive impact and should be reviewed closely prior to using the new forms. Below is a high-level overview of some of the substantive changes:

  • Termination for Convenience: Improper terminations for default/cause are no longer automatically converted into terminations for convenience. Accordingly, an improper default termination may result in substantial damages.
  • Schedule of Work: Incorporates Critical Path Method Scheduling concepts and specifically requires the identification of critical dates and a graphic representation of all activities, including float values that will affect the critical path.
  • Indemnification: Expanded to include “intentionally wrongful” acts or omissions and also provides some clarity to the definition of “Others” who or which are indemnified.
  • Insurance: Contractor, rather than the owner, is now the default party responsible for obtaining the builder’s risk insurance policy. The party who procures the builder’s risk insurance policy bears the risk of loss from damage to the work until Final Completion.
  • Bonds: No longer requires that the bond penal sum increase automatically in accordance with the contract price when the price increase exceeds 10 percent.
  • Changes and Directives: Revisions clarify and account for changes with no time or cost impact and expand changes to encompass “Interim Directives.”
  • Payment: Adds an additional category of “losses, expenses, or damages … not compensated by insurance” and “cost of corrective work” as recoverable costs on a cost reimbursable basis.
  • Dispute Resolution: Adds a “check-the-box” option for the mediation procedures and administrator. If no box is selected, mediation will be conducted pursuant to the American Arbitration Association rules.
  • Fiduciary Relationship: Removed language from the ConsensusDocs 240 Design Professional Standard Agreement that may imply that a fiduciary duty existed between the owner and its design professional.

These revisions affect numerous ConsensusDocs standard agreements, including: ConsensusDocs 200 Owner & Constructor Agreement, ConsensusDocs 205 Owner & Constructor Short Form Agreement, ConsensusDocs 240 Owner & Design Professional Agreement, ConsensusDocs 750 Constructor & Subcontractor Agreement and ConsensusDocs 751 Constructor & Subcontractor Short Form Agreement. Although this blog focuses on changes to the Design-Bid-Build forms, revisions to other ConsensusDocs forms including the Design-Build and construction management at-risk forms (ConsensusDocs 410; 415; 420; 450; 560 and 500) were released in March 2017 and address changes in the industry impacting insurance, legal, technology and terminology.

Disputes often arise because a party is unfamiliar with its contract. This blog should serve as a reminder to review each contract you are presented with; update any forms you may have for use in your company; read your contract (we hope before you sign it); and, if you have questions, consult with a seasoned construction lawyer to increase the likelihood that your project is governed according to what you think you bargained for.

Solar in the Frost: What to Watch Out For

solar panels

As solar technology continues to become more efficient, construction of solar plants is expanding rapidly around the world, including in colder environments that, in the past, may have lacked the irradiance necessary to make solar feasible.  Installation of solar panels north of the frost line creates some additional risks that solar developers, owners and contractors should consider. We have recapped some of those concerns below.

  • Who carries the subsurface risk and what does that risk extend to?
    • Post-driving in northern climates requires attention to the “heave,” or the impact of frost expansion of soils during winter months on the driven piles that support the panels. Frost expansion can cause uplift and sinking of piles that create serious warranty issues after a plant is operational, and, because the cause of the warranty issue occurs underground, it may be difficult to ascertain or assign responsibility after-the-fact.  Parties can and should work together to define and assign this risk during contract negotiations to avoid unnecessary and potentially expensive disputes during a project and after completion.
  • Who is responsible for weather impacts and how will weather delays be addressed?
    • In many construction contracts, the notice to proceed date is left to the discretion of the owner/developer once the contract price and scope have been negotiated. Contractors and subcontractors should be wary of an open-ended NTP date or any kind of protracted negotiation after the award of a bid in regions that suffer from early-onset, harsh and lengthy winters.
    • Solar contractors, in particular, focus on creating efficiencies and managing a compressed schedule to make the work profitable. The manufacturing-like process of solar farm construction demands that contractors maintain a high level of productivity to achieve project goals.  If a contractor allows owner-financing or material availability concerns to push its NTP date into late summer or fall in a colder climate, the contractor may be vulnerable to winter weather impacts that could cripple its productivity, spelling disaster for a project.
    • For example, frost penetration can make malleable soil take on rock-like qualities and seriously hamper pile-driving operations. Similarly, installation of racking and panels in sub-freezing temperature may require additional equipment/materials to keep laborers warm and may require more skilled or expensive labor to work productively in such harsh environments.  Even where construction is completed before winter sets in, a contractor should consider potential impacts weather may have on testing requirements.  For instance, a contractor may have difficulty demonstrating required performance standards if panels are covered with snow for prolonged periods.
    • To account for winter weather impacts, a savvy contractor will look for additional protection beyond the standard force majeure language that may appear in many contract forms. Force majeure provisions do not always cover weather impacts that are ordinary or expected for a particular climate even if such conditions are typically harsh or difficult.  Instead, a contractor should look for additional protection by addressing winter weather impacts and delays separately and clearly assigning responsibility for associated costs to the appropriate party.
    • The contractor, to the extent it will rely on subcontractors for any of the work, must clearly understand what that entity believes is “winter work,” before agreeing to definitions or relief with the owner/developer.

There are obviously other considerations that solar industry participants should evaluate when pursuing work in cold weather climates.  But the above examples may encourage you to think more deliberately about the various unforeseen issues that might arise.  And, indeed, regardless of where you are pursuing new work, it is always a valuable exercise to consider potential environmental impacts, especially in a marketplace with a fast-expanding footprint like solar energy.

Bradley Partner David Pugh Appointed Chair of Bylaws and Policies for National ABC

David PughBradley’s Construction Practice Group is pleased to announce that David Pugh was appointed Chair of the Bylaws and Policies Committee for the National Associated Builders and Contractors at the ABC Workforce Conference 2017. As a member of the firm’s Construction team, Mr. Pugh represents owners, general contractors, subcontractors, engineers, architects, insurance companies and sureties throughout the United States at every stage of a construction project, from conception and planning to performance and closeout. He also serves as the 2017 Chair of the ABC Alabama Chapter Executive Committee.

The ABC Workforce Conference 2017 was held this past week in Ft. Lauderdale, Florida, and featured innovations in construction field applications, educational content, cutting-edge product demonstrations and a celebration of the best in merit shop construction. The annual conference also recognizes the dedication and contributions of ABC members, chapters and craft professionals to the construction industry.

New FAR Rule Requires Self-Reporting of Reduced or Untimely Payments to Subcontractors

Bradley attorneys Aron Beezley and Emily Unnasch recently published a Law360 Expert Analysis article on the new changes to the Federal Acquisition Regulation (FAR) that impose mandatory reporting requirements on federal prime contractors who fail to make full and timely payments to their small business subcontractors. Although little more than a month old, these new requirements already have been the source of considerable confusion for both federal prime contractors and small business subcontractors. Accordingly, the article aims to provide a user-friendly overview of the new requirements, and concludes by offering context and analysis from the perspective of both federal prime contractors and small business subcontractors.

The Expert Analysis article was published by Law360 on February 23, 2017. If you have any questions about any of the topics discussed in the article, please do not hesitate to contact Aron Beezley or Emily Unnasch.

The Most Important Government Contract Disputes Cases of 2016: A Feature Comment Authored By Beth Ferrell and Aron Beezley

Bradley attorneys Beth Ferrell and Aron Beezley recently published in The Government Contractor a Feature Comment on the most important government contract disputes cases of 2016. The Feature Comment analyzes the U.S. Court of Appeals for the Federal Circuit’s decisions in Kellogg Brown & Root Servs., Inc. v. Murphy, 823 F.3d 622 (Fed. Cir. 2016) and Laguna Constr. Co., Inc. v Carter, 828 F.3d 1364 (Fed. Cir. 2016), and provides insights on how these two decisions impact the assertion of claims and resolution of government contract disputes.

The Feature Comment appeared in The Government Contractor on February 8, 2017. If you have any questions about any of the topics discussed in the Feature Comment, please do not hesitate to contact Beth Ferrell or Aron Beezley.

Riding Currents into New Markets: What Power Generation Developers and Contractors Should Watch Out For

Electricity Generation Plants Images SetThe CPV St. Charles Energy Center, a new 725 MW combined-cycle gas power plant in Maryland, went online earlier this month. The U.S. Supreme Court analyzed federal preemption with respect to state regulation of power generation in interstate markets administered under the Federal Energy Regulatory Commission (FERC) in a ruling affecting the CPV plant’s rate structure. As the Court recounted, Maryland attempted to evade the “clearing price” set by the interstate market for power by ordering local power utilities to enter into a 20-year “contract for differences” with CPV for capacity generated by the new gas power plant. Under the terms prescribed by Maryland, if the clearing price set by the interstate market was less than the rate under the contract for differences, the power utilities would make up the difference, and, if the reverse were true, CPV would owe the power utilities for the difference.

Maryland’s aim was to encourage and subsidize local production of clean and renewable sources of electrical power generation, but the Court found that Maryland’s efforts at price fixing in the interstate market were preempted by the existing regulation of that market by FERC. However, the Court also left open the door for future efforts by states to incentivize local electrical production so long as such efforts avoided interference in interstate markets:

We reject Maryland’s program only because it disregards an interstate wholesale rate required by FERC. We therefore need not and do not address the permissibility of various other measures States might employ to encourage development of new or clean generation, including tax incentives, land grants, direct subsidies, construction of state-owned generation facilities, or re-regulation of the energy sector. Nothing in this opinion should be read to foreclose Maryland and other States from encouraging production of new or clean generation through measures “untethered to a generator’s wholesale market participation.” … So long as a State does not condition payment of funds on capacity clearing the auction, the State’s program would not suffer from the fatal defect that renders Maryland’s program unacceptable.

President Trump has promised to “identify and eliminate unnecessary regulations that kill jobs and bloat government” and to allow states more freedom from federal restrictions, although it is too early to determine if he will encourage renewables, in light of his promise to lift restrictions on coal, oil, natural gas, and shale. While FERC is unlikely to be affected, states will likely seek ways to persuade developers and contractors to the state’s backyard. As more states pursue markets for renewable and other forms of electrical generation, they are likely to implement incentive programs to try to attract developers and contractors to produce capacity locally.  Power generation developers and contractors must consider the potential enforceability of any regulatory or rate-setting scheme that is used to entice them into a new market. If a state overreaches in the development of its incentive program and a court strikes the program down after a project is under way, that action might substantially impact the profitability and viability of any power plant.

$1 Billion in Credit Assistance Now Available from EPA’s New Water Infrastructure Program

water treatmentOn January 10, 2017, the U.S. Environmental Protection Agency (EPA) announced the availability of $1 billion in credit assistance for water infrastructure projects under the new Water Infrastructure Finance and Innovation Act (WIFIA) program. See 82 Fed. Reg. 2933 (Jan. 10, 2017).  Congress enacted WIFIA in order to provide low-cost, long-term credit assistance through direct loans or loan guarantees. The program supplements other traditional forms of water infrastructure financing such as State Revolving Fund (SRF) programs and bonds.

Entities interested in applying for WIFIA funding must act fast. In order to be considered in the current round of funding, prospective borrowers must submit formal letters of interest to EPA no later than April 10, 2017. EPA will host informational webinars explaining the process of submitting and evaluating letters of interest on February 9 and March 7, 2017.

WIFIA Overview

  • Eligible Borrowers
    • Local, state, tribal, and federal government entities and instrumentalities
    • Partnerships and joint ventures
    • Corporations and trusts
    • State infrastructure financing authorities
  • Eligible Projects
    • Wastewater conveyance and treatment
    • Drinking water treatment and distribution
    • Enhanced energy efficiency projects at drinking water and wastewater facilities
    • Brackish or seawater desalination, aquifer recharge, alternative water supply, and water recycling
    • Drought prevention, reduction, or mitigation
    • Acquisition of property if it is integral to the project or will mitigate the environmental impact of a project
    • A combination of projects secured by a common security pledge or submitted under one application by an SRF program
  • Key Program Features
    • $20 million – Minimum project size for large communities
    • $5 million – Minimum project size for small communities (population of 25,000 or less); WIFIA requires EPA to set aside 15 percent of its budget authority for small communities.
    • 49 percent – Maximum portion of eligible project costs that WIFIA can fund
    • Total federal assistance may not exceed 80 percent of a project’s eligible costs
    • 35 years – Maximum final maturity date from substantial completion
    • Five years – Maximum time that repayment may be deferred after substantial completion of the project
    • Interest rate will be equal to or greater than the U.S. Treasury rate of a similar maturity at the date of closing
    • Projects must be creditworthy and have a dedicated source of revenue

Letters of Interest and Applications for Funding

Prospective borrowers must first submit a letter of interest to EPA by April 10, 2017. The primary purpose of the letter of interest is to: (i) validate the eligibility of the prospective borrower and the prospective project; (ii) perform a preliminary creditworthiness assessment; (iii) perform a preliminary engineering feasibility assessment; and (iv) evaluate the project against the selection criteria and identify which projects EPA will invite to submit applications.

EPA will invite selected prospective borrowers to submit an application based on preliminary engineering feasibility findings, a preliminary creditworthiness assessment, the amount of budget authority necessary to provide credit assistance, and the scoring of the eligibility criteria. EPA expects that it “will only invite projects to apply if it anticipates that those projects are able to obtain WIFIA credit assistance.”

Eligibility Criteria

EPA has identified the following project priorities, in addition to geographic and project diversity:

  • Adaptation to extreme weather and climate change including enhanced infrastructure resiliency, water recycling and reuse, and managed aquifer recovery;
  • Enhanced energy efficiency of treatment works, public water systems, and conveyance systems, including innovative, energy-efficient nutrient treatment;
  • Green infrastructure; and
  • Repair, rehabilitation, and replacement of infrastructure and conveyance systems.

Within the priorities, selection criteria (and relative weight) for this round of funding include:

  • National or regional significance with respect to the generation of economic and public health benefits – 10 percent
  • The likelihood that WIFIA assistance would enable the project to proceed at an earlier date than without – 5 percent
  • Use of new or innovative approaches (energy-efficient parts and systems, renewable or alternate sources of energy, green infrastructure and alternate sources of drinking water through desalination, aquifer recharge or water recycling) – 10 percent
  • Protection against extreme weather events, such as floods or hurricanes, as well as the impacts of climate change – 10 percent
  • Maintenance or protection of the environment or public health – 10 percent
  • Service of regions with significant energy exploration, development, or production areas – 5 percent
  • Service of regions with significant water resource challenges, including water quality concerns, significant flood risk, issues identified in existing regional, state, or multistate agreements, and water resources with exceptional recreational value or ecological importance – 10 percent
  • Responds to identified municipal, state, or regional priorities – 5 percent
  • Readiness of the project to proceed toward development, including a reasonable expectation that the construction of the project can commence no later than 90 days after the date on which a federal credit instrument is obligated – 5 percent
  • Inclusion of public or private financing in addition to assistance under WIFIA – 5 percent
  • Reduction of other federal assistance to the project – 5 percent
  • The needs for repair, rehabilitation, or replacement of a treatment works, community water system, or aging water distribution or wastewater collection system – 10 percent
  • Service to economically stressed communities, or pockets of economically stressed rate payers within otherwise non-stressed communities – 10 percent

Conclusion

Letters of interest must be submitted no later than April 10, 2017. Prospective borrowers should take action immediately to evaluate their potential WIFIA eligibility and to begin preparing a letter of interest. Developers, designers, program managers, and contractors may want to help identify eligible cities and projects.

 

Bart Kempf is a member of Bradley’s environmental and government relations teams.

Government Contractors a Continued DOJ Target for False Claims Act Enforcement in 2016

Government contract concept on missing puzzleThe federal government continues to use the False Claims Act (FCA) as one of its prime enforcement tools against banks and mortgage companies. As it does each year, Bradley has assembled an overview of the year’s major False Claims Act developments and opinions to keep you abreast of the status of law. You may find our 2016 Year in Review here.

Cybersecurity-Related Bid Protests: Feature Interview with Aron Beezley

Aron C. BeezleyBradley attorney Aron Beezley recently sat down with PubKLaw for a feature interview about significant 2016 legal developments regarding bid protests. Among other things, the feature contains a discussion of the rising prominence of cybersecurity-related bid protests, an analysis of the most noteworthy cybersecurity-related bid protest decisions from the past year, and forecasts about what 2017 will hold with respect to cybersecurity-related bid protests.

The complete interview, “ Cyber 2016 Year in Review with Aron Beezley of Bradley Arant Boult Cummings,” first appeared in PubKCyber on January 4, 2017. (login required))

If you have any questions about any of the topics discussed in the interview, please do not hesitate to contact Aron Beezley.

 

Obama Trumped? Top Five Trump Targets Among Obama’s Executive Orders

The White HouseThe election of Donald Trump will significantly affect companies that contract with the federal government. Trump’s business background and campaign promises suggest many upcoming changes in the way the federal government does business.

In his 1987 bestseller, Trump: The Art of the Deal, Trump wrote: “Deals are my art form. Other people paint beautifully on canvas or write poetry. I like making deals, preferably big deals.  That’s how I get my kicks.” Federal contractors should realize that the Trump administration will negotiate deals that differ from those of the Obama administration.

President Obama issued many executive orders and presidential memoranda that imposed new restrictions and requirements on government contractors. Trump has taken a dim view of Obama’s executive orders. Trump’s “Contract with the American Voter” outlines a 100-day action plan to “Make America Great Again.” In the contract, Trump states that he will “cancel every unconstitutional executive action, memorandum and order issued by President Obama.” Trump’s campaign website promised to “[c]ancel immediately all illegal and overreaching executive orders.”

Trump’s statements indicate that he will roll back regulations with the goal of reducing government expenses and encouraging job growth. His frequent use of Twitter also suggests that soon-to-be-President Trump may personally negotiate with government contractors to create better deals and reduce costs.

Given these statements, Trump will likely lift numerous restrictions on government contractors as part of an overall deal for the federal government to get more for less. We believe these Obama executive orders will be among the “First Five to Dive” under a Trump administration:

  1. Executive Order 13495: “Nondisplacement of Qualified Workers Under Service Contracts.” This was one of President Obama’s first executive orders, signed January 30, 2009. It requires a new federal contractor to offer jobs to workers employed by the outgoing contractor. It effectively gives the workers a right of first refusal to obtain jobs with the new contractor. Opponents say that this order limits the efficiency of new contractors.
  2. Executive Order 13502: “Use of Project Labor Agreements for Federal Construction Projects.” A project labor agreement (PLA) is a pre-hire collective bargaining agreement with a union that establishes the terms and conditions of employment for a construction project. President Obama signed this order on February 6, 2009, to require the use of PLAs on all federal construction projects valued at $25 million or more. Critics say that the order increases federal construction costs and limits the competitiveness of non-union contractors.
  3. Executive Order 13673: “Fair Pay and Safe Workplaces.” This order, signed by President Obama on July 31, 2014, requires prospective federal contractors to disclose labor law violations. Government officials are then required to consider a prospective contractor’s violation history when awarding contracts. The order also bars contractors from imposing pre-dispute arbitration agreements on their employees. Several companies sued to block implementation of this order, and on October 24, 2016, a federal district court in Texas sided with the employers against the Obama administration.
  4. Executive Order 13706: “Establishing Paid Sick Leave for Federal Contractors.” President Obama signed this order on September 7, 2015. It mandates that federal contractors allow employees at least one hour of paid sick leave for every 30 hours worked. The House Freedom Caucus has notified Trump’s transition team that this order needs to be rescinded. The Freedom Caucus also wants Trump to rescind Executive Order 13658, “Establishing a Minimum Wage for Contractors,” which sets a $10.10 minimum wage for the employees of federal contractors.
  5. Executive Order 13665: “Non-Retaliation for Disclosure of Compensation Information.” This order prohibits federal contractors from taking adverse employment actions against employees who disclose compensation information to other employees. President Obama signed the order on April 8, 2014. Critics of the order say that it increases government costs because salary transparency increases the employee expense of federal contractors.

Federal agencies have adopted rules implementing many of Obama’s executive orders, including those listed above. As a result, the rulemaking process will have to be used to eliminate these restrictions, and that process won’t be completed on “day one.”

In The Art of the Deal, Trump wrote: “The best thing you can do is deal from strength, and leverage is the biggest strength you have. Leverage is having something the other guy wants. Or better yet, needs. Or best of all, simply can’t do without.”

Trump is not one to voluntarily give up his leverage in a business deal. If federal contractors want or need the removal of government restrictions like those outlined above, Trump will likely expect something in return. Contractors can expect Trump to negotiate for lower prices, faster turn-arounds and better deliverables.

President Obama limited government outsourcing, but a Trump administration will likely increase outsourcing. In his contract with the American voter, Trump promised a hiring freeze on all federal employees except those in the military, public safety or public health, with the goal of reducing the federal workforce through attrition. At the same time, Trump has promised increased spending on defense, immigration enforcement, infrastructure, prison privatization, energy, law enforcement, cybersecurity and school choice. Companies in these industries will likely have many new opportunities to obtain government contracts. On the other hand, spending on environmental enforcement and education regulations will likely decrease, and companies in these industries may have fewer opportunities.

Federal contractors should also be on the look-out for new regulations on hiring former government contracting officers. In a recent television interview, Trump said that “the people that are making these deals for the government, they should never be allowed to go to work for these companies.”

Bradley has the experience to help companies strike good deals with the Trump administration and to take advantage of new government contracting rules that will be in the works.  Our Governmental Affairs Team is staffed with experienced professionals in national, state, and local legislative and executive branch processes, and is supported by lawyers from a number of our other practice groups. This multidisciplinary approach enables us to provide our clients with the broad range of experience and expertise needed to address their specific goals. Our governmental affairs practice encompasses a full range of services that are focused in two primary areas – advocacy and compliance. Our professionals provide advocacy services at the federal, state and local levels of government to both private and public entities. In addition to seeking to accomplish our clients’ advocacy goals, we help them to comply with the numerous lobbying, ethics, gift and campaign finance laws that govern these activities. If it all goes wrong, our Government Contracts Practice Group can help with a bid protest. If it all goes right, we can help with implementing the contract requirements by training your people on compliance and interpretation issues.

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