ENR recently announced its 2013 global “Best Projects” winners. ENR looked at 66 projects in a variety of categories, including airports/ports, bridges/tunnels, cultural, education, environmental, government, health care, office, industrial, rail, residential, mixed use, roads, and entertainment. Among other factors, ENR examined the safety and innovation of the projects, as well as the extent to which the project overcame challenges. ENR also placed special emphasis on the global diversity of the project team.
Somewhat interestingly, the majority of the winners are projects from outside North America. One notable exception is the BC Place Revitalization project in Vancouver, which received the Sports/Entertainment award. PCL Constructors was the general contractor for the project.
Arbitration can be a longer and more expensive path to justice than litigation. The latest example, described in the April 2, 2013 decision of the U. S. Court of Appeals for the Sixth Circuit in Thomas Kinkade Co. v. White (No. 10-1634), raises questions about the effectiveness of American Arbitration Association’s process and the utility of the party-appointed arbitrator concept as well as the inherent risks intrinsic to arbitrator performance.
One of the potential benefits—as well as potential detriments—of arbitration is finality. It is generally quite difficult to overturn an arbitration award. However, the Sixth Circuit unanimously vacated a $1.4 million award in a case that “was a model of how not to conduct” an arbitration.
For the fifth straight month, architecture firms reported improving business conditions according to the Architecture Billings Index (ABI) for December. In 2012, architecture firms reported growth during eight of the twelve months of the year—the best performance year since 2007. The chart from calculatedriskblog.com depicts 2012’s results against more than five years of past performance. Although the score of 52.0 in December was down from November’s score of 53.2, any ABI score above 50 represents an increase in billings.
In its press release addressing the news, AIA Chief Economist, Kermit Baker commented:
While it’s not an across the board recovery, we are hearing a much more positive outlook in terms of demand for design services. . . . Moving into 2013 we are expecting this trend to continue and conditions improve at a slow and steady rate. That said, we remain concerned that continued uncertainty over the outcomes of budget sequestration and the debt ceiling could impact further economic growth.
While nationally the results are positive, performance in the West continues to lag. When we reported on the ABI in September, firms in the West had reported a score in August of 51.2, which at that time was the first monthly increase in billings in five years. Since September, however, firms reporting in the West have experienced a decline in business conditions. December 2012’s ABI score was 49.6 for firms in the West. The commercial/industrial sector shows the greatest increase in growth over the fourth quarter of 2012.
The ABI is considered one of the leading indicators of construction activity and is published by the AIA Economics & Market Research Group. The ABI provides a nine to twelve month glimpse into future non-residential construction activity. The ABI is computed as a three-month moving average to help minimize the random variation in monthly architecture billings. Construction companies use the index as a barometer of potential future demand for construction equipment and components.
A recent Arizona Court of Appeals case, Sullivan v. Pulte Home Corporation, 290 P.3d 446 (Ariz. App. 2012), held that the economic loss rule does not bar tort claims for pure economic loss when there is no contract between the parties. In the Sullivan case, the plaintiffs were not the original homeowners and enjoyed no contractual privity with the defendant homebuilder. After discovering what they believed to be problems with their home-site, plaintiffs brought tort and implied warranty claims against the builder seeking to recover their economic losses. (Although the plaintiffs had no contract with the builder, the Court reasoned that Arizona treats an implied warranty claim as a contract claim notwithstanding the absence of contractual privity.) The builder argued that the economic loss rule should limit plaintiffs to their contract claim (implied warranty claim) and bar Plaintiffs’ tort claims.
At issue in the case was “whether an implied warranty claim, created by law in the absence of privity between the parties, will suffice to compel application of the E[conomic] L[oss] R[ule] to eliminate otherwise viable tort claims.” While the original owners had a contract with the builders, the plaintiffs had no such contract. And in the absence of a contract, the Court of Appeals held that the economic loss rule would not apply.
The Court of Appeals noted that its holding meant downstream home purchasers will be able to bring tort claims against homebuilders even though original purchasers (due to their contractual relationships with the builders) cannot. In the Court’s words “this application of [the economic loss rule] may create a seeming anomaly: a home buyer in privity with the home builder/vendor, seeking recovery for purely economic losses resulting from construction defects, may have fewer legal theories to assert than a subsequent purchaser who is not in privity with the builder/vendor…”
In Olson Engineering v. Key Bank, the Court of Appeals took up an issue of first impression in Washington: whether the filing of a lien release bond prevents a party from later contesting the validity of a lien. This issue was particularly important to private parties owning or possessing property subject to a lien because an adverse ruling would often prevent a party from recording a lien release bond.
Despite some creative arguments by Olson Engineering, the Court reaffirmed the plain language of RCW 60.04.161, which allows a party to record a lien release bond to remove the lien from the property. RCW 60.04.161 provides in part:
Any owner of real property subject to a recorded claim of lien under this chapter, or . . . lender . . . who disputes the correctness or validity of the claim of lien may record, either before or after the commencement of an action to enforce the lien, . . . a bond . . . to guarantee payment of any judgment upon the lien in favor of the lien claimant entered in any action to recover the amount claimed in a claim of lien, or on the claim asserted in the claim of lien. The effect of recording a bond shall be to release the real property described in the notice of claim of lien from the lien and any action brought to recover the amount claimed.
The Court also clarified that, to recover against a lien release bond, RCW 60.04.161 requires the lien claimant to “obtain a favorable judgment on the lien” and that recording a bond is not a concession by the bond-filer that the lien is valid.
Yesterday, as part of its Green Inc. series of articles, USA Today reviewed the benefits of sustainable schools in a cover story titled “Green schools: Long on promise, short on delivery.”
Citing research from McGraw-Hill, the USA Today article acknowledges the widespread increase in the design and construction of green schools stating, “Green schools exist in every state and account for 45% of new school construction, up from 15% in 2008. . . . By 2025, all school construction will be ‘green.’”
But, USA Today’s article then questions the advantages of green schools:
Advocates say green schools can boost students’ achievement by ensconcing them in quiet, well-ventilated, naturally lit, toxic-free spaces that minimize illness and enhance concentration. . . . But a USA Today review of school-test records, LEED-certification documents and research reports shows little correlation between ‘green schools’ and student performance or energy use. Buildings can get certified by following standard school-construction practice and adding features unrelated to energy use or the interior, such as steps to reduce car trips and water use, ease light pollution and heat reflection, and limit parking capacity and storm-water runoff.
As he has done in the past, Rick Fedrizzi, the CEO and President of U.S. Green Building Council, was quick to fact-check USA Today in an official statement, stating:
Green schools emphasize high indoor air quality, remove toxic materials and products and reduce CO2 emissions. Green schools offer welcoming learning environments that lessen distractions and encourage student participation. On average, green schools use 33% less energy and 32% less water than conventionally constructed schools, significantly reducing utility costs. These are facts.
Division Three of the Washington State Court of Appeals once again denied a disappointed bidder any monetary damages relating to its bid protest. Skyline Contractors, Inc. v. Spokane Hous. Auth., No. 30190-7-III (Wn. App. Dec. 6, 2012, Published Opinion). Skyline follows a long line of Washington cases that consistently deny damages to bidders, holding that the disappointed bidder’s sole remedy is an injunction against award to another bidder. Of interest, here the Court arguably extended the reasoning behind these prior cases in that damages were denied even though the Court found that a contract had been formed between the owner and the protesting bidder.
The public owner’s instructions to bidders stated that a “written award shall be furnished . . . and shall result in a binding contract without further action by either party.” The owner so notified the low bidder, and so the Court held that a contract was formed. Prior to executing the written contract, however, the owner determined that (in its opinion) the low bidder was unable to meet certain mandatory experience requirements, was thus not a responsive or responsible bidder, and so rescinded the award. The low bidder filed suit the next day, seeking an injunction and damages. While a temporary restraining order was orally granted, the order was subject to the low bidder posting security, which did not occur. The owner thus signed a contract with the second low bidder. The trial court later dismissed the low bidder’s claim for damages on summary judgment.
The Court of Appeals ruled that, unlike the verbal award that was insufficient to create a contract in Hadaller v. Port of Chehalis, 97 Wn. App. 750 (1999), here the written award combined with the instructions to bidders resulted in a contract. But the Court also found that the mutual contractual obligations were voidable if a party was mistaken as to a basic assumption of facts – here, the mandatory experience requirements. That, combined with Washington’s long-standing policy justifications against damages for disappointed bidders, lead the Court to once again come to this same result. The disappointed bidder also had to pay the owner’s attorneys’ fees.
The lesson for disappointed bidders is that an injunction remains the only remedy in Washington. The lessons for public owners are (a) be careful of what your instructions to bidders say and (b) that disappointed bidders will continue to test new theories in their attempts to break down the barrier against damages, regardless of how many times the Washington courts say no.
This case decided last week by the Court of Appeals of Iowa is a good reminder that courts do not uniformly interpret or apply the scope of waivers of subrogation clauses, a typical provision in most construction contracts. Such waivers are typically enforceable and serve to reduce duplicative insurance expenses and to avoid litigation between the participants of a project as to the cause of a loss covered by insurance. However, not all waiver of subrogation clauses are the same. Nor are identical clauses interpreted identically by all courts. In particular, waiver of subrogation provisions are not always interpreted to extend to losses to property than the defined “work” subject to the construction contract.
The issue arises most frequently in construction to or in existing buildings. The recently decided Iowa case involved the question whether a hospital’s property insurer could seek recovery from the contractors when, during a project to improve the hospital building, the sprinklers were activated and damaged both the portion of the building being improved and the contents of a storage room unrelated to the construction. The court concluded that it could not. The court evaluated the waiver of subrogation in section 11.4.7 of the AIA A201 (which is in section 11.3.7 of the 2007 version of the AIA form) and concluded that it extended to not just damage to the “work,” but also to damages covered by insurance “applicable to the work.” The court refused to interpret insurance “applicable to the work” to be mean only insurance ”to the extent applicable to the work.” In short, the court concluded, “the waiver looks to whether the loss was covered by insurance, not whether the loss was to ‘the work.’”
In reaching this result, the Iowa court specifically noted that courts from different states have reached different results on issues relating to the scope of subrogation clauses identical or similar to this. The court suggested it was following what it considered to be the majority rule, but pointed out that several courts have limited the waiver to damage to “the work.”
Although not cited within the list of majority or minority court positions in the Iowa court’s decision, Washington courts have confronted this issue in the past. So far, the Washington courts have applied the minority rule — looking at the property damaged rather than the type of insurance — and the results have varied. For instance, in Public Employees Mutual Insurance Co. v. Sellen Construction Co., 740 P.2d 913 (Wash. Ct. App. 1987), the court held that records stored away from the construction site were not part of the contemplated “work” and thus the waiver of subrogation did not extend to damages to those files. However, in Anderson Hay & Grain Co. v. United Dominion Industries, Inc., 76 P.3d 1205 (Wash. Ct. App. 2003), the court concluded that hay placed in a constructed hay storage building “was unquestionably at the work site” and that the waiver of subrogation did extend to the damage to that hay. The facts of the recently decided Iowa case fall somewhere in between these two fact scenarios, raising uncertainty how that case would be decided in Washington.
The breadth of a waiver of subrogation can be controlled by contract language. The clearer the language in this regard the better. This will avoid later fights, but it also will allow all parties to more accurately determine what insurance they need. Otherwise, all parties are likely to feel compelled to buy insurance to cover their risks even though also covered by property insurance, potentially resulting in duplicative costs being incurred on the project.
This month at Greenbuild, the U.S. Green Building Council (USGBC) launched a web portal called Green Building Information Gateway, coined “GBIG”—available at www.gbig.org.
USGBC describes GBIG as “a transparent view of places, projects, collections and credits, detailing the actions and activities of LEED building owners and project teams over time. The tool provides maps, analytics and insights that reveal trends, patterns and processes in green building practice.”
One of the unique features of the portal is the “collections” tab that allows visitors to identify green buildings by type, such as K-12 schools. The collections gathered on GBIG also include projects that have accessible 3-D models, and projects with BuildingGreen case studies.
GBIG also allows visitors to identify and view green buildings within a geographical area, or by city like Seattle, Denver, Chicago, New York, Washington, D.C., and Boston.
In the press release, Chris Pyke, Vice President, Research, of USGBC said, “The launch of GBIG represents years of research, information gathering and testing, and has been a true labor of love. Green building has gone from an era of firsts, to a global movement, connected by data.”
In a report titled “Construction Industry Workforce Shortages: Role of Certification, Training and Green Jobs in Filling the Gaps,” McGraw-Hill Construction in May 2012 found that 69% of architect, engineer and contractor (AEC) professionals expected skilled workforce shortages in the next three years; almost a third of AECs are concerned about a shortage of specialty trade contractors by 2014; nearly half of general contractors are concerned about finding skilled craft workers by 2017; and over a third of architect and engineering (A/E) firms are concerned about finding experienced workers. The report also found that workers skilled in the green building industry are in the greatest demand—86% of A/Es and 91% of contractors are finding too few green skilled employees.
Since the spring, concerns about the potential shortage of construction workers have continued. In its November 29th cover story, USA Today reports:
Contractors are struggling with shortages of workers as the home-building market comes to life and some commercial sectors strengthen. The crunch is affecting a handful of states, including Texas, Arizona, Iowa and Florida. But it’s expected to worsen and spread across the USA over the next few years, building officials say. The shortages are already prompting builders to raid each other’s job sites for workers.
Based on data from Moody’s, the print edition of USA Today’s article reports the following ten states (in order of number potential job gains) are forecasted to add the most jobs by Q3 in 2013: Florida, Texas, California, Virginia, Arizona, New Jersey, Washington, Pennsylvania, Massachusetts and North Dakota.