VOLUME 3   ISSUE 44   OCTOBER 31, 2014


By Bruce Jervis


If a contractor receives a progress payment covering work performed by subcontractors and then fails to use those funds to pay the subcontractors, it is almost certainly a breach of contract. A Missouri court recently ruled it was also civil conspiracy and fraud.


A Missouri construction company was a corporation owned by three shareholders. Those individuals diverted progress payment funds to their own use, leaving subcontractors unpaid. The three shareholders were held personally liable for actual and punitive damages. The court said intentional misrepresentation and misappropriation of the funds distinguished this situation from a “garden variety” breach of contract case. ... Read more.


Featured in this Week’s Construction Claims Advisor:

  • Individual Owners Liable for Misrepresentation of Subcontractor Payment
  • Public Bidding Restricted to Privately Approved Contractors


What happens when you have conflicting details on two different contract drawings? Which one is the contractor entitled to rely upon? When does “or equal” actually let you substitute a product that you consider equal? What exactly is the role of inspection on a construction project? These questions and more are covered in a chapter on contract interpretation by attorneys Brian Bennett and Jonathan Blocker in an upcoming book on construction claims. In this article, the authors discuss the role of inspection on construction project, which is sometimes misunderstood or misused. ... Read more.


It took three years, but the Treasury Department has responded to some concerns the American Subcontractors Association (ASA) raised about the agency’s planned rulemaking relating to surety companies that do business with the United States. The department offered its reply earlier this month when it issued a final rule to clarify the circumstances in which a federal agency’s bond-approving official can decline to accept a bond underwritten by a Treasury-certified surety. To read the gist of ASA’s concerns and how the department responded to them, click here.


A recent analysis of 18 projects that M.A. Mortenson Company completed between 2004 and 2013 using virtual design and construction (VDC) has uncovered some impressive benefits that others in the industry may want to note. Benefits stemming from the use of VDC in these projects include a collective 600 total days of schedule reductions, productivity increases surpassing 25 percent, and an average cost reduction of 2.9 percent. However, in reporting the results of the analysis during a BIMForum presentation in Dallas earlier this month, Mortenson Integrated Construction Director Ricardo Kahn was quick to point out that the technology alone did not produce these benefits. To see what other factors Mortenson believes contributed to the VDC success story, click here.

From Previous 3 Issues:
Volume: 3, Issue: 43 - 10/24/2014


By Bruce Jervis


Mechanic’s liens usually provide contractors and subcontractors with their most effective form of payment security on private construction projects. But, contracts sometimes call for constructors to waive or limit their lien rights before they have even performed the work. Are these prospective lien waivers enforceable? Are they conscionable?


The mechanic’s lien statutes in some states prohibit prospective waivers. These prohibitions may result from lien rights enshrined in the state constitution. Not all states protect lien rights so zealously, however. And, sometimes only second-tier parties such as subcontractors and suppliers are protected. ... Read more.


Featured in this Week’s Construction Claims Advisor:

  • Prime Contractor Waived Lien Rights through Subordination
  • Principals Paid $1.13 Per Hour in Termination for Convenience


Federal officials have wrapped up another enforcement action against a construction company over alleged violations of U.S. immigration law. Last week, the U.S. Department of Justice (DOJ) settled an immigration-related discrimination claim against Constructor Services Inc. (CSI), a business headquartered in metropolitan Atlanta. DOJ alleged that CSI engaged in discriminatory documentary practices during the employment eligibility verification process in violation of the Immigration and Nationality Act (INA). ... Read more.


Engineering and construction (E&C) entities may need to change some of their revenue recognition practices as a result of new guidance that the Financial Accounting Standards Board (FASB) and International Accounting Standards Board have unveiled, according to an analysis that Ernst & Young LLP released last month. While many of the principles in the new standard are similar to the guidance that remains in effect for now, “entities should not assume that the pattern of revenue recognition for their arrangements will be unchanged. E&C entities will need to make many judgments that they may not be used to making.” ... Read more.


Technology that rapidly 3D prints large-scale structures directly from architectural computer-aided-design models is expected to become commercially available in two to three years, a spokesperson for the research entity developing the Contour Crafting system told ConstructionPro Week. Contour Crafting recently netted the $20,000 grand prize in this year’s “Create the Future” design contest. ... Read more.

Volume: 3, Issue: 42 - 10/17/2014


By Bruce Jervis


The assessment of liquidated damages for late completion would seem straightforward to administer. When the work remains incomplete beyond the contract deadline, the project owner withholds the stipulated daily amount for each calendar day. Yet, project owners repeatedly trip themselves up by failing to act promptly and decisively.


The problem of waiver is well known. If an owner urges continued performance beyond the completion deadline without expressly establishing a new, reasonable completion date, the owner may be held to have waived the right to withhold liquidated damages. A recent situation on a federal project adds another twist. ... Read more.


Featured in this Week’s Construction Claims Advisor:

  • Assessment of Liquidated Damages Not a “Continuing Claim”
  • Surety Charged with Knowledge of Bonded Contract


To print or not to print? That is perhaps the question William Shakespeare would ask if he were working in today’s construction industry and trying to decide whether it is a good idea to routinely make hard copies of his organization’s electronic documents to prevent some potential legal headaches. And though the playwright did not pose this question to attorney Matthew DeVries during a recent WPL Publishing webinar, someone in the audience did, albeit in a slightly different way. To see how the Stites & Harbison PLLC member responded to the attendee’s inquiry, click here.


Soon there may be a significantly greater demand for those professionals who can help optimize a building’s performance over the long term. Why? Because on Nov. 13, a new U.S. Department of Energy (DOE) rule will go into effect to require verified energy and water performance for new and retrofitted federal buildings that are certified by private-sector green building certification systems. ... Read more.

Volume: 3, Issue: 41 - 10/10/2014


By Bruce Jervis


Active or intentional interference by the project owner with the contractor’s work is a widely recognized exception to the enforceability of no-damage-for-delay clauses. The Texas Supreme Court recently joined the national trend in expressly adopting this exception for private and public construction contracts alike. In so doing, however, the court left open the question of intent.


The question is whether the project owner must intend to delay or disrupt the contractor’s work, or, does the owner merely need to take an affirmative step that has the foreseeable effect of delaying the contractor? The Texas court said public policy prohibits a party from intentionally injuring the other party to a contract. The court spoke of “willful acts” and “bad faith.” The court then muddied the water by referring to “negligence” and “omissions.” ... Read more.


Featured in this Week’s Construction Claims Advisor:

  • Intentional Interference Ruled Exception to Delay Disclaimers in Texas
  • Apportionment of Lien Claim by Square Footage Upheld


Courts and board decisions are narrowing the coverage of the Differing Site Conditions (DSC) clause, Navigant Construction Forum (NCF) Executive Director James Zack reported both during a recent WPL Publishing webinar and in a new 32-page NCF research perspective. He noted that this trend is “making it much more difficult for contractors to recover damages.” And, it is a trend that NCF believes, “barring a watershed case concerning [DSC] claims,” likely will continue. Click here to read the steps that Zack and NCF urged contractors to take amid the current DSC environment.


There are some interesting results to report regarding a recent study of wireless sensor networks for indoor construction operations -- results that are expected to provide a reference for future research on the selection of indoor positioning technologies. To see some of these results, click here.

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