Construction Law Signal

Construction Law Signal

Insights & Information on Current & Emerging Developments affecting the Construction Industry

What We Can Learn from PennDOT's Award of the First Rapid Bridge Replacement P3 Project

Posted in Infrastructure, Pennsylvania

Background

In the first significant public private partnership (“P3″) infrastructure project in Pennsylvania, PennDOT recently selected Plenary Walsh Keystone Partners (“Plenary Walsh”) for award of the Rapid Bridge Replacement program. Under the P3 agreement, Plenary Walsh is required to demolish 558 bridges in various states of disrepair throughout Pennsylvania and to construct new bridges in their place within three years of work commencement in the summer of 2015. According to PennDOT, this P3 procurement will result in both cost and time savings. PennDOT states that it would have taken it eight to twelve years to complete the replacement bridge work under conventional procedures. PennDOT estimated that the cost of the work using traditional means would have been over $2 million per bridge, whereas the cost through this P3 agreement is approximately $1.6 million per bridge.

bridge maintenance workPennDOT’s Rationale for Selecting Plenary Walsh

Plenary Walsh narrowly edged-out competitor Keystone Bridge Partners (“Keystone”), scoring 95.14 on PennDOT’s grading scale, as compared to Keystone’s grade of 94.77. The Plenary Walsh consortium includes Plenary Group, The Walsh Group, Granite Construction Co., and HDR Engineering. Keystone includes Kiewit, Parsons, and DBi. PennDOT stated that it selected Plenary Walsh over Keystone because of Plenary Walsh’s commitment to complete the 558 bridges eight months earlier than required, its $899 million price, and other key elements of its proposal, such as the traffic management plan and quality control plan. PennDOT Secretary Barry Schoch said that the goal for the project was not only finding cost savings, but also minimizing impact to the traveling public, which was reflected in the traffic management plan and the plan to complete eight months early in Plenary Walsh’s proposal. According to PennDOT’s press release, PennDOT also considered the financial capability to carry out the project, the background and experience in managing comparable projects, and the understanding of the project in selecting Plenary Walsh.

What Does This Mean for Those Seeking Award of Future Rapid Bridge Replacement P3s?

The takeaways for consortiums on future bridge replacement projects are that price, cost savings, experience, and financial capability remain fundamental considerations. Should these considerations be nearly equal between competing consortiums, the winning proposal is likely to be the one that demonstrates early completion of the project and a careful traffic management plan calculated to minimize the impact to the traveling public.

Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men.

Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.

 

Crisis Management: Are You Ready for the BIG Surprise?

Posted in Business, Consumer Protection, Pennsylvania

Having designated legal counsel is critical to any comprehensive crisis management strategy. Whether you are in pre-crisis, crisis or post-crisis—having an attorney involved in your decision-making process can be the difference between surviving or even thriving in a crisis and having a crisis disrupt your business or derail your career permanently. How can your attorney help you be ready for a crisis? For starters, counsel can assess your document retention and storage policies and recommend best practices. Your counsel should also review your readiness procedures with a dedicated crisis management team of public relations and marketing professionals as well as a company spokesperson. Being prepared for a crisis requires strategic planning. Crisis flow chart

Be ready for the BIG surprise or bombshell that may be lurking in your future. Please join me and my team of crisis management experts for a half-day program of invaluable crisis management training, February 17th in Bethlehem, PA hosted by the American Subcontractors Association of Central PA. Our all-star panel will feature David Blain, Principal, of McKonly & Asbury, Doug Dvorchak, Sales/Account Executive & Risk Control Consultant, with Murray Securus and Lydia Mantle, Bond Account Executive, also with Murray Securus. Using real-world examples, we will provide tips on risk management, protecting your credit and assets, among other topics. We will answer your questions in a live Q&A. The best crisis management response takes planning, a holistic effort and a range of expertise. Take this opportunity to learn from the best and start planning now for your own synchronized response. Make the best of what will surely be a stressful situation.

Tuesday, February 17th
Event Center at Blue
4431 Easton Avenue, Bethlehem, PA

Registration & Breakfast – 7:30 a.m. – 8:00 a.m.
Program: 8:00 a.m. – 11:30 a.m.

Register here.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate. 

Best Practices in Construction Webinar

Posted in Compliance, Contract, Federal, New Construction, Small Business

On December 3, Jennifer Horn and Maria Panichelli presented the second webinar in their core construction curriculum series for Women Impacting Public Policy and Give Me 5%. The presentation, entitled “Best Practices in Construction,” covered suggested best practices for before, during, and after conclusion of a construction project, in the context of both state and federal jobs. The presentation provides tips on contracting, documentation, compliance, and claims prevention strategies. Start implementing business practices that make the difference between a profitable construction project and one that exposes your company to financial risk now! Check out: “Give Me 5: Best Practices in Construction,” here.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

Webinar on Federal Acquisition Regulations and Federal Procurement for WIPP and Give Me 5%

Posted in Small Business

On November 12, Jennifer Horn and Maria Panichelli presented the first webinar in their core construction curriculum series on the Federal Acquisition Regulations and Federal Procurement for Women Impacting Public Policy and Give Me 5%. The presentation covered the bidding process for both sealed bidding and negotiated procurement. Improve your understanding of FAR and its application in the construction context by checking out “Give Me 5: Construction Unit FAR 101 – Part 1, The Fundamentals of the Federal Acquisition Regulations and Federal Procurement: The Bidding Process,” here.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

Jennifer M. Horn and Maria L. Panichelli To Begin Core Construction Curriculum Series for WIPP and Give Me 5%

Posted in Federal, Small Business

Please join Jennifer M. Horn and Maria L. Panichelli as they begin their “Core Construction Curriculum” series for Women Impacting Public Policy’s Give Me 5% program.

WIPP is a national nonpartisan public policy organization advocating on behalf of its coalition of 4.7 million businesswomen including 75 business organizations. WIPP identifies important trends and opportunities and provides a collaborative model for the public and private sectors to increase the economic power of women-owned businesses.  Give Me 5%, named after the 5% federal contracting goal for women-owned businesses, was created to educate women business owners on how to apply for and secure federal procurement opportunities. GiveMe5 is working to improve the WOSB Procurement Program to increase access to contracts for women entrepreneurs.

Give me 5

Jennifer and Maria will begin the Core Construction Curriculum series with two webinars.  On November 12th at 2:00pm they will be presenting Give Me 5: Construction Unit FAR 101 – Part 1, The Fundamentals of the Federal Acquisition Regulations and Federal Procurement: The Bidding Process.  The Federal Acquisition Regulations or “FAR” can be confusing whether you are new to federal contracting or have been contracting with the government for years. This webinar will focus on improving participants’ understanding of FAR and its application in the construction context. The presentation will cover the bidding process for both sealed bidding and negotiated procurement. You can find a description of the presentation and registration information, here.

On December 3rd at 2:00pm Jennifer and Maria will be presenting Best Practices in Federal Construction. Whether you a contractor working on federal, state or private projects, certain construction practices should be followed to ensure that you and your company are protected on the project. Observing best business practices can mean the difference between a profitable construction project and one that exposes your company to financial risk. This Webinar will focus on best construction practices before, during and at the conclusion of a construction project.  Read more and register, here.

We will keep you posted on additional webinar topics and times. If you have suggested topics, feel free to contact Jennifer or Maria.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

New Changes to Pennsylvania Mechanics' Lien Law Take Effect

Posted in Consumer Protection, Liens, Pennsylvania

Rolled Blueprints and gavel of justice

On July 9, 2014, Pennsylvania Governor Tom Corbett signed a bill (S.B. 145) into law that amends the Pennsylvania Mechanics’ Lien Law of 1963 (the “Lien Law”). The new law took effect on September 8, 2014 and affects subcontractor lien rights on residential construction projects as well as the order of lien priority between mechanics’ liens and open-end mortgages.

Liens on Residential Property

Under the new law, an unpaid subcontractor no longer has lien rights if all three of the following conditions are satisfied:

  1. The property owner or tenant has paid the full contract price to its general contractor;
  2. The property is or is intended to be used as the owner’s or tenant’s residence; and
  3. The property in question is a one or two unit residential property or townhouse.

In other words, this amendment protects homeowners from having to pay twice for the same work (e.g., where the owner pays the general contractor but the general contractor fails to pay its subcontractor). The new law includes a procedure through which an owner can discharge or reduce the amount of the mechanics’ lien by petitioning the court and proving that he or she has paid the full contract price to the general contractor.

Changes to Lien Priority

Through S.B. 145, the Pennsylvania Legislature has also changed how the Lien Law addresses the question of lender priority. As we have blogged previously, “priority” refers to who gets paid first if a property encumbered with multiple mortgages, mechanics’ liens, or the like is sold. Before the new law was passed, a mechanics’ lien could enjoy priority over a mortgage if the work in question began before the bank recorded the mortgage and the loan proceeds secured by the mortgage were used, in part, for non-construction costs.

With the new changes to the Lien Law, these open-end mortgages will enjoy priority over a mechanics’ lien claim as long as at least 60% of the loan proceeds are used to pay the “costs of construction” (which is defined in S.B. 145 very broadly to encompass just about every conceivable construction cost including taxes, bonding, and permits). These changes appear to be the legislature’s response to situations like the one in which the Pennsylvania Superior Court encountered in the case of Commerce Bank/Harrisburg, N.A. v. Kessler. In Kessler, a contractor’s mechanics’ lien was given priority over a bank’s open-end mortgage on the property in connection with a construction loan because not all of the proceeds from the loan were used to cover the costs of construction.

What Do These Amendments Mean to Players in the Construction Industry?

For subcontractors, the risk of nonpayment on residential projects increases because the homeowner may be able to demonstrate that it paid the general contractor in full. In those instances, the subcontractor’s recourse will most likely be limited to a breach of contract lawsuit against the general contractor. It is important for all members of the construction industry to note that this new protection to owners is limited to residential properties where the owner intends to use it as his or her residence.

Lenders and title companies will likely celebrate the changes to the Lien Law because it effectively overrules the Kessler decision and defines “costs of construction” more broadly such that open-end mortgages in connection with construction loans are likely to enjoy priority over a mechanics’ lien claim under most circumstances.

As is evident from these amendments, the Lien Law is a powerful and complicated statutory remedy that affects the rights of most participants in a construction project including lenders, owners, contractors, subcontractors, and suppliers. These latest changes remind us how challenging it can be to balance and navigate the competing rights and interests of each player. Anyone with questions regarding these new changes or the Lien Law generally should feel free to contact Cohen Seglias.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.

Shafer Electric & Construction v. Mantia: PA Supreme Court holds that noncompliance with the Home Improvement Consumer Protection Act does not entitle homeowners to free work

Posted in Consumer Protection, Contract, Home Improvement, Pennsylvania

Pennsylvania’s Home Improvement Consumer Protection Act (“HICPA”), which went into effect in 2009, generally requires that home improvement contracts be in writing and contain thirteen specific items (including the contractor’s home improvement contractor registration number, the date of the transaction and the name, address and telephone number of the contractor).  Absent inclusion of all items, the contract is not valid or enforceable against the owner.  This means that the contractor cannot assert a claim for breach of contract if the owner fails to pay for work performed.

Home Renovation

However, in the recent case of Shafer Electric & Construction v. Mantia, the Pennsylvania Supreme Court ruled that even if a contract fails to comply with HICPA, the contractor may still be able to recover the reasonable value for its services under the equitable theory of quantum meruit, or unjust enrichment.  What this means is that a homeowner is not excused from its obligation to pay the contractor simply because the home improvement contract does not comply with HICPA.

In Shafer, the homeowners engaged the contractor to build a garage addition onto their home.  The contract, however, did not comply with most of the requirements of HICPA.  After the contractor had performed work, a dispute arose and the parties agreed that the contractor would 1) invoice the homeowners for the work completed and 2) thereafter, discontinue its efforts.  Nevertheless, the homeowners refused to pay and the contractor filed suit for breach of contract and quantum meruit.  The homeowners moved to dismiss the action pursuant to HICPA.  The trial court granted the motion.  On appeal, the Pennsylvania Superior Court reversed as to the quantum meruit claim.  The homeowners then took a further appeal to the Pennsylvania Supreme Court.

The Supreme Court determined that HICPA does not preclude a non-compliant contractor from pursuing an action in quantum meruit.  Instead, HICPA only speaks to the enforceability and validity of home improvement contracts.  Further, under common law principles, a party is not precluded from bringing a quantum meruit action when one for breach of contract is unavailable.  Significantly, the court noted that the language of HICPA does not make any reference to a claim for quantum meruit being precluded and that it would be improper to insert words into HICPA that would extinguish a claim for quantum meruit.

Shafer is helpful for contractors in the event of noncompliance with HICPA.  However, it remains our strong recommendation to contractors that your home improvement contracts comply with HICPA.  Under quantum meruit, you can only recover the reasonable value of the services rendered and not necessarily the profit under the contract.  Additionally, a violation of any aspect of HICPA is also considered a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, which could subject you to enhanced damages and attorney’s fees in the event that a homeowner asserts a claim against you.

If you are unsure about whether your home improvement contract complies with HICPA, please do not hesitate to contact us.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate. 

Matthew L. Erlanger is an Associate in the Construction Group.

Update on Discoverability of Attorney-Expert Communications

Posted in Jennifer Horn, Matthew Erlanger, Pennsylvania

On April 29, 2014 an evenly divided Pennsylvania Supreme Court in Barrick v. Holy Spirit Hospital upheld a lower court ruling holding that communications between a party’s attorney and a party’s expert witness are exempt from disclosure during discovery.  This case was previously discussed in “Pennsylvania Supreme Court Evenly Divided on Discoverability of Attorney-Expert Communications“. In that blog post we noted that there was a proposed amendment to Pennsylvania Rule of Civil Procedure 4003.5 that would afford absolute protection from disclosure to attorney-expert communications and that it would be interesting to see what effect the order of the divided court would have on the proposed amendment.

File Protection

On July 10, 2014, the Supreme Court addressed the proposed amendment by officially amending Rule 4003.5.  Under new Rule 4003.5(a)(4), which goes into effect on August 9, 2014, a party may not discover the communications between another party’s attorney and any expert.  This is true regardless of whether the expert is expected to testify at trial.  Additionally, a party may not discover draft expert reports and any communications between another party’s attorney and experts relating to such drafts.

Based on the amendment, there is no longer any doubt.  Going forward, in any civil case in the Pennsylvania state courts, communications between an attorney and an expert are not discoverable.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate. 

Matthew L. Erlanger is an Associate in the Construction Group.

Amendments to Ohio P3 Legislation Add Bonding Requirements with a Twist

Posted in Bond, Lisa Wampler, Lori Azzara, Ohio

It is no secret within the construction industry that public-private partnership (P3) project delivery has recently become all the rage.  The demand for infrastructure repairs and improvements is high, and the public dollars needed to fund them are scarce.  P3 projects incorporating public and private funding have, therefore, become a creative delivery alternative that states like Ohio have adopted.  And with new delivery methods comes the need for new legislation to regulate and administer these types of projects.

istock

The Bonding Requirements

Last month, Ohio Governor John Kasich approved new amendments to the state’s public-private partnership (P3) legislation that could have drastic impacts on subcontractors and suppliers performing work on Ohio P3 projects.  The new law, which goes into effect this September, requires prime contractors to provide both performance and payment bonds on P3 projects in Ohio—a change that subcontractors and suppliers will likely be touting as it will help to secure the payment obligations of prime contractors to their subs.

The Catch

The catch is that the director of the Ohio Department of Transportation (ODOT), Jerry Wray, will have discretion to determine the amount of the bonds.  In other words, the director could fix a bonding amount that is less than the prime contract price, leaving potential bond claimants somewhat exposed to the risk of nonpayment.

The legislation also requires that the performance bond be conditioned on the private entity performing the work according to the agreed upon terms, within the time prescribed, and in conformity with any other terms and conditions that the director requires.  Similarly, the payment bond must be conditioned on the payment for all labor, work performed, and materials furnished in connection with the P3 agreement and any such terms and conditions that director requires.

What Do the Amendments Mean for the Future?

This bonding requirement is a major change to Ohio’s P3 legislation, which is currently silent on bonding.  The new bonding requirement, which gives the director considerable discretion, is markedly different from some of Ohio’s other legislation relating to public construction.   The Ohio Transportation Code, for instance, requires a payment and performance bond for 100% of the contract amount for transportation projects.

Depending on the amount specified by the ODOT director for the payment and performance bonds, starting in September of 2014, contractors farther down the chain on Ohio P3 projects may have little or no payment protection other than directly bringing an action against the contracting party directly upstream.  We will continue to monitor the implementation of the new P3 bonding requirement and how ODOT’s director decides to use his discretion.

Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

Schuylkill Products: Important Lessons and Reminders about the Power of the False Claims Act

Posted in Daniel Fierstein, Federal, Jennifer Horn, Small Business

By: Jennifer M. Horn, Daniel E. Fierstein and Katherine Tohanczyn

As many federal government contractors know, the False Claims Act (FCA) is a tool used by the federal government to deter fraud. Those found to have knowingly submitted false information to the government in violation of the FCA stand to suffer the imposition of fines, forfeiture of improperly obtained proceeds, and, in some instances, incarceration.

Regs-Guide-Compliance.jpg

Recently, in the largest reported fraud case involving a disadvantaged business enterprise (DBE) in the country’s history, a Pennsylvania federal judge ruled against a government contractor in a $136 million DBE fraud claim brought by a former employee and whistleblower under the FCA. In that case, Schuylkill Products, Inc. (SPI), a Pennsylvania-based concrete bridge beam manufacturing company, conspired with and used Marikina Construction, Corp. (Marikina) as a “DBE” front to procure millions of dollars of federally funded DBE-designated work.

What Is a DBE Program?

Like many governmental agencies, the U.S. Department of Transportation (DOT) has a DBE program, which attempts to increase the participation of DBEs in state and local procurement. The DOT seeks to accomplish this goal by requiring state and local agencies receiving DOT funds to establish goals and requirements for the participation of DBEs (small businesses owned and controlled by socially and economically disadvantaged individuals, such as businesses owned by minorities and women). Contractors working on these transportation projects must make a good-faith attempt to meet specific DBE participation goals as a requirement of federal funding and can do so by subcontracting work that is actually performed and installed by a certified DBE.

The Schuylkill Products Case

In Schuylkill Products, SPI, its wholly owned subsidiary (CDS Engineers), and Marikina, a Connecticut-based contractor certified in Pennsylvania as a DBE, created a scheme through which Marikina subcontracted work to SPI that was federally mandated to be performed by a DBE. SPI employees, pretending to be Marikina employees, performed the work and received the profits. In order to give the appearance of compliance with the DBE rules to the federal government, PENNDOT, and the general contractor, SPI used Marikina business cards, email addresses, stationary, and decals in order to create the appearance that Marikina was performing the work.

Judge Rambo of the United States District Court for the Middle District of Pennsylvania found that this conduct fell squarely within the scope of the FCA and constituted clear violations of the FCA. Accordingly, the United States (and the former employee who initiated the FCA lawsuit) are entitled to monetary damages (the Court has not yet ruled upon the amount).

What Is the Takeaway from Schuylkill Products?

Schuylkill Products serves as a forceful reminder of the power of the FCA. The government, through its agencies and the private individuals that are permitted to enforce the FCA, monitors DBE compliance very carefully.

On the one hand, these programs provide excellent opportunities for small businesses to compete for government contracts on a more level playing field. On the other hand, the maze of rules and regulations that govern these programs must be taken seriously and followed carefully. In the face of this landscape, government contractors and contractors looking to enter the government contracting arena should consult with a construction attorney to ensure that their particular corporate structure, behavior, and contract comports with the rules.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.

Katherine Tohanczyn is a Summer Associate in the Construction Group of Cohen Seglias.