Primer Piece - "No Damage for Delay" Clauses

Posted by Jennifer M. Horn on April 06, 2012

By: Jennifer M. Horn

As part of an ongoing series, Construction Law Signal will examine basic construction contract clauses and offer tips for navigating the nuanced arena that is the negotiated construction contract.

“No Damage for Delay” Clauses On Public Projects: In the Mid-Atlantic Region, Geography Matters

A “No Damage for Delay” provision is a classic construction clause that, if present in the contract, provides that where a contractor is delayed by an event that is not the contractor’s fault, the contractor’s remedy in that instance is limited to an extension of time – and no additional money is provided. However, more time can be little consolation to the contractor when every dollar counts. A myriad of issues can result in delay on a job site. Unforeseen subsurface site conditions can cause delay. These could include:

  • Inclement weather;
  • Acts of God;
  • Design changes;
  • Problems with obtaining access to one’s work site;
  • Strikes and/or labor disputes; and
  • Failure to have timely delivered material and equipment.

In addition, poor project coordination, the inability to mobilize adequate labor and/or delays caused by the actions or failure of another contractor to act on a project also frequently result in delay.

As a consequence, costs associated with delay may occur. These costs may manifest in the form of wage escalation, extended equipment costs, or inefficiency. Also, increased finance costs, extended job supervision and field overhead costs, and reduced profits are typical costs associated with delay.

In the realm of public contracts, where the contractor can not negotiate the terms of the contract, different states have reached different conclusions about the validity of the “no damage for delay” clauses that limit a contractor’s ability to recover money in addition to being granted an extension of time in which to perform the work. For instance, in New Jersey and Virginia, legislation provides that “no damage for delay” clauses are void against public policy.

In Maryland, Pennsylvania and Delaware, however, the validity of “no damage for delay” clauses has been upheld in various courts of law.In short, one must be cognizant of the controlling contractual jurisdiction before jumping to conclusions regarding the force and effect of “no damage for delay” clauses in a construction contract.

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

Montgomery County, Maryland Changes Aimed at Facilitating Construction

Posted by Jason C. Tomasulo on February 09, 2012

By: Jason C. Tomasulo

Montgomery County, Maryland, recently simplified its construction permitting and inspection processes to better accommodate businesses and developers. Montgomery County consolidatedfire.jpg the inspection of fire protection systems for new building and renovation construction in the Department of Permitting Services (DPS). Previously, both DPS and Montgomery County Fire and Rescue Services each conducted inspections of the fire protection systems, which resulted in scheduling issues and additional costs.

Montgomery County also eliminated the requirement that inspections associated with an approved forest conservation plan be obtained prior to issuance of a building permit. The inspection is still required and implementation of the approved plan will be addressed in the field as with other approved plans.

The County is having a series of public forums to further discuss streamlining development. The first forum is scheduled for Tuesday, February 14, 2012 from 2:30 to 4:30 p.m. in the Executive Office Building, Lobby Level Auditorium, 101 Monroe Street, Rockville, MD. The second forum will be on Friday, March 9, 2012 from 1:30 to 3:30 p.m. at the same location. In addition, the County also created a dedicated website to receive comments and information on streamlining the development approval process. Please refer to the "Streamlining Development" section on the website.

Jason 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.

Q&A with Maryland Construction Network's Founder, Rob Bertazon

Posted by Jennifer M. Horn on February 01, 2012

Rob talking sq crop close web.jpg

I recently had the pleasure to chat with Robert W. Bertazon, founder of Maryland Construction Network, an innovative forum for the Maryland construction industry. I asked Mr. Bertazon to comment on the genesis of the Maryland Construction Network and his hopes for its growth in the coming years.

Jennifer Horn: What is the Maryland Construction Network?

Rob Bertazon: The Maryland Construction Network is a unique construction forum designed to deliver news and educational information to contractors and other industry professionals through audio podcasts that can be accessed 24 hours a day via the internet.

Horn: Why Podcasts?

Bertazon: Contractors and construction industry professionals are often plagued with long commutes to various jobsites – it’s the nature of the beast. My podcasts are essentially pre-recorded radio-type segments that a contractor can access and repeat at any time – especially in the car. It’s a way to gain valuable information and put some of those long commuting hours to good use.

Horn: How has the Maryland Construction Industry reacted to the idea? 

Bertazon: The reaction has been resoundingly positive and continues to exceed our expectations. Contractors especially appreciate the index of topics available on our website and the ability to pick and choose which segments to download and repeat. In addition, contractors are able to comment on each segment using the Network’s Blog.

Horn: What types of programming have you featured?

Bertazon: Our podcasts, to date, have included useful news segments about upcoming and ongoing Maryland Construction Projects. We have also featured interviews with surety and legal professionals discussing particular aspects of the business. Providing practical tips to improve one’s construction business is another cornerstone of programming.

Horn: How can we tune in?

Bertazon: You can listen to the free programming by tuning in at www.mdconstructionnet.net or through iTunes. We welcome all feedback and look forward to watching the evolution of the Network in the coming years.

Robert Bertazon can be reached at 443-982-7503 or rob@mdconstuctionnet.net. For more information about the Maryland Construction Network, please visit www.mdconstructionnet.net.

Unlicensed Subcontractor's Claim Against General Contractor Valid

Posted by Jennifer M. Horn on November 03, 2011

By: Jennifer M. Horn

For over ninety years, Maryland's Court of Appeals has refused to honor the claims of unlicensed entities, including those of subcontractors and contractors who failed to adhere to the applicable regulatory licensing requirements. In late October, however, Maryland's high court upheld the reversal of this precedent and allowed an unlicensed subcontractor to enforce its contract against a general contractor on home improvement work.

In Stalker Brothers, Inc. v. Alcoa Concrete Masonry, Inc., subcontractor Alcoa Concrete did not obtain the proper license in accordance with Maryland law, yet performed residential home improvement work pursuant to its contract with general contractor Stalker Brothers. Stalker Brothers promised to pay Alcoa for the concrete work Alcoa performed; however, ultimately withheld payment. It was undisputed that Alcoa was not licensed with the State of Maryland Department of Labor, Licensing and Regulation prior to March 26, 2008, and the Maryland Home Improvement Commission confirmed Alcoa’s status as an unlicensed entity. On this basis, Stalker Brothers moved to dismiss Alcoa’s plea for payment, asserting that contracts made by an unlicensed entity are “illegal” and “will not be enforced.” The Circuit Court agreed.

In overturning the Circuit Court opinion, the Court of Special Appeals and, most recently, the Maryland Court of Appeals determined that the contract between Stalker Brothers and Alcoa was enforceable despite Alcoa’s status as an unlicensed subcontractor. In so doing, the high courts recognized that Maryland Home Improvement Law was intended to protect consumers from unlicensed contractors – not licensed general contractors from their unlicensed subcontractors.

Of course, every contractor should be licensed to perform their work in every appropriate jurisdiction in accordance with Maryland law. However, Maryland Home Improvement Law, according to the Alcoa case, is not intended to serve as a shield for contractors like Stalker Brothers who seek to elude payment for their just debts. For those reasons and others, the contract between Stalker Brothers and Alcoa was enforceable.

As contractors expand their geographic jurisdictions to gain more work in other areas, the Alcoa case serves as a reminder to all companies to update all appropriate professional licenses.

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

The Perils of Contracting with Public Entities in Maryland

Posted by Jennifer M. Horn on September 16, 2011

By: Jennifer M. Horn and Robert Ruggieri

A September 1, 2011 decision by the Maryland Court of Special Appeals reminds us of the critical importance of strictly following contractual and procurement procedures before performing change order work for a pubic entity; and of the perils of proceeding with work outside the scope of a contract without formal approval, even where employees and agents of the public entity request gavel.jpgand provide informal, and even written authorization, for the additional work.

Baltimore County, Maryland v. AECOM Services, Inc., f/k/a DMJM H&N, Inc.

This case concerned a dispute between Baltimore County (County) and DMJM H&N, Inc., now known as AECOM Services, Inc. (DMJM) over payment for services performed by DMJM for the County in connection with the expansion of the Baltimore County Detention Center (Project). DMJM entered into a contract with the County to provide architectural and engineering services for the Project. The County sued DMJM seeking damages for an alleged breach of contract and negligence. DMJM countersued, seeking payment for services provided both under the “base contract” and for “additional services” performed outside the scope of the base contract. After trial, the jury found that DMJM did not breach its contract, and had not been negligent. More importantly, the jury awarded DMJM damages in the amount of $1,653,600, the majority of which included payment for the additional services. Appeals followed, with the most important issue being whether DMJM was entitled to payment for the additional services where DMJM had not obtained a formal contract amendment approved by the County Council for the additional services.

Language in the contract required not only written authorization by the County, but also approval by the County Council before the contract amount could be increased. DMJM claimed that during the course of the Project it had performed significant additional services valued at $1,471,498, that were authorized and requested by County officials, but had not been formally approved by a contract amendment.

The Court’s “Harsh” Ruling

The Appeals Court, relying on a strict interpretation of the contact, the Baltimore County Charter, the Baltimore County Code, and prior Maryland case law, reversed the jury’s award to DMJM for the additional services, and held that DMJM was not entitled to payment for any of the additional services because they were not formally approved by the County and County Council in a written amendment. First, the Court stated that the contract language unambiguously required written authorization from the County to obligate the County to pay for the additional services. Second, the Court found that the Baltimore County Code and Baltimore County Charter required that a contract amendment had to be approved by the County Council to be enforceable; because the County Council never approved an amendment for the additional services, the County could not be liable for payment. Finally, the Court relied on prior Maryland case law that set forth the principle that “a government entity may never have an obligation imposed upon it except in the formal manner expressly provided by law.” The rationale behind this principle, the Court provided, is that public funds must be protected by stringent procurement procedures, not only against outside parties, but even against its own employees and agents.

The Court was not persuaded by DMJM’s argument that County Council approval was only required for the underlying contracts, but not for changes to existing contracts. Nor did the Court accept DMJM’s argument that the County had waived its right to rely the strict procedures of the contract and Baltimore’s code and charter by acting and proceeding as if all the requirements had been met and informally approved and authorized the additional services.

The Court acknowledged that its ruling was harsh, but insisted that it was not unjust, and that there are sound policy reasons for its harshness. The Court reasoned that DMJM knew, or should have known, by the terms of the contract, that County Council approval was required for all amendments, and that the law imputes upon the party contracting with the municipality knowledge of the municipality’s limitations. The Court’s decision makes it abundantly clear that even if the additional services were done at the express request and direction of the County’s employees and agents, DMJM would still not be entitled to payment because the exact contract requirements were not fulfilled. The Court reasoned that it is more reasonable that an individual contractor or design professional occasionally suffer from the mistakes of public officials and agents who improperly authorize additional work than to risk detriment or injury to the public. The Court also reiterated that no state more rigidly enforces these principles than Maryland, and that those who deal with employees and agents of a Maryland municipality must, at their peril, take notice of the limits of the powers of both the municipality and those who assume to act as its agents and officers.

Not all states are as unforgiving as Maryland when it comes to allowing payment to contractors and design professionals who have performed work not approved in 100% accordance with contract requirements. States such as Pennsylvania, in certain circumstances, will consider other factors, such as whether the municipality was prejudiced and/or whether the municipality, though its conduct of requesting and informally approving additional work, waived its right to rely on strict contractual procedures to avoid payment obligations. Nonetheless, this case provides an important lesson to all contractors and design professionals, in any state, of the importance of strictly following procedures for changed or extra work and the perils of not doing so, especially when contracting with public entities.

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

Robert Ruggieri is an associate at Cohen Seglias and a member of the Construction Group. He concentrates his practices in the area of complex construction litigation.

For Subcontractors Filing Mechanics' Liens in Maryland: Clarification of "Owner"

Posted by Jennifer M. Horn on August 14, 2011

By: Jennifer M. Horn

As all subcontractors are aware, mechanics’ lien rights are precious tools to recover payment on a project for work performed. Often with the aid of a title search, subcontractors and their counsel strive to ascertain the exact identity of the “owner” of the land – a critical factor in any successful mechanics’ lien claim. The Maryland Mechanics’ Lien statute defines an “Owner” as “the Owner of the land except that, when the contractor executes the contract with a tenant for life or for years, ‘Owner’ means the tenant.” But what happens when a tenant controls the design and construction of the Project, provides funding, and is the ultimate beneficiary of the subcontractor’s work?

How Is “Ownership” Impacted For Lien Purposes When The Tenant Controls Construction?

In BRC Lease Company, LLC v. Audio Visual Innovations, Inc.,  corporations of the Johns Hopkins University, BRC/FSK, argued that they were not the proper “Owners” of the Johns Hopkins Biomedical Research Center located on the Bayview Campus because the National Institutes of Health (NIH), their tenant, controlled the design and construction of the project, provided funding and was the ultimate beneficiary of the subcontractor’s audio visual work. In upholding the plain language of the Maryland statute and in accordance with case law, the Maryland Court of Special Appeals confirmed that there was no merit in BRC/FSK’s argument that the NIH should be considered the “owner” because NIH did not contract with the subcontractor to install the equipment.

Impact Moving Forward

The recent decision means that prudent contractors can continue to rely on the plain meaning of the real property article. In particular, when identifying the “Owner of the land” for mechanics’ lien purposes, contractors (in addition to a properly run title search) should look to the contract for guidance.

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

Maryland's Adoption of the International Green Construction Code Raises More Questions Than Answers

Posted by Jennifer M. Horn on July 15, 2011

As many in the industry are aware, Maryland became the first state to fully adopt the International Green Construction Code (IGCC) when Governor Martin O'Malley signed HB 972, effective March 1, 2012. In response to our IGCC blog post on this issue, authored by Lane Kelman, readers raised a multitude of questions that highlight a vast amount of confusion regarding the legislation. The questions range from the impact on the construction industry to the interpretation and application of the House Bill. A number of the issues that have been raised necessarily call into question the clarity of the legislation and, in turn, create legal issues. Some of the questions that have been raised are:

  • What does the adoption of the IGCC mean for Maryland in the short and long term?
  • Does House Bill 972 give a Local Maryland Jurisdiction the alternative of adopting the IGCC in addition to the Maryland Building Performance Standards?
  • If a Local Maryland Jurisdiction adopts the IGCC, is compliance mandatory?
  • What does the legislation mean for developers and contractors?
  • Is Maryland's HB reflective of a national trend?
  • Look for upcoming Blog posts on this important issue.

We will continue to report on the answers to these questions as the answers are clarified in the legislation. In the meantime, please contact Lane Kelman or Jennifer Horn with questions.

Mid-Atlantic Construction Update

Posted by Jennifer M. Horn on June 08, 2011

Pennsylvania:

PNC Financial Services Group (PNC) is moving its headquarters to Pittsburgh. PNC, which is the largest bank in Pennsylvania, plans to build a $400 million “green” office structure in downtown Pittsburgh, which will create 2,500 construction jobs. The new skyscraper, which is to be about 40 Stipmall.jpgstories high and 800,000 square-feet, will be PNC’s largest building in Pittsburgh. Currently plans include 300 underground parking spaces and street level retail. The building will be complete with green rooftops.

Maryland:

Maryland’s National Harbor is adding a “$100 million retail outlet as part of a plan by its developers to expand the convention and resort complex into a one-stop shop for visitors.” The outlets, to be built on 40 acres of land, are expected to house 80 designer stores.

The National Harbor is quickly on the way to becoming a must-see attraction. The National Children’s museum has announced plans to relocate to the harbor . Plans to break ground on a new 140,000 square-foot building to house the museum are expected to start later this year.

New Jersey:

New Jersey’s Xanadu Mall is about to get a $1.5 billion face lift. New Jersey Governor Chris Christie announced plans to renovate and expand the mall, including a “recladding of its multicolor exterior.” Refurbishing the mall, a 2.4 million square-foot structure, will create over 9,000 construction jobs. Christie who had previously dubbed the mall the states “ugliest” building, has also announced a name change to the structure. Going forward the new mall will be known as “American Dream Meadowlands.”

 

Maryland Becomes the First State to Fully Adopt the International Green Construction Code

Posted by Lane F. Kelman on June 02, 2011

Maryland Governor Martin O’Malley recently signed bill MD HB 972 into law, effective March 1, 2012. The law “authorizes the state's Department of Housing and Community Development to adopt the IGCC, while allowing local jurisdictions to make amendments to the IGCC under certain conditions as long as the local amendment is adopted in accordance with applicable local law.”MD IGCC.jpg

The IGCC was designed to reduce the environmental impact of construction projects and specifically addresses energy, water and material usage, as well as indoor environment quality.

Maryland adopted the International Green Construction Code (IGCC) as an optional requirement for new construction projects including commercial construction and residential construction over three stories high. Local governments will now have the freedom to incorporate the IGCC as a supplement - not a requirement – to the State’s current green building policy. Compliance with the IGCC, where adopted, will be voluntary, and available to a property owner who wishes to avail himself of the code. Maryland has become the first state to pass this legislation statewide.

According to Builder News, other states that have begun to adopt the IGCC include:

  • An optional code in Richland, WA;
  • An alternative requirement for new public buildings in Rhode Island;
  • The nation’s first tribal community enactment in Kayenta Township, AZ, with an optional requirement with mandatory applications still under consideration; and
  • Fort Collins, CO, approved significant extractions from the IGCC and the National Green Building Standard, ICC 700, as part of green building code amendments to the city’s building codes.

The implementation of the IGCC highlights Maryland’s leadership in the national trend towards green development. The use of IGCC or similar green construction codes is becoming more commonplace nationwide. Contractors will benefit from becoming familiar with the IGCC as implementation of green friendly codes will certainly result in changes to not only construction practices but also to specifications, construction contracts and bonding and insurance requirements.

Maryland's Job Applicant Fairness Act

Posted by Melissa C. Angeline on May 23, 2011

The “Job Applicant Fairness Act,” (the Act) signed into law on April 12, 2011, prohibits most Maryland employers from using credit reports and credit histories as a means of determining hiring and retention. Generally, employers are prohibited from using an applicant’s or employee’s credit report or credit history for the purpose of denying employment, discharging an employee, or determining compensation or other terms, conditions or privileges of employment.
Credit History.jpg
Importantly, the Act does not affect employers that do not obtain credit information on employees and applicants. Employers may continue to conduct background checks, criminal record checks and obtain consumer reports that do not include credit information, subject to the requirements of the Fair Credit Reporting Act and other laws.

The Act exempts several positions where the use of credit information has been deemed “substantially job-related.” Specifically, the Act exempts the following positions:

  • Managerial positions involving direction or control of part or all of the business;
  • Positions provided expense accounts or corporate credit or debit cards;
  • Positions involving access to personal information of employees, customers or the employer;
  • Positions involving access to the employer’s protected trade secrets and intellectual property, or confidential business information; or
  • Positions involving money-handling (authority to issue payments, collect debts, transfer money, or enter into contracts).

Also, certain categories of employers are exempt from these restrictions. Financial institutions and affiliates, investment advisors registered with the U.S. Securities & Exchange Commission, and employers legally required to obtain credit checks or histories for employment purposes, are not subject to the above restrictions.

Maryland employers must conform their employment policies to these requirements, which are effective as of October 1, 2011. Employees have no private cause of action for violations of the Act, but may file complaints with the Commissioner of Labor & Industry. Employers may be subject to monetary fines for violating the Act.

For questions regarding compliance of the Act, please contact Melissa Angeline.

Mid-Atlantic Construction Update: Looking Up?

Posted by Jennifer M. Horn on May 12, 2011

Is construction picking up throughout the Mid-Atlantic region? Here are just a few summaries of headlines for Maryland, Delaware and Pennsylvania

Maryland:

As of March 2011, construction projects in several Maryland counties continue to increase, and Mid-Atlantic.jpgconstruction contracts “were up 55% when compared to the same month in 2010.” For the first quarter, future construction contracts reached $272M.

These statistics include Anne Arundel, Baltimore, Carroll, Harford, Howard and Queen Anne’s,counties in Maryland . The commercial projects included, but were not limited to, the construction of commercial, manufacturing, educational, religious, administrative, recreational, hotel, and dormitory buildings.

Delaware:

Delaware Governor Jack Markell spoke to Delaware business leaders on May 4, 2011 proposing how to spend the projected surplus above the $3.4 billion operating budget he proposed in January.

Ideally, Markell wants to spend $135 million of a projected $320 million budget surplus “on one-time construction projects to stimulate the economy” through a new initiative, the Building Delaware’s Future Now fund.

Some of the projects Markell suggests committing funds to include:

  • $40 million for a new jobs infrastructure fund to pay for road and sewer improvements for getting new companies to relocate to Delaware;
  • $40 million for the state’s Transportation Trust Fund;
  • $35 million for the preservation of historic buildings, the capital complex in Dover and state parks facilities;
  • $10 million for investing in affordable housing projects; and
  • $10 million for open space preservation.

Pennsylvania:

Pennsylvania has been awarded $40M, from the US Department of Transportation, for additional rail lines, leading from Philadelphia to Harrisburg. The funds come as part of the $2.4B that Florida Governor Rick Scott declined. Erin Waters, spokesperson for the Pennsylvania Department of Transportation (PennDOT) said the “upgrade would shave another 7 to 9 minutes from the travel time between Harrisburg and Philadelphia,” by improving the switch and signal network in Harrisburg.

No timeline has currently been released for this project.

Also in Pennsylvania, the Commonwealth Financing Authority approved $172M to fund 160 water infrastructure projects, in 51 counties, through the H2O PA program.

The H2O PA program provides “grants for flood control projects, construction of drinking water, sanitary sewer and storm sewer projects and high hazard or unsafe dam projects.”

For a complete list of projects and their descriptions please visit www.newpa.com.

These (Construction) Boots Were Made for Walkin' (Across State Borders)

Posted by Jennifer M. Horn on May 05, 2011

For an increasing number of contractors, survival in the current economy has resulted in the need to find and secure work in other states. The migration of contractors to neighboring states is apparent throughout Jobs.pngthe country. Besides the work itself, benefits of an expanded geographic footprint include a broader client base, thereby creating mutually beneficial relationships.

For a complete breakdown on which states are seeing the biggest increases in cross border work, please visit, The Construction Blog, which is a dedicated to construction software technology.

Construction Technology Facilitates an Expanded Geographic Footprint

Recent advances in technology are accelerating the migration of contractors to neighboring states. Such technology includes, but is not limited to:

  • Online Plan Rooms - This software aids contractors looking for jobs across state lines. A contractor can browse by project type, trade or location to find upcoming construction projects.
  • Bid Management Software – This program acts like a “virtual broker” and assists contractors in the bidding process, by connecting buyers with sellers.
  • Web Based Project Management Software – This technology allows for real time monitoring of construction projects.
  • Onscreen Takeoff and Cost Estimating - This tool allows contractors to build cost estimates for projects happening in other states.
  • Building Information Modeling (BIM) – BIM brings a project to life, through 3D, 4D and 5D models.

Contractors seeking an expanded geographic footprint should be aware of the upgraded technology as a means of facilitating work across borders.

Maryland Court of Appeals Issues BEKA Decision - County Boards of Education Can be Sued for Contract Disputes

Posted by Jason C. Tomasulo on April 28, 2011

On April 26, 2011, the Maryland Court of Appeals (Court of Appeals) issued a decision in BEKA Industries, Inc. v. Worcester County Bd. of Education. This case involves a number of issues, the most significant of which is the application, extent and waiver of sovereign immunity for county boards of education involved in construction contract disputes.

Background

The Maryland Court of Special Appeals (Court of Special Appeals), the intermediate appellate court, previously determined that county boards of education were entitled to sovereign immunity to contract actions, but held that such immunity could be waived if the contractor proved that the county board of education had funds available to satisfy a judgment against the board. This “funds available” requirement was the final of three requirements to determine whether the county board of education could assert sovereign immunity in defense of a lawsuit based on a contract.

The Decision

The Court of Appeals rejected the Court of Special Appeals’ conclusion that sovereign immunity was available as a defense in a breach of contract action, and held that because Section 12-203 of the State Government Article of the Maryland Code provides a mechanism to ensure that funds will be available to satisfy a judgment, and waived sovereign immunity for county boards of education as to contract actions.

As such, and of critical importance to construction contractors, it is not necessary to prove that a county board of education has funds available to satisfy a judgment in order to pursue and recover on a breach of contract claim against the board. The Court of Appeals’ decision resolves this important issue in favor of contactors, which had been in doubt since the Court of Special Appeals decision on February 26, 2010.

Pennsylvania Rail System Receives $6.8M Grant

Posted by Robert Ruggieri on April 25, 2011

With Marcellus Shale natural gas continuing to grow in demand, it has become increasingly important to update the rail systems used to transport the product. With this in mind, U.S. Transportation Secretary Ray LaHood on April 18, 2011, announced a $6.8M grant to update the rail systems in four Pennsylvania Marcellus Shale counties, which include: Lycoming, Centre, Blair and Northumberland.train tracks.jpg

Included in the upgrades will be 200 miles of track and bridge improvements, which is estimated to create more than 300 construction jobs. These projects will “expand the capacity, efficiency and safety of Pennsylvania’s short line rail network.”

According to LaHood, “Projects like this advance President Obama’s vision to create jobs, support U.S. energy sources and reinvigorate the economy…Building an innovative, transportation network with world-class railways will help local businesses compete now and in the future.”

This grant was awarded as a part of President Barack Obama’s infrastructure plan, under the U.S. Department of Transportation’s TIGER II (Transportation Investment Generating Economic Recovery) initiative. A recent press release issued by the Federal Railroad Administration stated that the grant will be matched by $4.6 million from the Susquehanna Economic Development Association – Council of Governments Joint Rail Authority.

Through the TIGER II program, $600 million has been granted to 42 capital construction projects and 33 planning projects in 40 states for critical improvements to highways, bridges, transit systems, rail lines, bicycle and pedestrian paths and ports.

With the TIGER II program well underway, contractors should continue to look for ways to become involved in the numerous projects breaking ground throughout the country.

Rail Projects in Maryland

Maryland Governor Martin O’Malley has formally announced that he is submitting two applications to the Federal Railroad Administration for projects that would create more than 2,300 jobs.

O’Malley is applying for funds that recently became available after Florida Governor Rick Scott declined $2.4 billion in federal aid, that had been earmarked for a high-speed rail line between Tampa and Orlando.

The two Maryland projects that are up for consideration are:

  • BWI Area Improvements: $299 million for final design and construction of the BWI Area Improvements, including a critical new fourth track in the area of the station, and redevelopment of the station and pedestrian bridge to create access to all four tracks. Maryland is offering $41 million in matching funds for this project to improve rail infrastructure and service on Amtrak’s Northeast Corridor along the MARC Penn line. The total investment for this final stage of the project will directly support an estimated 1,830 jobs.
  • Maryland Bridge Replacement: $116 million for Preliminary Engineering and National Environmental Policy Act analysis for the Northeast Maryland Bridge Replacement and Capacity Expansion project. This funding will advance studies to replace and add capacity to three bridges built in 1906 and 1913 across the Bush, Gunpowder and Susquehanna rivers. During this planning and environmental study phase the project will directly support an estimated 547 jobs.

We will continue to monitor developments on the status of Maryland’s applications and keep you updated on any new information available regarding other regional rail developments.

Subcontractors Wanted for Construction of Maryland Live! Casino

Posted by Jennifer M. Horn on April 14, 2011

Maryland Live! Casino, which broke ground in Casino.jpgJanuary of this year, is hosting an event on Monday, April 18, 2011, “for subcontractors, vendors and suppliers to participate in the construction of the $200 million project.” Casino management is encouraging minority and women-owned businesses to attend the event. This is the second open event the casino has sponsored.

When completed, Maryland Live! will be the largest casino in Maryland, boasting 300,000 square feet of gaming space featuring, “4,750 of the latest slot and electric table games, including black jack, roulette, craps and poker” and a 4,800-space parking garage.

According to a press release posted on Citybiz Real Estate:

Maryland Live! will be constructed by the Commercial Interiors/TN Ward Joint Venture. The Joint Venture is majority owned by the Anne Arundel County-based Commercial Interiors and is the only Gaming Facility in the State to be built by a Maryland Minority-Owned Business Enterprise.

While the casino has experienced some controversy since its inception, the project has the green light to move forward. Maryland-based subcontractors should consider attending this event to learn how to become part of this multi-million dollar project.

About the Event:



Location:
BWI Airport Marriott
1743 W. Nursery Rd.
Linthicum, MD 21090

Date:
Monday, April 18, 2011

Time:
8:30 a.m. to Noon

New Baltimore Task Force Plans to Reduce Building Vacancies

Posted by Jennifer M. Horn on April 11, 2011

According to the Baltimore Business Journal, downtown Baltimore’s office vacancy rate is, amazingly, about 19%. A new task force, co-chaired by  J. Kirby Fowler, President of Downtown Partnership of Baltimore Inc. and Colin Tarbert, Deputy Director of the Mayor's Office for Economic and Neighborhood Development, aims to combat this ballooning rate. Contractors working in downtown Baltimore should be aware of this task force and the steps it is taking to build-up the downtown area.
Downtown Baltimore.jpgBaltimore Mayor Stephanie Rawlings-Blake recently commented that the newly created “Downtown Task Force” would be “developing strategies to strengthen the downtown office market by attracting new business, stimulating job growth and spurring new investment.”

In describing the Task Force, the mayor noted:

While focused primarily on office vacancy, the overarching goal of the Mayor’s Task Force was to develop recommendations that will also serve as part of a larger strategy aimed at strengthening Downtown with a new vision for the future. That vision includes Downtown becoming an ever-evolving mixed use neighborhood, which includes business, a diverse population of residents, hotels, thriving retail and restaurants, and expanding anchor institutions.

The Task Force had three main goals in mind while conducting their background research, which were to:

  • Review past, present and anticipated office market trends;
  • Determine short-term and long-term strategies to reduce vacancy rates, attract new business, and facilitate the growth of existing companies; and
  • Identify opportunities for new development and/or the repositioning of underutilized office properties.

Based on their findings, the Task Force has made five recommendations for Baltimore, including:

  1. Collectively market downtown's office space by combining the efforts of Downtown Partnership, the Economic Alliance of Greater Baltimore, city agencies and private businesses, and clearly define which role each group should play in those efforts;
  2. Review and evaluate the effectiveness of federal, state and city incentives, and develop new ones, to help attract and keep businesses downtown;
  3. Work with downtown businesses and institutions to identify service providers those groups work with that may also want to relocate to the city;
  4. Establish a standing committee of federal, state and city agencies to identify what their future office needs will be and how downtown's office buildings can accommodate those needs; and
  5. Create a plan, including financial incentives, to help downtown building owners convert obsolete office space into apartments or mixed-use projects.

What does this mean for Baltimore Builders?

The final recommendation – conversion of obsolete office space into apartments - has the most impact on contractors. High priority buildings recommended for conversion into mixed-use spaces are:

  1. 10 Light Street, The Bank of America Building;
  2. 2 Hopkins Plaza, PNC Bank Building;
  3. 114 East Lexington Street, Provident Bank Building;
  4. 225 North Calvert Street, Bank of America Building;
  5. 10-12 North Calvert Street, The Equitable Building; and
  6. 10 North Charles Street, Johns Hopkins Downtown Center.

The Task Force also intends to implement an incentive program which would primarily focus on the conversion of properties from an office use to a residential use, either owner-occupied or rental. Good news for contractors looking to participate in Baltimore’s downtown revitalization.

Maryland-Based Minority Owned Business Needed for $115M Broadband Project

Posted by Jennifer M. Horn on March 17, 2011

The Baltimore Business Journal reported on March 14, 2011, that, “Howard County (Maryland) is recruiting small and minority-owned businesses to help build the state’s $115 million “One Maryland Broadband network.”

The proposed One Maryland fiber optic network will interconnect community anchor institutions across 10 jurisdictions in Central Maryland, uniting rural, urban, and suburban communities in one contiguous network across the State… To summarize, the One Maryland Broadband proposal will spur economic development and job creation, coordinate and enhance public safety communication, and create a fiber backbone and necessary redundancy for homeland security purposes that is interconnected amongst local jurisdictions and State public safety entities – a feat never before accomplished in Maryland.

When completed, One Maryland Broadband would service:

  • 500 schools;
  • 30 colleges and universities;
  • 160 fire/police stations and 911 call centers;
  • 50 libraries;
  • 50 hospitals and health clinics; and
  • 25 transit centers, train stations, airports, and ports.

Howard County is currently compiling a short list of local minority-owned businesses to recommend to contractors to hire from for the project. To be considered, applicants must be businesses that have “three years of experience in outside plant construction, three references of performance over the three years, and good standing with the Maryland Department of Assessments and Taxation.”

Apply Today

The initial due date for applications is today, Thursday, March 17th. Applications submitted after today will be reviewed on a rolling basis. To download a copy of the application, please visit the Howard County website.

Baltimore Construction: Things Are Looking Up

Posted by Jennifer M. Horn on March 11, 2011

According to a recent study released by McGraw Hill Construction, “Contracts for future commercial construction in the Baltimore-Towson Metropolitan statistical area for January 2011 were up 72 percent when compared to the same month in 2010.”

In an article that appeared on Citybizlist Maryland this week, it stated that, “January 2011 saw future construction contracts top $41 million, a 72 percent increase over January 2010. Although residential construction contracts fell 17 percent, total building in the Baltimore region topped $103 million in January 2011, a five percent increase over the same month in 2010.”

The statistics released cover only Maryland’s Baltimore-Towson area, which consists of Anne Arundel, Baltimore, Carroll, Harford, Howard and Queen Anne’s counties.

The recent surge in activity in Baltimore seems to mirror the experience of the rest of the country. As Anirban Basu, Chief Economist for the Associated Builders and Contractors, Inc., stated in a Q&A conducted by Construction Law Signal on January 24, 2010, “In terms of U.S. production, we are now more than one and a half years into the current economic recovery… some construction indicators, such as the architecture billings index, have begun to show signs of life.”

Maryland Awards $11.1 Million for Sustainable Building Projects

Posted by Jennifer M. Horn on February 18, 2011

Governor Martin O’Malley recently announced that through the Sustainable Communities Tax Credit Program, ten different projects throughout Maryland received grants totaling $11.1 million towards sustainable construction.Maryland.jpg

O’Malley said the ten projects, “will help create 740 construction jobs in projects that will revitalize communities and promote green building practices around the state.” He continued to explain, in the State issued press release, that the Sustainable Communities Tax Credit and its predecessor, the Historic Tax Credit, have invested more than $358 million in Maryland revitalization projects in the past 15 years, supporting 15,000 jobs and revitalizing communities.

The ten winning projects were selected from 36 applications, who sought approximately $40 million in state funds.

The projects and their state grants are:

  • Sheppard Pratt Gatehouse in Towson: Renovation of the gatehouse to create two guest apartments for the Sheppard Pratt Health System, $232,200.
  • Oella Community Hall in Oella: Conversion of a community center to office space, $100,000.
  • A. Hoen Lithograph plant in Baltimore: Conversion of a vacant factory to office and commercial space, possibly a "healthy foods" commissary for the city school system, $3 million.
  • Algonquin Building in Baltimore: Renovation to convert building from offices to 56 apartments, $1.8 million.
  • Clifton Park Mansion in Baltimore: Conversion into a community center, $1.5 million.
  • Crown Cork and Seal Machine Shop in Baltimore: Conversion of a vacant factory to an art- and design-oriented high school, $3 million.
  • Raffel Building in Baltimore: Conversion of a vacant factory for residential use, $348,900.
  • Buildings at 9-11 and 13-17 W. Antietam St. in Hagerstown: Renovation of vacant commercial properties for use as apartments, $284,000.
  • Building at 101 S. Potomac St. in Hagerstown: Conversion of a vacant commercial building into apartments, $289.900.
  • Oxford Community Center in Oxford: Conversion of a former school to a community center, $625,000.

Four Seasons to Finish New $197M Hotel in Maryland

Posted by Zoe Klein on January 05, 2011

The luxury hotel chain, the Four Seasons, has been building an 18-story, 256-room hotel in Harbor East, Baltimore for over a year now. Until now, thhotel.jpgey have not been able to fully finance the $197 million project. On Thursday, January 6, 2011, Maryland Governor Martin O’Malley is expected to sign off on a deal to provide the hotel with partial financing from the proceeds of $45 million in tax-exempt bonds (in the form of “recovery zone facility revenue” bonds) issued by the Maryland Industrial Development Financing Authority. This money was made available through President Obama’s Recovery and Reinvestment Act.

The hotel is expected to create $221 million in economic activity, 1,273 construction jobs and 577 permanent hotel jobs.

Timothy P. Doyle, a program manager with the Maryland Department of Business and Economic Development, said “the authority decided to back the package based on its economic impact and job creation projections.”

With this assistance, the hotel is scheduled to open in late 2011. Upon completion of the project, the plan is to then build condominiums above the hotel, bringing the building to 44 stories. This would make the Four Seasons building the tallest in the city. The bond money will be used solely for the creation of the hotel, and related retail space, not the condominiums.

Maryland Case Clarifies Subcontractor Home Improvement Licensing Law

Posted by Jason C. Tomasulo on October 08, 2010

In Maryland, contractors who perform home improvements are required to be licensed with the Maryland Home Improvement Commission. In addition to facing civil and criminal fines and penalties, unlicensed contractors risk losing the ability to enforce their contrahome.jpgcts, meaning that they may lose their right to effectively demand payment for services performed. Furthermore, with limited exceptions, contractors are prohibited from making payments to unlicensed subcontractors under the Maryland Home Improvement Law. The policy behind the Maryland licensing requirement is to protect the public from unscrupulous home improvement contractors.

Alcoa Concrete & Masonry, Inc. v. Stalker Brothers, Inc.

Earlier this year, in interpreting the Maryland Home Improvement Law (Licensing Law) the Maryland Court of Special Appeals ruled that a subcontractor that is unlicensed both at the time it contracted to perform home improvements and when it performed the work, can file suit to demand payment so long as it is licensed at the time of filing.

Alcoa Concrete & Masonry, Inc. (Alcoa), a subcontractor, brought suit against general contractor, Stalker Brothers, Inc. (Stalker), for non-payment for work performed. The trial court determined that the subcontracts between Alcoa and Stalker were illegal and could not be enforced because Alcoa was not licensed when it contracted with Stalker, or when it performed the work. The decision of the trial court relied upon a well-established principle of Maryland law that if the purpose of a licensing statute is to protect the public, then courts will not enforce contracts made by unlicensed parties seeking compensation for business activities that require a license. Since the purpose of the Licensing Law is to protect the public, the trial court would not enforce Alcoa’s subcontract.

On appeal, the Court of Special Appeals reversed the decision of the trial court and granted Alcoa the right to enforce its subcontract with Stalker, reasoning that the policy of protecting the public is not implicated in the arms-length transaction between a general contractor and a subcontractor.

The appellate court also noted that Maryland law allows exceptions for payment to unlicensed contractors where the contractor loses its license through expiration, suspension or revocation. The appellate court further stated that the prohibition in the Licensing Law against paying an unlicensed contractor is limited to the time when payment under the subcontract is to be made. Accordingly, the appellate court concluded that allowing Stalker to withhold payment to Alcoa as a licensed subcontractor, when it had already made payments to Alcoa when it was unlicensed, would not be a reasonable interpretation of the Licensing Law.

Lessons of the Alcoa Case

There are lessons in the Alcoa case for both contractors and subcontractors.

  • Subcontractors that perform home improvements are required to be licensed and should get licensed with the Maryland Home Improvement Commission.
  • If a subcontractor that performs home improvements is not licensed at the time of contracting, all is not lost. However, unlicensed contractors should immediately begin the application process so that they can obtain a license in the event that it becomes necessary to file suit to recover payments.
  • General contractors should obtain evidence that their subcontractors are licensed with the Maryland Home Improvement Commission. In Alcoa, the appellate court emphasized that general contractors are part of the enforcement process, placing the burden on general contractors to withhold payment until a subcontractor is licensed. This will effectively ferret out unlicensed subcontractors and motivate other subcontractors to get licensed, furthering the policy of homeowner protection.

Finally, it is important to note that in Alcoa, there were no allegations of defective work by the subcontractor, and the general contractor had induced the subcontractor to continue working based on assurances of future payment. Accordingly, be aware that different facts may yield a different outcome in another case.

Establishment of a Mechanics' Lien in Maryland

Posted by Jennifer M. Horn on August 24, 2010

When payment for good work performed on a construction project is delayed, contractors, subcontractors, and suppliers alike must act quickly to preserve their mechanics’ lien rights in Maryland.  A mechanics’ lien is a way for contractors,subcontractors or suppliers whose work improved the value of a property to receive payment. The lien, when established, attaches to the property which serves as security for the unpaid amounts due to the contractors, subcontractors or suppliers. If critical deadlines are missed, however, these parties will forever lose their right to payment. Preservation of mechanics’ lien rights is particularly important in this economy where the risk of default and/or non-payment is especially high.

What Must Happen To Establish A Mechanics’ Lien in Maryland?

 In Maryland, the right of a “contractor” or “subcontractor” to file a lien against an “owner” – specially defined terms under Maryland law that include suppliers – is governed by the Maryland Mechanics’ Lien Statute.  To establish a lien in Maryland, a contractor or subcontractor must do the following:

  • First, a contractor or subcontractor doing work or furnishing materials at a project site must give a written Notice to Owner or Owner’s Agent of Intention to Claim a Lien within 120 days of performing the work or furnishing the materials.   The Notice must contain the following information:
    • The amount due and owing
    • A brief description of the work done and/or materials furnished
    • The time the work was performed and name of the person to whom the materials were furnished
    • The description of the property
  • Second, within 180 days of performing the work or furnishing the materials, the contractor, subcontractor, or supplier must file a petition to establish the mechanics’ lien, with a sworn affidavit. An attorney must file the petition for the contractor in the Maryland county where the property is located.
  • Third, after the petition is filed, the Court will issue a Show Cause Order and schedule a show cause hearing to determine whether probable cause exists to establish the lien or interlocutory order.  Probable cause is measured as the likelihood that a reasonable judge would establish the lien and the show cause hearing serves as a “mini-trial” on the contractor’s entitlement to the lien.