Is the Removal and Replacement of Nonconforming Work Economically Wasteful?
September 19, 2022 —
David Adelstein - Florida Construction Legal UpdatesThere are times a contractor installs the wrong material or system contrary to the plans and specifications. A nonconformity. The owner wants the already-installed material or system to be replaced in conformity with the plans and specifications. However, what was installed is functionally equivalent to what the plans and specifications required and would be cost prohibitive, i.e., economically wasteful. If the contractor elects to remove and replace the nonconforming work, it may seek a change order because it is economically wasteful. Or, the contractor may refuse (typically, not the best approach) in furtherance of taking on the fight based on the economic wastefulness associated with the removal and replacement. A recent case, David Boland, Inc. v. U.S., 2022 WL 3440349 (Fed.Cl. 2022), talks about this exaction situation and the economic waste doctrine. This is an important doctrine for contractors to understand when faced with a similar predicament.
Here, a contractor was hired by the government to construct a wastewater collection system that was to be owned and operated by a private company. The contractor’s work was going to be incorporated into a larger sewer system that the private company already operated. The contractor was required to install sewer manholes reinforced with steel in accordance with an ASTM standard. The manholes could be rejected if they did not conform to the ASTM standard. Compliance with this ASTM standard was also required by the private company’s construction protocol for the infrastructure, which was incorporated into the contractor’s contract with the government. The contractor was required to strictly comply with the contract.
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David Adelstein, Kirwin Norris, P.A.Mr. Adelstein may be contacted at
dma@kirwinnorris.com
Ex-Pemex CEO Denies Allegations of Involvement in Brazil Scandal
April 13, 2017 —
Carlos M Rodriguez & Juan Pablo Spinetto - Bloombergormer Petroleos Mexicanos Chief Executive Officer Emilio Lozoya denied participating in an alleged bribery scheme involving Brazilian construction company Odebrecht SA in Mexico, after Veja magazine reported the executive was mentioned in connection with an ongoing corruption probe.
"I haven’t requested nor have I received illegal money," Lozoya said in an emailed response to questions by Bloomberg News on Wednesday. "I reiterate my interest in having this matter investigated and penalties issued, but without dishonoring and defaming without proof along the way."
In a report this week, Brazilian magazine Veja cited court documents suggesting the former Pemex CEO allegedly requested a $5 million illegal payment to Odebrecht, Latin America’s biggest construction company, to obtain benefits in Mexico. Veja says it based its reporting on portions of a plea-bargain agreement between prosecutors and a former top executive at Odebrecht. The allegations are part of a three-year, sweeping corruption probe in Brazil known as Operation Carwash.
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Carlos M Rodriguez, Bloomberg and
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Dorian Lashes East Canada, Then Weakens Heading Out to Sea
September 16, 2019 —
The Associated Press (Rob Gillies) - BloombergThe storm that already walloped the Virgin Islands, Bahamas and North Carolina lashed at far-eastern Canada with hurricane-force winds for much of Sunday, knocking out power to hundreds of thousands of people before weakening and heading into the North Atlantic.
Dorian had hit near the city of Halifax Saturday afternoon, ripping roofs off apartment buildings, toppling a huge construction crane and uprooting trees. There were no reported deaths in Canada, though the storm was blamed for at least 50 elsewhere along its path.
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The Associated Press (Rob Gillies), Bloomberg
How the Pandemic Pushed the Construction Industry Five Years Into the Future
September 06, 2021 —
Alexandra McManus & Hussein Cholkamy - Construction ExecutiveOn any given day, there are a multitude of variables playing out on construction jobsites, from maintaining daily logs to track hundreds of workers to creating daily schedules to keep projects on track. What made an industry that’s arguably about 20 years in the past get a dramatic technology boost five years into the future? A global pandemic that nobody saw coming.
When COVID-19 made its first appearance on construction sites in early 2020, the domino effect of project shutdowns and labor shortages created uncertainty along with budget and timeline nightmares. The pandemic shook up the industry, with many projects coming to a screeching halt. As general contractors scrambled to keep their projects moving and workers safe, technology proved to be the solution.
With jobsites shutting down, coupled with a nationwide labor shortage, real-time visibility over workforce variables, such as who was on-site, where they were and who they interacted with was more important than ever. Safe proximity tracking, virtual density and access control technologies helped construction companies gain more control, visibility and the ability to deal with the ever-changing regulations due to the global pandemic. More importantly, it helped keep their valuable workforce safe.
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Alexandra McManus & Hussein Cholkamy, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
Mr. Cholkamy may be contacted at hussein@eyrus.com
Ms. McManus may be contacted at alex@eyrus.com
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Florida Federal Court to Examine Issues of Alleged Arbitrator Conflicts of Interests in Panama Canal Case
May 24, 2021 —
Sarah B. Biser & Philip Z. Langer - ConsensusDocsThe parties in a $238-million dispute over the construction of the third set of locks for the Panama Canal are raising issues concerning alleged conflicts of interest on the part of the International Chamber of Commerce (“ICC”) arbitrators in the United States District Court for the Southern District of Florida.[2] The case may address rarely litigated issues concerning whether arbitrators who sit on multiple arbitration panels together or who support appointment of each other to lead arbitration panels have disabling conflicts of interest.
The case pits Grupo Unidos por el Canal, S.A. (“Grupo”), a consortium of Spanish, Italian, Belgian, and Panamanian construction firms, against Autoridad del Canal de Panama (“ACP”), the Panamanian entity that operates the Panama Canal and that sponsored the multi-billion-dollar, decade-long project to expand the Canal’s capacity by building a new set of locks (the “Project”). The current dispute (the “Panama 1 Arbitration”), which centers on the suitability of the rock coming from the excavations to be used to produce concrete aggregates for the Project, was arbitrated before a three-member ICC Tribunal and resulted in a $238-million award to ACP and against Grupo. The ICC Tribunal reversed a decision of the dispute review board established in the parties’ contract.
Reprinted courtesy of
Sarah B. Biser, Fox Rothschild LLP and
Philip Z. Langer, Fox Rothschild LLP
Ms. Biser may be contacted at sbiser@foxrothschild.com
Mr. Langer may be contacted at planger@foxrothschild.com
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To Sea or Not to Sea: Fifth Circuit Applies Maritime Law to Offshore Service Contract, Spares Indemnity Provision from Louisiana Oilfield Indemnity Act
March 29, 2017 —
Richard W. Brown & Afua Akoto – Saxe Doernberger & Vita, P.C.Faced with the issue of whether maritime or state law should be applied to determine the validity of an indemnity clause in a Master Services Contract (MSC), the Fifth Circuit affirmed that where there is no historical treatment of the contract in question (1), it would consider six factors established in Davis (2).
In Doiron, the Apache Corporation and STS (3) entered a broad-form blanket MSC, under which STS agreed to perform flow-back services, a process designed to dislodge solid objects from inside a well, on Apache’s well located off shore of Louisiana. The MSC also contained an indemnification provision, which required STS to defend and indemnify Apache and its company groups against all claims of property injury or bodily injury. During the flow-back operation, Larry Doiron Inc. (LDI), one of the Apache Company groups, supplied a crane barge for use by STS employees. Subsequently, the crane knocked over an STS employee, causing him to suffer severe injuries. LDI then made a formal demand to STS for defense and indemnification. STS rejected the demand and argued that the Louisiana Oilfield Indemnity Act applied to the MSC instead of maritime law. Pursuant to the Act, indemnity clauses in agreements pertaining to wells for oil, gas or water are void as against public policy. But, under maritime law, the enforcement of such provisions is not barred. Therefore, if the MSC was construed under the Act, STS had no duty to defend or indemnify LDI.
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Richard W. Brown, Saxe Doernberger & Vita, P.C. and
Afua S. Akoto, Saxe Doernberger & Vita, P.C.
Mr. Brown may be contacted at rwb@sdvlaw.com
Ms. Akoto may be contacted at asa@sdvlaw.com
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Beyond the Flow-Down Clause: Subcontract Provisions That Can Expose General Contractors to Increased Liability and Inconsistent Outcomes
December 10, 2024 —
Phillip L. Parham III - ConsensusDocsFlow-down clauses in construction subcontracts—blanket clauses providing that some or all of the terms and conditions in the prime contract between the general contractor and the property owner apply equally between the subcontractor and general contractor—are an important component to managing risk for a general contractor and reducing the likelihood of disputes with either/both the owner and subcontractor. Put simply, flow-down provisions can provide continuity between the general contractor’s obligations to the owner and the subcontractor’s obligations to the general contractor. Properly drafted, flow-down clauses reduce the general contractor’s risk by ensuring that the subcontractor is legally bound to meet the owner’s objectives for the project in the same way as the general contractor. But relying on blanket flow-down clauses, alone, to protect the general contractor is like a soldier going into battle with nothing but a helmet, leaving significant other areas exposed and unprotected. In other words, a general contractor should look beyond just a singular, blanket flow down of terms to ensure its bases are properly covered.
Accordingly, this article goes beyond the blanket flow-down clause and highlights several key subcontract provisions where inconsistent obligations among the subcontractor, general contractor, and owner expose the general contractor to increased liability and inconsistent outcomes. Specifically, this article will examine disputes resolution clauses, liquidating provisions, notice provisions, and termination provisions. However, this article will not provide a deep examination of these clauses, nor does it highlight every potentially relevant clause. Rather, it focuses on these select clauses to highlight important issues associated with flow-down provisions.
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Phillip L. Parham III, Jones Walker LLPMr. Parham may be contacted at
pparham@joneswalker.com
Condo Buyers Seek to Void Sale over Construction Defect Lawsuit
November 07, 2012 —
CDJ STAFFA Michigan couple seeks to void their purchase of a condo in Texas after discovering that the complex was undergoing a construction defect lawsuit. ABQ Journal reports that Charles M. Lea and Olga Y. Ziabrikova said that they would not have purchased the condo if they had known the association was already alleging construction defects. The condo association discovered the defects “by at least late 2010,” according to the suit. The couple bought their condo in August 2011 and heard of the defects only in March 2012.
The couple notes that no one involved with the sale informed them of the construction defect complaints. The community association’s lawsuit states that problems have lead to $2.5 million in damages. The developer, Vegas Verde Condo Partners, have filed a general denial of the construction problems.
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