Recovering For Inflation On Federal Contracts: Recent DOD Guidance On Economic Price Adjustment Clauses
October 24, 2022 —
Amanda L. Marutzky - ConsensusDocsSince October 2020, inflation in the United States has seen its fastest increase in more than 30 years. In the last year alone, inflation has remained as high as 8.6%. This hike has impacted everything from diesel to steel. In the construction industry, the higher prices of goods and services directly affect how contractors draft their construction contracts.
The Department of Defense (DoD) has taken note of this dramatic price increase and recently issued guidance to its commanding officers and the procurement community. On May 5, 2022, DoD issued a memorandum titled “Guidance on Inflation and Economic Price Adjustments.” The stated purpose of the memo is “to assist COs to understand whether it is appropriate to recognize cost increases due to inflation under existing contracts as well as offer considerations for the proper use of EPA when entering into new contracts.” DoD’s memo responds to contractor and contracting officer concerns about the sudden and unexpected cost increases in labor and materials.
Economic Price Adjustments, or EPAs, are adjustments to a stated contract price upon the occurrence of certain contingencies. FAR 16.203-1. They are of three general types – (1) adjustments based on established prices, (2) adjustments based on actual costs of labor or material, or (3) adjustments based on cost indexes of labor or material. Id. Because EPAs allow for adjustments in a contract price, EPA clauses allow a contractor to recover unanticipated increases in its project costs. For example, FAR 52.216-4, Economic Price Adjustment-Labor and Material, authorizes a contractor to recover for increases in the cost of material or labor. Such recovery is available when costs increase more than 3%, with a maximum recovery of 10% of the original contract price. See also FAR 52.216-2 through FAR 52.216-4. These EPA clauses provide contractors with relief and protection from issues such as dramatic inflation. EPA clauses, however, are not included in all contracts.
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Amanda L. Marutzky, Watt, Tieder, Hoffar, & Fitzgerald, LLP (ConsensusDocs)Ms. Marutzky may be contacted at
amarutzky@watttieder.com
Best Practices for ESI Collection in Construction Litigation
October 05, 2020 —
Kelley J. Halliburton - Construction ExecutiveThe construction business has always been heavy on records and data but now more than ever much of that information is stored electronically. Gone are the days of just a trailer full of drawings and paper documents.
Construction projects now have huge amounts of electronically stored information (ESI) including contract documents; drawings in both CAD, PDF and other formats; schedule files such as Primavera; spreadsheets; photos; job cost control software files; formal correspondence; and an ever-expanding amount of email communications. Successful collection of this ESI can be critical to the success of litigation in construction cases, where often very complex facts will need to be gathered to support a claim or defense.
The best first step to a successful ESI collection is to build a solid foundation before trouble arises with prepared policies and procedures in place. Implementing and enforcing a document management plan on a project basis will make sure documents are kept in an organized fashion so that materials can be accessed quickly and easily. Document management is important for types of ESI that are not handled well by word-searches, including Primavera schedules, photos and videos.
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Kelley J. Halliburton, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.
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Lower Manhattan Condos Rival Midtown’s Luxury Skyscrapers
April 09, 2014 —
Oshrat Carmiel – BloombergManhattan developer Bill Rudin hadn’t planned to start selling apartments at his Greenwich Village project until the end of this year. He began rethinking that strategy after getting cornered at a cocktail party.
“People came up to me and said, ‘We want to buy, we want to buy. When can we buy?’” Rudin said in an interview.
He opened a sales office in October for the Greenwich Lane, a complex under construction at the site of the shuttered St. Vincent’s Hospital, after an online sign-up list of would-be buyers for the 200 condominiums drew 1,100 names. More than half of the units at the development, still largely a field of dirt and skeletal towers, have sold at prices averaging $3,500 a square foot, in line with other projects downtown and a new luxury benchmark for the area.
While Midtown skyscrapers fringing Central Park are setting sales records and attracting international investors, downtown Manhattan’s new condos are breaking their own price barriers with a focus on local buyers. From the cobblestone streets of Tribeca to the low-rise landmarks of Greenwich Village, builders are accelerating projects with features and costs that rival high-end offerings farther north.
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Oshrat Carmiel, BloombergMs. Carmiel may be contacted at
ocarmiel1@bloomberg.net
Environmental and Regulatory Law Update: New Federal and State Rulings
April 19, 2022 —
Anthony B. Cavender - Gravel2GavelThe first quarter of 2022 has yielded a number of decisions, reversals and agency adjustments worth note.
FEDERAL CIRCUIT
U.S. Court of Appeals for the D.C. Circuit – Food & Water Watch v. Federal Energy Regulatory Commission
On March 11, 2022, the court decided the FERC case. On December 19, 2019, the Commission issued a Certificate to Tennessee Gas Pipeline and determined that a “modest expansion” and upgrade of the existing 11,000-mile natural gas pipeline would have no significant environmental impact. However, one of the Commissioners filed a partial dissent, arguing that the Commission’s treatment of the climate change impacts was inadequate. A petition for review was filed, and now the court has decided that the Commission erred in not accounting for the indirect effects of the expansion, namely the downstream emissions of greenhouse gas generated by the pipeline’s delivery of the gas to its customers. Consequently, NEPA’s requirement that a rigorous environmental assessment be made before the authorization was granted was violated. However, the court decided against vacating the Commission’s orders, which would have had a “disruptive effect” on the project which is, or soon will be, operational.
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Anthony B. Cavender, PillsburyMr. Cavender may be contacted at
anthony.cavender@pillsburylaw.com
Ensuing Loss Provision Found Ambiguous
April 25, 2012 —
Tred R. Eyerly - Insurance Law HawaiiAfter the insurer denied coverage in a homeowner’s policy for construction defects under various exclusions, the court found the ensuing loss provision was ambiguous.Kesling v. Am. Family Mut. Ins. Co., 2012 U.S. Dist. LEXIS 38857 (D. Colo. March 22, 2012).
After purchasing a home from the sellers, the insureds noticed problems with the deck of the home. Massive cracking appeared, causing lifting and leaking on the deck and water running through the exterior foundation wall into the home. There was also damage to the roof and crawlspace.
The insureds had a homeowner’s policy with American Family, which covered accidental direct physical loss to property described in the policy unless the loss was excluded. They requested coverage for "conditions, defects and damages." American Family denied coverage because wear and tear, as well as damage to foundations, floors and roofs were excluded. The policy did provide coverage, however, for "any resulting loss to property described . . . above, not excluded or excepted in this policy.
When coverage was denied, the insureds sued American Family.
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii. Mr. Eyerly can be contacted at te@hawaiilawyer.com
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Can Your Small Business Afford to Risk the Imminent Threat of a Cyber Incident?
November 28, 2018 —
Jeffrey M. Dennis & Heather H. Whitehead – Newmeyer & Dillion LLPCybersecurity incidents are occurring on a daily basis and at an increasingly growing rate. Yet, many small businesses still have not obtained adequate (or any) cyber insurance to address these risks and the costly impacts to the business that will result. In a recent study completed by the Insurance Information Institute1, only about a third of all small businesses polled responded that they have cyber insurance in place, with 70% of respondents replying that they have no plans to purchase a cyber insurance policy in the next 12 months. Most of the businesses indicated that they do not believe they have any need for cyber insurance, yet almost half of those same companies stated they are unprepared to handle cyber threats. A main reason for not purchasing cyber insurance was a lack of understanding about this type of insurance and coverages available.
The Risks for Small Businesses
These statistics are alarming considering that the average cost of a cyber-related loss for a small business has increased 250% in the past two years, and now totals $188,400. In determining whether insurance coverage should be purchased, companies typically assess the perceived risks to the company, the likelihood of such risks occurring, as well as any costs or expenses that may result. For example, most companies regularly obtain a property policy to cover a fire or other casualty that may damage its business location even though such an event is unlikely or unexpected. Yet, cyber incidents are just as likely, if not more likely to occur, and the impacts to a company in the event of an incident are far worse. Many incidents result in a complete suspension of the daily operations of the company for several days or longer.
In addition to financial loss, companies may face the following as a result of a cyber incident:
- Theft, breach or loss of information and data;
- Damage to the company's reputation, brand or image; and
- Regulatory, governance and legal issues.
- How Cyber Insurance can Help
Cyber insurance policies can be obtained to address the losses related to a data breach and may include costs for investigating a breach, notifying people affected by a breach of personally identifiable information, managing the potential damage to reputation and other crisis-management expenses, recovering lost or corrupted data, and related legal expenses. More importantly, well-drafted policies can afford coverage for business interruption losses; i.e. those expenses and lost revenue resulting from a breached system and a company's inability to continue its usual operations. Coverage may also be obtained for "cyber extortion", which covers costs resulting from an extortion event such as ransomware or fraudulent wire transfers.
It is important to keep in mind that cyber insurance is only one component to consider when developing and implementing an overall risk management strategy to prevent cyber incidents. However, taking into account the exposure to a company if and when a cyber incident occurs, it is highly advisable to have this coverage in place.
1Insurance Information Institute, "Small business, big risk: Lack of cyber insurance is a serious threat," October 2018.
Jeff Dennis is the head of the firm's Privacy & Data Security practice. Jeff works with the firm's clients on cyber-related issues, including contractual and insurance opportunities to lessen their risk. For more information on how Jeff can help, contact him at jeff.dennis@ndlf.com.
Heather Whitehead is a Partner in the firm's Privacy & Data Security practice. Heather also practices insurance coverage matters for commercial, retail, industrial, mixed-use, multi-family and residential projects. For more information on how Heather can help, contact her at heather.whitehead@ndlf.com.
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French President Vows to Rebuild Fire-Collapsed Notre Dame Roof and Iconic Spire
June 03, 2019 —
Scott Blair & Peter Reina - Engineering News-RecordTwo British masonry experts familiar with centuries-old stone structures voiced concern that the catastrophic fire that collapsed the roof and spire of Notre Dame on April 15 could also have damaged stonework of the iconic Paris cathedral that may affect its stability.
Reprinted courtesy of
Scott Blair, ENR and
Peter Reina, ENR
Mr. Blair may be contacted at blairs@enr.com
Mr. Reina may be contacted at reina@btinternet.com
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Flint Water Crisis Prompts Call for More Federal Oversight
August 28, 2018 —
Associated Press - Engineering News-RecordWASHINGTON (AP) — A federal watchdog is calling on the Environmental Protection Agency to strengthen its oversight of state drinking water systems nationally and respond more quickly to public health emergencies such as the lead-in-the water crisis in Flint, Michigan .
In a 74-page report released Thursday, the EPA's inspector general report pointed to "oversight lapses" at the federal, state and local levels in the response to Flint's contaminated drinking water.
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Engineering News-RecordENR may be contacted at
ENR.com@bnpmedia.com
