SMITH, CURRIE & HANCOCK LLP was founded in 1965. With offices in Atlanta, Georgia; Charlotte and Raleigh, North Carolina; Fort Lauderdale, Florida; San Francisco, California; Tysons, Virginia; and Washington, D.C., the firm has nationally recognized practices in the areas of construction law, construction insurance, government contracts, and environmental law. The firm represents clients in all 50 states, as well as Puerto Rico, Mexico, Canada, Central America, South America, Europe, Africa, and Asia.

JOHN M. MASTIN, JR. is a Partner at Smith, Currie & Hancock LLP. John has extensive, real-world experience in construction design and engineering, as well as the resolution of construction disputes involving, among other things, contract interpretation, contract changes, schedule delays, acceleration, differing site conditions, and proving costs and damages.

ERIC L. NELSON is a Partner at Smith, Currie & Hancock LLP. Eric practices in the areas of construction law, energy, federal construction procurements, infrastructure, and healthcare markets. He has extensive experience with U.S. federal construction issues, such as the False Claims Act, small business programs, cost and pricing, compliance, Miller Act, Green and sustainable construction, and requests for equitable adjustments and claims.

RONALD G. ROBEY is a Partner at Smith, Currie & Hancock LLP. Ronald specializes in the areas of construction law, insurance, and government contracts and has extensive experience with small and disadvantaged business issues in the federal and state procurement systems and with false claims in federal and in state procurement.

Preface xxv

Author Biographies xxvii

1 The Legal Context of Construction 1

I. Introduction 1

II. Contract Law 1

III. Evolution of Construction Law 3

IV. Torts 4

V. Statutory and Regulatory Laws Affecting the Business of Construction 7

2 Interpreting the Contract 11

I. The Importance of Contract Interpretation 11

II. What is a Contract? 11

III. The Goal of Contract Interpretation 12

IV. Defining Contract Terms 12

V. Interpreting the Contract’s Language 13

VI. The Facts and Circumstances Surrounding Contract Formation 15

VII. Resolving Ambiguities 18

VIII. Implied Contractual Obligations 19

IX. Contractual Obligations Arising by Operation of Law 23

3 Alternative Contracting Methods 26

I. Traditional Approach to Construction: Advantages and Disadvantages 26

II. Integrated Project Delivery 27

III. Multiprime Contracting and Fast-Tracking 31

IV. Construction Management 32

V. Design-Build Contracting 35

VI. Design-Build Aspects of Traditional Construction 43

VII. Contractor Liability Issues 47

VIII. Engineer-Procure-Construct 48

IX. Building Information Modeling 51

4 Public-Private Partnerships 56

I. The P3 Alternative 57

II. P3 Project Participants 64

III. P3 Financing Strategies 68

IV. P3 Risk Allocation 73

V. Conclusion 77

5 International Construction Contracts 79

I. Unique Issues 79

II. Project Delivery Methods and Contract Forms 81

III. Dispute Resolution 92

6 Working in a Different State 96

I. Qualifying to Do Business 96

II. State Registration Requirements: Bonds to Secure Payment of Taxes 97

III. State Licensing and Qualifications 98

IV. Public-Sector Construction 99

V. State Statutes and Policies Affecting Contractual Relationships and Terms 101

VI. Preservation of Lien/Bond Rights 107

VII. Project Risk Assessment—“Foreign States” 109

VIII. Information Sources 110

Appendix 6.1 Checklist: Projects in “Foreign Jurisdictions” 112

7 Competing for the Contract 115

I. Introduction: The Rationale for Competition 115

II. Key Concepts in Traditional Public Competitive Bids—Responsiveness and Responsibility 116

III. The “Lowest and Best” Bidder 122

IV. Negotiated “Best Value” Selection Process 124

V. Electronic Bids 126

VI. Reverse Auctions 128

VII. General Considerations When Competing on Private Contracts 129

VIII. Effect of Past Performance Evaluations on Award Process 130

IX. Contractor Bid Mistakes 136

X. Bid Protests on State or Local Government Contracts 140

XI. Bid Bonds 142

XII. “Bid Shopping”: What is the Prime Contractor’s Obligation to the Subcontractor Submitting the Lowest Price? 144

XIII. Holding Subcontractors and Vendors to Their Bids 146

XIV. Statute of Frauds Issues 149

XV. Damages 150

8 The Uniform Commercial Code and the Construction Industry 152

I. Applicability to Construction Projects—Purchasing Equipment and Materials 152

II. Determining When Article 2 Applies 153

III. Modifying U.C.C. Obligations 153

IV. Contract Formation Under the U.C.C. 154

V. Risk of Loss 156

VI. Inspection, Acceptance, Rejection, and Revocation of Acceptance 157

VII. Warranties Under the U.C.C. 160

VIII. Statute of Limitations and Commencement of the Warranty Period 162

IX. Performance Issues 164

9 The Design Professional’s Authority and Responsibility 169

I. Overview 169

II. Standard of Care, Professional Responsibility, and Liability 169

III. The Design Professional’s Authority 176

IV. The Design Professional’s Administrative Functions 179

V. The Design Professional’s Other Duties 189

VI. The Design Professional’s Liability to the Contractor and Third Parties 190

VII. Statutes of Repose 196

VIII. Effects of Contractual Limitations on Design Professional Liability 198

IX. Assumption of Design Liability by the Contractor 201

X. Shared Responsibility and Risk 203

XI. The Design Professional’s Copyright for Design Documents 205

10 Subcontract Administration and Dispute Avoidance 209

I. Dispute Avoidance Begins at the Bidding Stage 209

II. The Subcontract Agreement 214

III. Should Subcontractors Be Bonded? 233

IV. Dispute Avoidance by Diligent Project Administration 234

11 Contract Changes 245

I. What is a Changes Clause? 245

II. Recovery Under the Changes Clause 251

III. Constructive Changes 259

IV. Cardinal Changes 264

V. The Impact of Numerous Changes on Unchanged Work 266

VI. Impossibility/Impracticability 266

12 Differing Site Conditions 269

I. “Differing Site Condition” Defined 269

II. Responsibility for Differing Site Conditions 269

III. Standard Industry Differing Site Conditions Clauses 270

IV. Comparison of Differing Site Condition Provisions 277

V. Operation of the Differing Site Conditions Clause 279

VI. Stumbling Blocks to Recovery 288

VII. Relief in the Absence of a Contract Provision 294

Appendices—Site Investigation Checklists 299

Appendix 12.1 Project Checklist: Qualifying the Site 300

Exhibit A: Site Investigation Record 301

Appendix 12.2 Pre-Bid Environmental Considerations 303

13 Schedules, Delays, and Acceleration 305

I. Allocating the Risk of Performance Time in the Contract 306

II. Use of Schedules in Project Management 311

III. Analysis of Project Delay 314

IV. Typical Causes of Compensable Delay 316

V. Concurrent Delay 322

VI. Excusable but Noncompensable Delays 323

VII. Acceleration 325

VIII. Contractual Limitations to Recovery for Delays 327

IX. Owner Claims for Delay 330

X. Delay Claims and the Use of CPM Schedules 331

XI. Documentation to Support Delay Claims 332

14 Inspection, Acceptance, Warranties, and Commissioning 337

I. Inspection 338

II. Acceptance 348

III. Contractual Warranties 355

IV. Project Commissioning and Post-Acceptance Facility Operations 359

15 Management Techniques to Limit Risks and Avoid Disputes 364

I. Construction: A Risk-Prone Business 364

II. Qualifying the Project and the Participants 365

III. Defining Rights, Responsibilities, and Risks: Parties and Their Contracts 371

IV. Contract Framework 372

V. Avoiding and Preparing for Disputes Through Proper Management and Documentation 376

VI. Prudent and Responsible Estimating 376

VII. Establish Standard Operating Procedures 377

VIII. Establish Lines of Communication 378

IX. Project Documentation 378

X. Electronic Communications on Construction Projects 383

XI. Cost Accounting Records 387

XII. Monitoring the Work through Scheduling 388

XIII. Preserving Electronically Stored Information 389

XIV. Conclusion 390

Appendix 15.1 ConsensusDocs 221—Contractor’s Statement of Qualifications for a Specific Project 391

Appendix 15.2 Logs and Forms 406

Appendix 15.2A Format for Notice Checklist 407

Appendix 15.2B Sample Partial Notice Checklists 409

Appendix 15.2C Forms 413

Appendix 15.2D Request for Information 418

Appendix 15.2E Telephone Conversation Memorandum 419

Appendix 15.2F Sample Daily Report 420

Appendix 15.2G Notice of Backcharge 421

Appendix 15.2H Field Order Status Chart 422

Appendix 15.2I Log: Incoming Correspondence 423

Appendix 15.2J Log: Outgoing Correspondence 424

16 Payment Bonds 425

I. Payment Bonds Required by Statute 426

II. Payment Bonds on Private Projects 431

III. Who is Protected by Payment Bonds 432

IV. Work Qualifying for Payment Bond Coverage 437

V. Recovery Under Payment Bonds for Extra Work, Delay Damages, or Lost Profits and Other Costs 439

VI. Distinguishing between Payment Bond Claims and Performance Bond Claims 441

VII. Procedural Requirements for Payment Bonds 442

VIII. Effect of Payment Bonds on Lien Rights 446

IX. The Surety’s Defenses to Payment Bond Liability 446

17 Performance Bonds and Terminations 451

I. Surety Performance Bonds 451

II. Termination 465

18 Proving Costs and Damages 480

I. Basic Damage Principles 480

II. Methods of Pricing Claims 485

III. Contractor Damages 488

IV. Owner Damages 502

19 An Overview of Environmental and Safety Concerns on the Construction Site 509

I. Sources of Environmental Regulation and Liability 509

II. Minimizing Environmental Risks Prior to Contracting 518

III. Management Techniques for Environmental Risks during Contract Performance 523

IV. Mold: Developing a Program to Limit Liability 525

V. Environmentally Friendly Construction: Green Buildings 526

VI. Construction Safety 530

20 Construction Insurance 540

I. Importance of Insurance Planning 540

II. Introduction to the Language of Insurance Policies 541

III. Types of Insurance 543

IV. Contract Requirements for Insurance 548

V. Prompt Action to Protect Potential Coverage 551

VI. Insurer’s Response to Claims 552

VII. Routine Coverage Issues 553

VIII. Concurrent Causes 559

IX. Construction Insurance and Mold Claims 560

21 Labor and Employment Issues Affecting the Construction Industry 566

I. Immigration Issues 566

II. Employee Safety and Health 571

III. Wage and Hour Requirements 572

IV. Employee Benefits: ERISA 581

V. Employment Discrimination 583

VI. Family and Medical Leave Act 588

VII. Union Labor 590

VIII. Employee-Background Investigations 590

IX. Workers’ Compensation—Exclusive Remedy Assertions 593

22 Bankruptcy in the Construction Setting 595

I. Introduction 595

II. The Players 595

III. Key Terms 596

IV. Bankruptcy Code 598

V. Status of the Debtor’s Contracts 606

VI. Status of Materials and Equipment 610

VII. Status of Contract Funds 613

VIII. Other Sources of Funds 617

23 Resolving Construction Disputes 623

I. Early Claim Recognition and Preparation 624

II. Early Involvement of Experts and Attorneys 625

III. Demonstrative Evidence 626

IV. Contemporaneous Records 627

V. Components of a Well-Prepared Claim Document 627

VI. Calculating and Proving Damages 629

VII. Pursuing Negotiation and Settlement 630

VIII. Arbitration 633

IX. Litigation 643

24 Federal Government Construction Contracting—An Overview 651

I. Introduction: The Key Differences 651

II. Contractor Selection 656

III. Social-Economic Policies 663

IV. Resolution of Contract Disputes 684

V. Standards of Conduct for Contractors 694

Appendix 24.1 Internet Resources for Federal Government Construction Contracts 704

Index 705

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