The Pennsylvania Department of Transportation (“PennDOT”) has announced that based upon responses to PennDOT’s request for qualifications for its Rapid Bridge Replacement Project, a public-private partnership involving the construction of more than 500 bridges, it will invite four teams to submit proposals for the project. Those four teams are:
- Plenary Walsh Keystone Partners: Plenary Group, The Walsh Group, Granite Construction Company, HDR Engineering, HNTB Corporation and Infrastructure Corporation of America
- Keystone Bridge Partners: InfraRed Capital Partners, Kiewit, Parsons, The Allan A. Myers family of companies, DBi and American Infrastructure;
- Commonwealth Bridge Partners: John Laing Investments, Fluor, American Bridge Company, Traylor Bros. Inc., Joseph B. Fay Co., STV Incorporated and Infrastructure and Industrial Constructors;
- Pennsylvania Crossings: Meridiam, Lane Construction, AECOM, Trumbull, Wagman Companies and Cofiroute.
PennDOT expects to release the final project details and requirements to the four teams this summer and select a preferred proposal this fall. Construction is anticipated to begin in the summer of 2015.
According to PennDOT, the selected team will manage the design, construction and maintenance for at least 500 bridges throughout the Commonwealth for yet-to-be determined number of years under one contract. The team will be responsible for financing the effort and PennDOT will make payments based on the team’s adherence to the terms of the contract.
To learn more about the Rapid Bridge Replacement Project, you can visit PennDOT’s public-private partnership website.
The United States District Court for the District of Maryland recently interpreted the mediation clause in the AIA A201 -2007 “General Conditions of the Contract for Construction” to require mediation before proceeding with a mechanics’ lien claim. Kane Builders S&D, Inc. v. Maryland Pharmacy, LLC, 2013 U.S. LEXIS 83432 (D. Md. June 13, 2013). In Kane, the subcontractor and contractor used a form AIA contract as their agreement for the subcontractor to furnish labor and materials in the construction of a retail pharmacy. The parties incorporated as part of the contract the AIA Document A201 – 2007 General Conditions.
The standard conditions in the AIA A201 include Section 15.2.8, which provides, “If a Claim relates to or is the subject of a mechanic’s lien, the party asserting such Claim may proceed in accordance with applicable law to comply with the lien notice or filing deadlines.” Section 15.3.1, however, states, “Claims, disputes, or other matters in controversy arising out of or related to the Contract . . . shall be subject to mediation as a condition precedent to binding dispute resolution.” Another relevant clause is Section 15.3.2, which provides that a request for mediation “may be made concurrently with the filing of binding dispute resolution proceedings but, in such event, mediation shall proceed in advance of binding dispute resolution proceedings, which shall be stayed pending mediation for a period of 60 days from the date of filing.”
The subcontractor filed a mechanics’ lien in state court for nonpayment, and the owner contended that mediation was a condition precedent to the subcontractor prosecuting its lien claim. Distrct Court Judge Deborah K. Chasanow held that Section 15.3.1 is sufficiently broad to include mechanics’ lien claims. The court also rejected the subcontractor’s argument that litigation does not constitute “binding dispute resolution” as that term is used in Section 15.3.1. Therefore, the court concluded that mediation was a condition precedent to the subcontractor’s right to prosecute its mechanics’ lien claim.
Notwithstanding this point, the court declined to dismiss the action. Judge Chasanow noted that Section 15.3.2 expressly contemplated that the subcontractor had the right file the lien claim while concurrently requesting mediation, and have the litigation stayed pending mediation. The court reasoned that staying the litigation, rather than dismissing it, was appropriate.
The practical takeaway from this case is the reminder that if parties do not wish to subject a mechanics’ lien claim (or other specific types of claims) to mediation or another form of alternative dispute resolution provided for in the contract, the parties should expressly exclude lien claims from the mediation or ADR provisions. Otherwise, the parties are at the mercy of the court to determine whether the claim falls within or outside of the ADR requirement, and awaiting the decision of the court on this matter will only serve to delay the ultimate resolution of the underlying dispute.
The Pittsburgh Post-Gazette recently published an article about how Pennsylvania’s Department of Transportation (“PennDOT”) plans to replace at least 500 decaying bridges across Pennsylvania via public-private partnerships (“P3”). According to the article, nearly 60 of those bridges are located within Allegheny County, with another 23 in neighboring Westmoreland County and another 13 in Butler County. The Post-Gazette reports that PennDOT hopes to get construction underway on 50 to 100 bridges in 2015 and that the party or parties with whom PennDOT contracts for the construction of the bridges will also maintain the new bridges for a period that may be as long as 40 years.
The entire Post-Gazette article is available here.
In June of 2013 we reported that the United States Supreme Court agreed to decide In re Atlantic Marine Construction Co. to resolve a split between the United States Courts of Appeals regarding whether a federal court must honor a forum selection clause in a construction contract by transferring the case to the forum so designated in the contract.
On October 9, 2013, the Supreme Court heard oral argument in the Atlantic Marine case. Less than two months later, on December 3, 2013, the nation’s highest court issued an opinion declaring that upon motion of one of the parties, a federal district court should transfer a case to the forum selected in the contract “unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor the transfer.”
The Supreme Court’s Atlantic Marine opinion reaffirms the enforceability of choice of forum clauses and suggests that courts may only disregard the contractually designated forum for litigating disputes under exceptionally rare circumstances. Accordingly, owner, contractors and subcontractors should pay particular attention to the choice of forum clauses in their contracts and subcontracts because federal courts now have a clear mandate that they must be enforced.
As the shutdown of the federal government enters its second week, its impact on federally funded construction projects has been somewhat muted because of the way that certain federal agencies receive their funding. For example, because the Federal Highway Administration is funded by the Highway Trust Fund, which still has funding through the end of the 2014 fiscal year, the shutdown has virtually no impact on any Federal Highway Administration construction projects. The Airport Improvement Program is also funded by a trust, and thus, the federal government shutdown will have much less of an impact on Airport Improvement Program construction projects. Other agencies, including the Federal Transit Administration and the Federal Aviation Administration are not funded by a trust fund, and therefore, the government shutdown will have a much more significant impact on those agencies’ construction projects.
Overall, however, because funding has already been appropriated for most ongoing and already awarded direct federal construction projects, the federal government shutdown will have virtually no impact on ongoing and already awarded contracts. Rather, the furloughs of non-essential government employees has suspended pending solicitations and awards, including task orders for existing multiple award contracts, until the shutdown comes to an end.
More information on the impact of the shutdown on federal construction contracts is available at the Association of General Contractors’ website. The source of the information in this post is available here.
The Association of General Contractors has created a Resource Center to provide information to government contractors about the current federal government shutdown. The Resource Center, which is available here, contains links to contingency plans drafted many different federal agencies detailing how the agency will likely proceed and operate in the event of a government shutdown. While each agency’s contingency plan is intended to be informative rather than authoritative, the documents should provide some guidance for government contractors about the process for dealing with federal government agency construction project owners during the federal government shutdown.
In October 2010, the Small Business Administration implemented the Women-Owned Small Business Program, which authorized contracting officers for federal agencies to set aside certain federal contracts for eligible and qualified Women-Owned Small Businesses and Economically Disadvantaged Women-Owned Businesses. Under the program, however, those set-asides were capped at $6.5 million for manufacturing contracts and $4 million for all other contracts.
However, the 2013 National Defense Authorization Act, which President Obama signed into law earlier this year, removed the statutory limits for set-asides for Women-Owned Small Businesses and Economically Disadvantaged Women-Owned Businesses. Recently, the Small Business Administration issued an Interim Final Rule officially removing dollar value limits on set-asides for Women-Owned Small Businesses and Economically Disadvantaged Women-Owned Businesses. A copy of the new Interim Final Rule, which details the new parameters under which set-asides may be made, can be found by following this link.
The United States District Court for the Western District of Pennsylvania recently issued an opinion in a diversity action dismissing with prejudice a principal’s claims for tortious interference with a contractual relationship, breach of fiduciary duty and bad faith against its surety.
In Reginella Construction Company, Ltd. v. Travelers Casualty and Surety Company of America, Civ. A. No. 12-1047, 2013 WL 2404140 (W.D. Pa. May 31, 2013), Reginella Construction Company, Ltd (“Reginella”) sued its surety, Travelers Casualty and Surety Company of America (“Travelers”) for breach of fiduciary duty, tortious interference with a contractual relationship and bad faith. The court, however, granted Travelers Motion to Dismiss all claims against Travelers with prejudice.
Regarding Reginella’s breach of fiduciary duty claim, the court looked to Pennsylvania case law regarding sureties, insurers, and commercial guarantees, and concluded that (1) surety bond agreements are standard commercial contracts; (2) imposing a fiduciary duty relationship between parties to a contract is the exception rather than the rule; and (3) a surety is not an insurer. Based upon these conclusions, the court predicted that the Pennsylvania Supreme Court would not find a fiduciary relationship between a surety and its principal. Therefore, the court concluded that Travelers owed no fiduciary duty to Reginella.
The court then turned to Reginella’s tort claims (i.e. its bad faith and tortious interference with a contractual relationship claims) and held that Pennsylvania’s gist of the action doctrine barred Reginella’s ability to assert either claim. Specifically, Pennsylvania’s gist of the action doctrine bars tort claims (1) that arise solely from a contract between the parties; (2) where the duties allegedly breached were created and grounded in the contract itself; (3) where the liability stems from a contract; or (4) where the tort claim essentially duplicates a breach of contract claim or the success of which is wholly dependent on the terms of a contract. The court found that the relationship between Reginella and Travelers was purely contractual in nature, and therefore, the gist of the action contract barred Reginella’s tort claims.
Although the Pennsylvania Supreme Court has not yet ruled upon the issue, Reginella suggests and supports the notion that a principal’s only cause of action against its surety under Pennsylvania law is one for breach of contract. Therefore, pursuant to Reginella, the terms of the contract between a principal and its surety will strictly govern the relationship and obligations between the parties.
Construction subcontracts often contain “forum selection” clauses requiring that the parties to the contract settle all of their disputes in arbitration or litigation in some state that seems entirely unrelated to the construction project but happens to be the state where the general contractor maintains its home office. These clauses provide economic and strategic benefits to the general contractor by eliminating or mitigating the travel expenses for key personnel and by requiring litigation in a court familiar to the contractor’s legal counsel.
This ability to contract for a “home field advantage” has been eroded by provisions included in some states’ recently enacted prompt payment laws (which require that all disputes by resolved by courts in the jurisdiction of the project location), and it was more recently rejected by the Court of Appeals for the Fifth Circuit in In re Atlantic Marine Construction Company, Inc. In that case, the Fifth Circuit held that a subcontractor could file suit against a general contractor in Texas (where the project was located), despite a clause in the subcontract agreement requiring that all disputes arising from the contract be resolved in a specific federal court in Virginia.
The Fifth Circuit’s decision directly contradicts the majority of federal circuit courts, including the Second, Seventh, Eighth, Ninth, and Eleventh Circuits, all of which have held that a forum selection clause in a contract negotiated at arms’ length should be enforced by the federal courts. On April 1, 2013, United States Supreme Court agreed to review the split between the Circuit Courts on the choice of forum issue by granting certiorari for the Atlantic Marine case. This nation’s highest Court will hold argument in case and decide it next term, which begins in October of this year. We will post the Supreme Court’s ruling on this important case as soon as it is issued.
In the recent decision of Cresci v. Martin, the Pennsylvania Superior Court issued an opinion qualifying the rule regarding prejudgement interest for breach of a construction contract. In October of 2004, Cresci Construction Services, Inc. (“Cresci”) and James H. Martin (“Martin”) entered into a construction contract (the “Contract”) wherein Cresci agreed to build a home for Martin in exchange for $184,730. The Contract did NOT contain a liquidated damages provision in the event that Cresci caused delays in completing construction, nor did it contain a “no damages for delay” clause, meaning that Martin could sue for his actual damages in the event that Cresci was late in constructing the hom.
Construction of the Martin’s home did not go smoothly, and Martin sued to recover his alleged damages. After a trial on the merits, the jury found that Cresci breached the Contract and entered a verdict awarding Martin $66,000.00. The jury’s verdict sheet did not subcategorize the amount of damages. After the verdict was entered, Martin filed post-trial motions seeking attorneys’ fees and prejudgment interest on the breach of contract damages. The trial court denied Martin’s motion, and Martin appealed to the Superior Court.
On appeal, the Superior Court affirmed. Regarding Martin’s claim for the prejudgment interest, the Superior Court explained that under Pennsylvania law, prejudgment interest is awarded automatically only when the damage resulting from the breach is liquidated at the time of breach. In all other circumstances, the decision whether to award prejudgment interest is left to the discretion of the trial court. The Superior Court concluded that because Martin’s damages were unliquidated, consequential damages (including items such as mortgage interest and the costs of maintaining two properties), an award of prejudgment interest on those damages was purely discretionary. The Superior Court found no abuse of discretion, and therefore affirmed the denial of prejudgment interest. The Cresci decision reinforces the significance of including liquidated damages provisions in construction contracts.
ConsensusDocs recently released its newest version of the 498 Design-Build Teaming Agreement. The 498 Design-Build Teaming Agreement provides a standard contract for parties desiring to form a design-build team for the purposes of submitting a proposal to construct a design-build project. According to ConsensusDocs, the New 498 Design-Build Teaming Agreement has the flexibility for design-build team members to include design professionals, constructors, and other contractors. The new 498 Teaming Agreement is available for purchase on ConsensusDocs’ website.