Bill Seeking to Amend Construction Payment Act Introduced in Pennsylvania’s Legislature

Bill Seeking to Amend Construction Payment Act Introduced in Pennsylvania’s Legislature

On May 18, 2017, Representative David S. Maloney, Sr. (R., Berks County) introduced House Bill 1387, which seeks to amend Pennsylvania’s Contractor and Subcontractor Payment Act (CASPA).  The changes include the inserting language amending CASPA to state the following:

  • A contractor or subcontractor may not contractually waive CASPA rights;
  • Failure to provide written notice of a deficiency item results in a waiver of the right to withhold for the deficiency and requires payment of the invoice in full;
  • If withholding for a deficiency item, payment for all non-deficient work must still be made;
  • If a party receiving an invoice alleges the invoice contains an error, the party must pay the correct invoice amount on the date payment would otherwise be due;
  • A party seeking release of retention may post a maintenance bond for 120% the amount retained to obtain release of retention;
  • Withholding retention for longer than 30 days after “final acceptance of the work” will qualify as an improper withholding unless the appropriate notice requirements are followed;
  • Withholding requirements also apply to subcontractors’ sub-subcontracts with lower-tier subcontractors; and
  • Compliance with the notice requirements for withholding based upon deficiencies is necessary for the withholding to “not be deemed to have been wrongfully withheld.”

Babst Calland will continue to monitor HB 1387 as well as other proposed legislation that may impact the construction industry and post updates on this Blog whenever they become available.

Commonwealth Court Addresses Engineer Licensure Requirements

Commonwealth Court Addresses Engineer Licensure Requirements

On May 24, 2016, the Commonwealth Court in Se. Reprographics, Inc. v. Bureau of Prof’l & Occupational Affairs, No. 2235 C.D. 2014, 2016 WL 2979844 (Pa. Commw. Ct. May 24, 2016) addressed an issue of first impression and held that the petitioner did not perform an “engineering land survey” in violation of the Engineer, Land Surveyor and Geologist Registration Law (Law), 63 P.S. §§ 148 – 158.2, when it used maps and mobile GPS/GIS equipment to locate and identify a customer’s physical assets for a non-engineering purpose.

Southeastern Reprographics, Inc., now known as The Davey Resource Group (“DRG”), was commissioned by Central Electric Cooperative, Inc. (“CEC”), a rural electric distribution cooperative, to locate every piece of electric equipment owned by CEC, including transmission poles, distribution poles, security and street light poles, mounted equipment, regulators, and meters. The purpose of this field inventory was to provide CEC with sufficient information to create a GIS database of its existing assets. Using GIS/GPS technology, DRG assessed over 100 square miles of land, located CEC’s assets to sub meter accuracy, took an inventory of all equipment at each location, and identified and tagged the equipment. DRG then transferred this data to CEC in the form of x-y coordinates to be electronically plotted on a base map.

Based on this information, the State Registration Board for Professional Engineers, Land Surveyors, and Geologists (the “Board”) concluded that DRG performed an “engineering land survey” as defined by the Law when it determined by measurement methods the position of fixed objects on the Earth’s surface through the use of GIS/GPS equipment. According to the Board, DRG violated the Law when it conducted this “engineering land survey” without the necessary license.

On review, the Commonwealth Court reversed the Board’s determination. Agreeing with DRG, the Court held that “‘engineering land surveys’ regulated or encompassed under the Law are those that are performed in connection with or related to building construction and land development.” And because DRG’s field inventory of CEC’s assets was performed purely so that CEC could create a GIS database of its electrical equipment, it was not an “engineering land survey” as defined by the Law.

In a dissenting opinion, Judge McCullough cautioned the Court against overturning legal determinations based on the Board’s extensive “technical expertise.” Judge McCollough also noted that the Law’s licensure requirements are in place to “to safeguard life, health or property and to promote the general welfare.” And because CEC shared DRG’s maps with PA One Call and EMS services for six or seven different counties, Judge McCollough believed that the risk of not properly identifying and locating electrical infrastructure was so great that it should only be entrusted to a licensed professional. The dissent also expressed dissatisfaction with the majority’s limiting the definition of “engineering land survey” to surveying activities performed in connection with building construction or land development.

Overall, the Court’s opinion demonstrates that licensure under the Law is not required to simply determine the location of objects on the Earth’s surface. However, design professionals should be aware that they must be licensed under the Law before performing any surveying activities in conjunction with building construction or land development.

President Obama’s Fiscal Year 2017 Proposed Budget Includes Over $10 Billion for Federal Building Fund

President Obama’s Fiscal Year 2017 Proposed Budget Includes Over $10 Billion for Federal Building Fund

The U.S. General Services Administration (GSA) is the federal government’s real estate manager and director of the government’s real estate investment strategies. The Agency’s FY 2017 funding requests, submitted along with the President’s proposed budget in February, include requests for over $1 billion worth of construction projects in and around the Washington, D.C. area. In addition, GSA is requesting the following funds for infrastructure in Pennsylvania and the region at large:

1. Boyers, Pennsylvania: $31,200,000 for design and related services for the construction of a new federally owned facility of approximately 462,000 gross square feet to provide a long-term housing solution for agencies currently leasing an underground mine location within the area.

2. Philadelphia, Pennsylvania: $52,300,000 for Phase II of a two phase repair and alteration project for the Federal Building (Green Building), located in downtown Philadelphia. The project involves the realignment and reconfiguration of tenant space, and multiple building system upgrades/replacements.

3. Cleveland, Ohio: $15,524,000 for a repair and alteration project to complete, repair, and expand the plaza system at the U.S. Courthouse located in downtown Cleveland. The structural steel that supports the plaza is exposed to the elements and has been since the original construction.

(Here is a complete list of GSA’s proposed infrastructure projects in its FY2017 request.) These anticipated projects, coupled with rumors GSA has started the process of implementing much-needed upgrades to fedbizopps.com (the single government point-of-entry for federal government procurement opportunities), suggests the prospect of federal government projects may become more attractive to companies in the region within the year to come.

Although the appropriations bills ultimately passed by Congress this fall may or may not mirror these infrastructure plans, GSA’s proposal provides insight into its development priorities. We will track Congress’ final appropriations bills and continue providing updates on this blog.

OSHA Fine Increases to Take Effect on August 1 but Increased Fines Could Apply to Inspections Occurring Now

OSHA Fine Increases to Take Effect on August 1 but Increased Fines Could Apply to Inspections Occurring Now

As previously reported in Babst Calland’s November 2015 Employment Bulletin, a little-noticed provision in the recent federal budget permits the Occupational Safety and Health Administration (“OSHA”) to raise its monetary penalties by nearly 80%.  The increase in fines – the first since 1990 – will take effect on August 1, 2016.  However, because OSHA has six months to issue a citation after an inspection, the increased penalties could be applied to inspections occurring now.

More information about the OSHA fine increases as well as other employment related issues that impact the construction industry may be found in Babst Calland’s regularly issued newsletters as well as on this blog.

Babst Calland Attorneys Attend Prompt Pay Task Force Coalition Meeting to Discuss Amendments to Pennsylvania’s Contractor and Subcontractor Payment Act

Babst Calland Attorneys Attend Prompt Pay Task Force Coalition Meeting to Discuss Amendments to Pennsylvania’s Contractor and Subcontractor Payment Act

On April 5, 2016 Babst Calland Attorneys Robert Palumbi and Marc Felezzola attended a Prompt Pay Task Force Coalition meeting in Harrisburg organized by the American Subcontractors Association’s Central Pennsylvania Chapter to discuss House Bill 726 of 2015 (“HB 726”). The meeting attendees discussed the proposed legislation, its practical impact on Pennsylvania’s construction industry.

In addition to discussing the as-drafted legislation, meeting participants worked together to prepare proposed changes to the language of HB 726 aimed at clarifying the existing language and placing a cap on the percentage of retention that can be withheld in private construction.

HB 726 is currently before the House Commerce Committee. We anticipate that the Committee will vote upon the Prompt Pay Coalition’s recommended changes to HB 726 at its regularly scheduled meeting in May.

Babst Calland will continue to track HB 726 and provide updates on this blog.

Proposed Legislation to Address Utility Delays on Pennsylvania Construction Projects

Proposed Legislation to Address Utility Delays on Pennsylvania Construction Projects

Our firm recently presented to members of the National Utility Contractors Association of Pennsylvania (“NUCA of PA”). The presentation summarized recent testimony offered by NUCA of PA to the Pennsylvania Senate Transportation Committee aimed 1) to educate the Legislature on the delays routinely experienced by contractors as a result of the relocation of a utility company’s facilities located within public rights-of-ways on state road, bridge, and utility construction projects and 2) to offer potential solutions to help minimize delays and reduce the costs of such delays.  The focus of the testimony was to address 1) delays that result from a utility company’s mismarking or failure to disclose utility lines in response to a Pennsylvania One Call request and 2) delays by utility companies in relocating facilities that must be moved to allow construction to proceed.  Given the tremendous cost impacts to contractors that experience delays to their construction projects resulting from the delays described above, NUCA of PA is seeking legislative action which would provide avenues of recourse for recovery of their costs by contractors.  Several potential solutions were addressed.  One solution calls for revisions to Pennsylvania’s Underground Utility Line Protection Act, known as the Pennsylvania One Call Law, 73 P.S. §§ 176, et seq.  A second solution seeks the creation of a statutory negligent misrepresentation claim against utility companies which would essentially expand the Supreme Court of Pennsylvania’s Bilt-Rite ruling.  A third solution would provide financial incentives to utility companies that perform their locating and relocating work in a timely manner.  Finally, a discussion centered upon making provisions such as those found in PennDOT’s Form 408 Specifications, relating to both differing site conditions and utility delays, mandatory for all construction projects in Pennsylvania.

NUCA of PA is seeking suggestions and prior experiences from contractors to share with legislators and lobbying consultants in its effort to enact legislation which would benefit contractors throughout the Commonwealth.  Please feel free to share those suggestions and stories with Richard Saxe or you can contact NUCA of PA’s Executive Director, Brenda Reigle, directly at ed@nucapa.org or (717) 234-8055.

Proposals Submitted to PennDOT for CNG Fueling Station P3 Project

Proposals Submitted to PennDOT for CNG Fueling Station P3 Project

On January 4, 2016 the three shortlisted proposers competing to enter into a public-private partnership (a “P3”) with the Pennsylvania Department of Transportation (“PennDOT”) submitted their proposals.  The award of the P3 contract, which calls for constructing 27 compressed natural gas (“CNG” fueling stations) along the Commonwealth’s public highways as well as making modifications to transit agencies’ vehicle maintenance and storage facilities, is expected to come sometime in February or March of 2016.

The goals and objectives of the Project include

  • Providing cost-effective CNG fuel availability to enable transit fleets to switch from diesel and gasoline to CNG;
  • Achieving operational cost savings for transit agencies;
  • Reducing greenhouse gas emissions;
  • Providing retail CNG fueling to the public (where feasible); and
  • Establishing consistency between transit agencies for the deployment of CNG fueling infrastructure.

To accomplish those goals and objectives PennDOT is seeking a private partner that will make the necessary utility upgrades, compress gas and make it available for fueling for transit agencies and third parties, and operate and maintain fueling stations.  The private entity will be compensated for its capital and operational costs but will be subject to PennDOT for liquidated damages in the event it fails to perform and will pay royalty payments to PennDOT based on third party sales of CNG.

As of October 2015, twenty three regional transit agencies opted into the CNG program and were divided into three tiers (Tier 1 includes five transportation agencies, Tier 2 includes seven transportation agencies, and Tier 3 includes eleven transportation agencies).  CNG facilities for Tier 1 agencies have completion deadlines between fall 2016 and spring 2017, CNG facilities for Tier 2 agencies have completion deadlines between spring and summer 2017, and CNG facilities for Tier 3 agencies have completion deadlines between fall 2017 and spring 2021.

More information about the CNG Fueling Station P3 Project, including a list of the shortlisted proposers and their partners, can be found by visiting PennDOT’s CNG Fueling Station website.

West Virginia Amends Public Project Change Order Process then Adopts Emergency Rule Restoring Previous Process

West Virginia Amends Public Project Change Order Process then Adopts Emergency Rule Restoring Previous Process

On July 1, 2015, amendments to West Virginia’s laws governing public construction took effect.  Among the changes ushered in by those amendments was a new requirement that all change orders for public construction be approved by the Purchasing Division of the West Virginia State Government before the contractor could begin the change order work.  Unfortunately, because of the bureaucracy and related delays necessary to obtain approval of a change order by the Purchasing Division, the amended legislation effectively required lengthy stoppages of work on active construction sites and had the potential to result in costly and unfeasible delays at the expense of taxpayers.  Accordingly, less than a month the amendments took effect, on July 31, 2015, West Virginia Secretary of State Natalie Tennant signed Decision 8-15 approving an emergency rule clarifying that change orders related to government construction contracts do not require prior approval from the Purchasing Division.

Accordingly, after the issuance of the emergency rule, the procedure for change orders on public projects has returned to the status quo – public agencies are colored with the authority to approve change orders on behalf of the State but are required to file construction change orders with the Purchasing Division “in a timely fashion.”

A copy of the emergency rule, which includes a revised version of Title 148, Series 1 (i.e. the “Legislative Rule” governing public procurement in West Virginia) may be found here.

Pennsylvania Supreme Court Grants Appeal of Decision Holding Individual Owner of an LLC May Not Be Liable for CASPA Damages

Pennsylvania Supreme Court Grants Appeal of Decision Holding Individual Owner of an LLC May Not Be Liable for CASPA Damages

The Pennsylvania Supreme Court recently granted allowance of appeal of the Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC case that we blogged about in February of this year.  As described more fully in our prior blog post, in Scungio Borst, the Superior Court of Pennsylvania (i.e. the intermediate level court) held that Robert DeBolt, the President and 50% shareholder of 410 Shurs Lane Developers, LLC did not qualify as an “owner” as defined in Pennsylvania’s Contractor and Subcontractor Payment Act (“CASPA”), and therefore, could not be held personally liable for sums that the 410 Shurs Lane Developers, LLC failed to pay to a general contractor.

On July 28, 2015, however, Pennsylvania’s highest Court agreed to hear an appeal of that decision.  The Court summarized the issue before it as follows:

Did the lower court commit an error of law or abuse its discretion in granting summary judgment to [Robert] DeBolt under [the Contractor and Subcontractor Payment Act (“CASPA”), 73 P.S. §§ 501 et seq.], where: (a) CASPA makes the owner [(410 Shurs Lane Developers, LLC)] and the “agent of the owner acting with the owner’s authority” (DeBolt) liable to contractors such as [Petitioner], (b) DeBolt is a fifty percent owner of [410 Shurs Lane Developers], (c) [Petitioner] consistently dealt with DeBolt and received his authorizations for change orders, (d) [Petitioner] never received payment for the change orders, and (e) [Petitioner’s] construction of CASPA is consistent with the courts’ construction of the Wage Payment and Collection Law[, 43 P.S. §§ 260.1et seq.]?

Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC, No. 30 EAL 2015, 2015 WL 4545986, at *1 (Pa. July 28, 2015) (alterations in original).

While it is still far too early to tell how the Pennsylvania Supreme Court will answer the above question, the mere fact that the Court agreed to hear the appeal – a discretionary act that the Court exercises for only a select few cases every year – raises concerns that individuals possessing a significant ownership interest the corporation or limited liability company may become personally liable for the CASPA damages for unpaid change orders that they authorize on behalf of the corporation or limited liability company in which they hold a significant ownership interest.

Babst Calland will continue to monitor the Scungio Borst case and will post updates on its Construction Law Blog as they become available.

 

American Arbitration Association Revises Rules for Construction Arbitration

American Arbitration Association Revises Rules for Construction Arbitration

On July 1, 2015 the American Arbitration Association (“AAA”) issued revisions to its Construction Arbitration Rules and Mediation Procedures intended to address preferences of users for a more streamlined, cost-effective, and tightly managed arbitration process.  The AAA’s press release announcing the rule amendments, which became effectively immediately, states that the changes “reflect what the [AAA] learned from focus groups conducted across the country” structured to “ensure that all industry sectors had the opportunity to provide input.”

Perhaps the most significant change to the rules is the new “mediation step”, which provides subject to any party opting out, all cases with claims that exceed $100,000 must proceed to mediation at some point during the arbitration.  The new mediation step rule requires mediation in accordance with the AAA’s Construction Mediation Procedures and provides that unless specifically agreed to by all parties, the mediator may not be appointed as an arbitrator in the case.  According to the AAA, the mediation step is a “novel approach” to dispute resolution “intended to further assist the parties with the quick and economical resolution of their disputes.”

The amendments also include a new rule regarding a “Preliminary Management Hearing” that generally should take place very soon after the arbitrator is appointed.  The purpose of the hearing is to allow the parties and the arbitrator to “discuss and establish a procedure for the conduct of the arbitration that is appropriate to achieve a fair, efficient, and economical resolution of the dispute.”  The parties and the arbitrator have the option of conducting the preliminary management hearing in person or telephonically.

Other changes brought about by the amendments give the arbitrator a greater degree of control over the discovery process, the power to impose sanctions upon parties that fail to comply with the mandates of the arbitrator and the ability to allow parties to file dispositive motions.  Finally, the amendments contain a new mechanism that will allow the AAA to appoint an emergency arbitrator within one day to rule upon requests for emergency relief (but only for claims arising from contracts entered into on or after July 1, 2015) and contain time limits and filing requirements intended to streamline the consolidation and joinder processes.

More information about the AAA’s changes to its Construction Arbitration and Mediation Processes is available on the AAA’s website.

 

Proposed Amendment to Mechanics’ Lien Law Seeks to Give Architects Lien Rights in Pennsylvania

Proposed Amendment to Mechanics’ Lien Law Seeks to Give Architects Lien Rights in Pennsylvania

Representative Dan Truitt, a Republican serving part of Chester County, Pennsylvania, recently proposed as House Bill 430 legislation that seeks to amend the Pennsylvania’s Mechanics’ Lien Law of 1963 (i.e. the current and applicable mechanics’ lien law, hereinafter referred to as the “Lien Law”) to add “architect, engineer, or other licensed design professional” to the definitions of “contractor” and “subcontractor” that have mechanics’ lien rights.

Under the Lien Law, a mechanics’ lien may only be maintained for payment of debts due by the owner to a “contractor” or by a “contractor” to any of his “subcontractors”. 49 P.S. § 1301.  As of the date of this blog post, the definitions section of the Lien Law defines “contractor” to include “an architect or engineer who, by contract with the owner, express or implied, in addition to the preparation of drawings, specifications and contract documents also superintends or supervises any such erection, construction, alteration or repair.”  49 P.S. § 1201.  The definitions section also states that the term “subcontractor” does not include “an architect or engineer who contracts with a contractor or subcontractor….”  Id. 

Thus, under the current law,  architects only have mechanics’ lien rights if they supervise or “superintend” onsite work for the construction project.  By amending the definitions of “contractor” and “subcontractor” to expressly include architects, engineers and other design professionals, House Bill 430 stands to remove the requirement that design professionals must perform onsite work to have mechanics’ lien rights, thereby significantly expanding what were previously very limited mechanics’ lien rights for design professionals.

House Bill 430 is currently before the House’s Labor and Industry committee.  Babst Calland will continue to monitor the Bill’s status and will post updates on this blog when applicable, so check back often.

Skanska and Massaro Opening New Offices in Western and Central PA

Skanska and Massaro Opening New Offices in Western and Central PA

In exclusive April 14, 2015, article, the Pittsburgh Business Times reported that Skanska, a Swedish construction company that ranks as the world’s seventh largest, is opening a new office in Pittsburgh.  The construction giant will occupy approximately 8,000 square feet of commercial space at 11 Stanwix Street in Downtown Pittsburgh.  It remains to be seen what types of projects the company will pursue.

In construction industry news, the Pittsburgh Business Times is also reporting that O’Hara Township based Massaro Corp. is opening an office for its construction management business in Bellefonte, Centre County, Pennsylvania.  The office will be located near the Centre County Courthouse and is intended to allow the company to serve its customer base in central Pennsylvania.

Pennsylvania Supreme Court Confirms That Only Clients and Patients of Professionals Need a Certificate of Merit

Pennsylvania Supreme Court Confirms That Only Clients and Patients of Professionals Need a Certificate of Merit

The Pennsylvania Supreme Court recently issued its opinion in Bruno v. Erie Insurance Company holding that the Pennsylvania Rule of Civil Procedure requiring a certificate of merit to pursue a negligence claim against a licensed professional in their professional capacity only applies to clients or patients of the licensed professional.  Although certificates of merit are most common in medical malpractice cases, prior to the Bruno decision, many construction attorneys believed that the Pennsylvania Rules of Civil Procedure required a contractor seeking to pursue a Bilt-Rite claim against a design professional (essentially a claim that the plans issued by the design professional (either an architect or an engineer) constituted a negligent misrepresentation upon which the contractor reasonably relied) to obtain a certificate of merit in support of its claim.  However, following Bruno, it is now clear that contractors need not obtain a certificate of merit in support of a Bilt-Rite claim because the contractor is not the design professional’s client.

OSHA update: New Reporting Requirements Started January 1, 2015

OSHA update: New Reporting Requirements Started January 1, 2015

Beginning January 1, 2015, there was a change to what covered employers are required to report to the Occupational Safety and Health Administration (“OSHA”). Employers will now be required to report within 24 hours: (1) all in-patient hospitalizations (even for just one employee, as opposed to the current 3-employee hospitalization rule); (2) amputations, and (iii) losses of an eye. The 24 hour notice begins when the employer first learned of the work related incident.

In-patient hospitalization is defined as “formal admission to the impatient service of a hospital or clinic for care or treatment.”  Employers do not have to report an inpatient hospitalization if it was for diagnostic testing or observation only. Additionally, employers do not have to report the events listed above if the event resulted from a motor vehicle accident on a public street or highway. Employers must only report the event if it occurred in a construction work zone.  Read more about the new changes and reporting requirements here.

 

 

Labor and Employment Professor’s Study Shows that the Marcellus Shale has Boosted the Construction Industry

Labor and Employment Professor’s Study Shows that the Marcellus Shale has Boosted the Construction Industry

According to a report in the Pittsburgh Business Times, Robert Bruno, a labor and employment relations professor at the University of Illinois at Urbana-Champaign, has determined that the shale fields in Western Pennsylvania, Eastern Ohio and Northern West Virginia are a strong job growth engine that have provided work for between 36,320 and 45,400 construction jobs between 2008 and 2014.  The Pittsburgh Business Times quotes Mr. Bruno’s study, saying “An examination of national and relevant state employment data for the construction industry indicates that but for natural gas projects, the [Western Pennsylvania, Eastern Ohio and Northern West Virginia] region would have experienced substantially higher incidences of construction industry job displacement.”

The full Pittsburgh Business Times article about Professor Bruno’s study is available here.

Pennsylvania Department of Transportation Announces New P3 Project to Construct 37 CNG Fueling Stations

Pennsylvania Department of Transportation Announces New P3 Project to Construct 37 CNG Fueling Stations

On September 29, 2014, the Pennsylvania Department of Transportation (“PennDOT”) issued a press release announcing that the Pennsylvania Public-Private Partnership (“P3″) Board approved a project seeking a private partner to design, build, finance, operate and maintain compressed natural gas (“CNG”) filling stations at as many as 37 transit facilities throughout the state.  According to PennDOT, the CNG filling stations must be designed to provide CNG for public transportation vehicles as well as for private parties with CNG vehicles.  Once the fueling stations are build and operating, PennDOT will retain an unspecified portion of the fuel sales revenue for use in future capital projects.  The rest of the fuel sales revenue will presumably go directly to the private partner.

The press release indicates that PennDOT will soon issue a Request for Qualifications to solicit interested parties and that PennDOT expects to invite qualified teams to submit proposals as early as next year, with a project team selection coming as early as summer 2015.  Additional information regarding the P3 CNG Fueling Station Project is available at Pennsylvania’s P3 website.

New Jersey OSHA Instructor Pleads Guilty to Selling False OSHA 30 30 Certifications, Faces up to 5 Years in Prison

New Jersey OSHA Instructor Pleads Guilty to Selling False OSHA 30 30 Certifications, Faces up to 5 Years in Prison

On September 10, 2010, Frederick T. Prinz, an New Jersey based Occupational Safety and Health Administration (“OSHA”) instructor pleaded guilty to selling false OSHA 30 Hour cards to New Jersey construction workers.  Mr. Pritz’s actions qualify as a felony, and he now faces up to five years in prison and as much as a $250,000 fine.  Court documents indicate that Mr. Printz will receive his sentence on December 10, 2014.

An OSHA 30 Hour card certifies that the card holders completed 30 hours of OSHA regulations and standards training and may only be issued by a certified OSHA instructor to individuals who complete one of OSHA’s Outreach Training Program classes and pass a test.  According to documents filed by prosecutors with the United States Federal Court for the District of New Jersey, Mr. Frintz became certified to conduct OSHA Outreach Training Program classes and then, for a period spanning February 2011 through July 28, 2012, Mr. Prinz issued authentic OSHA 30 Hour cards to construction workers in New Jersey that had neither taken nor passed the OSHA required safety courses.  The Philadelphia Business Times has reported that Mr. Frintz sold more than 100 the false OSHA 30 Hour cards, charging a fee between $150 to $250 for each card.

Reports Indicate Construction Activity Starts Down Significantly in First Half of 2014

Reports Indicate Construction Activity Starts Down Significantly in First Half of 2014

Recent economic data suggests that construction starts are down significantly over the first half of the 2014 calendar year.  According to the Tall Timer Group, as reported by the Pittsburgh Business Times, housing starts are down 37.3% and non-residential construction is down 29.4% during the first half of 2014.  Much more information about the sluggish construction numbers for the beginning of this year may be found by following this link to a blog post about the subject found on Building Pittsburgh, a blog operated and maintained by the Tall Timber Group’s president, Jeff Burd.

Pennsylvania Amends Mechanics’ Lien Law to Protect Home Owners from Double Jeopardy and Clarify Priority Given to Open Ended Mortgages

Pennsylvania Amends Mechanics’ Lien Law to Protect Home Owners from Double Jeopardy and Clarify Priority Given to Open Ended Mortgages

On July 9, 2014, Governor Tom Corbett signed into law legislation amending Pennsylvania’s Mechanics’ Lien Law of 1963 (the current Mechanics’ Lien Law in Pennsylvania).  The stated primary purpose of the amendments is to protect homeowners who pay the prime contractor(s) that perform improvements to their residential property from mechanics’ liens of subcontractors that the prime contractor fails to pay.  The amendments accomplish this by eliminating a subcontractor’s right to a mechanics’ lien on residential property if: (1) the owner or tenant pays the full contract price to the prime contractor; (2) the property is to be used as the residence of the owner or a tenant of the owner; and (3) the residential property consists of one or two dwelling units.

Although this new law will likely be viewed as good public policy for owners, it potentially hurts the subcontractor or supplier who did not contract with the owner. Typically, subcontractors and material suppliers do not know if or when an owner makes payment to a general contractor. As such, mechanics’ liens can be effective tools for subcontractors and suppliers to obtain payment on a project when a general contractor absconds with the owner’s payment.

Now, subcontractors and suppliers must manage their projects and accounting more closely than ever before. Failure to do so could leave the subcontractor or supplier with no legal recourse after it financed a project to completion.

The amendments also clarify and significantly expand the definition of “costs of construction” as the term is used in the Mechanics’ Lien Law.  Specifically, the amendments define “costs of construction” as

all costs, expenses, and reimbursements pertaining to erection, construction, alteration, repair, mandated off-site improvements, government impact fees and other construction-related costs, including but not limited to, costs, expenses, and reimbursements in the nature of taxes, insurance, bonding, inspections, surveys, testing, permits, legal fees, architect fees, engineering fees, consulting fees, accounting fees, management fees, utility fees, tenant improvements, leasing commissions, payment of prior filed or recorded liens or mortgages, including mechanics liens, municipal claims, mortgage origination fees and commissions, finance costs, closing fees, recording fees, title insurance or escrow fees, or any similar or comparable costs, expenses or reimbursements related to an improvement, made or intended to be made, to the property.

The definition is especially notable because it brings legal fees, accounting fees, and other “soft costs” that are typically not considered recoverable as part of a mechanics’ lien within the definition of “costs of construction.”  Unfortunately, however, this expanded definition may have little or no impact for contractors and subcontractors performing work within the Commonwealth because the term “costs of construction” only appears in the the section of the Mechanics’ Lien Law related to the priorities given to mortgages on the property being improved.

Specifically, following the amendments, open-ended mortgages will only receive priority over a mechanics’ lien if at least 60% of the proceeds from the mortgage “are intended to pay or are used to pay all or part of the costs of construction.”  Thus, while the amendments define “costs of construction” very broadly, that broadly defined term may have a very limited impact on the substantive rights the Mechanics’ Lien Law provides to contractors and subcontractors performing work within the Commonwealth because the term is not used to describe those things that an contractor or subcontractor may include in its lien.

Nevertheless, the inclusion of such a broad definition of “costs of construction” in the Mechanics’ Lien Law may open the door for parties to argue that their mechanics’ lien claims should include damages that were once thought to be well outside those that could be included in a mechanics’ lien claim.

The amendments took effect September 7, 2014, and will apply to any lien perfected on or after September 7, 2014 regardless of when the construction giving rise to the lien commenced.

 

Pennsylvania Construction Job Growth Ranks Fourth Highest

Pennsylvania Construction Job Growth Ranks Fourth Highest

The Pittsburgh Business Times, citing an analysis of Labor Department Data performed by the Associated General Contractors of America, recently reported that over the past twelve months, the Commonwealth of Pennsylvania has experienced the fourth highest amount of construction job gains.  According to the Pittsburgh Business Times, over the past year, Pennsylvania has experienced a 4.3% increase in construction jobs.  This increase translates to the addition of approximately 9,800 construction jobs within the Commonwealth.

Although 39 of the 50 states experienced construction job gains, the Labor Department data suggests that the construction industry is far from fully recovering from the recent economic downturn.  In fact, according to the Pittsburgh Business Times article, only North Dakota is now adding construction jobs at a rate above prior peaks in job growth percentages.  The full Pittsburgh Business Times article is available here.

Babst Calland Attorneys Publish Article on Public-Private Partnerships

Babst Calland Attorneys Publish Article on Public-Private Partnerships

The February/March 2014 edition of Foundation Drilling Magazine features an article written by Babst Calland attorneys Richard D. Kalson and Marc J. Felezzola entitled “P3:  The Future of the Construction Industry?”  The article discusses the growing popularity of public-private partnerships as an alternative means for public construction and the most common public-private delivery methods.

Foundation Drilling Magazine is published by the International Association of Foundation Drilling.  For more information regarding Foundation Drilling Magazine, including how to obtain a copy of the February/March 2014 edition of Foundation Drilling Magazine containing the article referenced above, please visit the International Association of Foundation Drilling’s website or contact one of the article’s authors via the links provided above.

PennDOT Shortlists Four Teams for its Rapid Bridge Replacement P3 Project

PennDOT Shortlists Four Teams for its Rapid Bridge Replacement P3 Project

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:

  1.  Plenary Walsh Keystone Partners: Plenary Group, The Walsh Group, Granite Construction Company, HDR Engineering, HNTB Corporation and Infrastructure Corporation of America
  2. Keystone Bridge Partners: InfraRed Capital Partners, Kiewit, Parsons, The Allan A. Myers family of companies, DBi and American Infrastructure;
  3. Commonwealth Bridge Partners: John Laing Investments, Fluor, American Bridge Company, Traylor Bros. Inc., Joseph B. Fay Co., STV Incorporated and Infrastructure and Industrial Constructors;
  4. 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.

 

 

Construction Industry Employment Reaches Highest Level Since June of 2009

Construction Industry Employment Reaches Highest Level Since June of 2009

According to the most recent government data as reported by the Associated General Contractors of America (the “AGC”), construction employers added 15,000 workers to payrolls in February despite harsh winter weather throughout much of the nation.  Those additions have pushed the construction industry employment to the highest level since 2009.  The largest area of growth remains residential construction; however, over 50,600 non-residential jobs have been added over the last twelve months.

The AGC also reports that the unemployment rate for workers actively looking for jobs and last employed in construction declined from 15.7% in February of 2013 to just 12.8% last month.  This unemployment rate is the lowest since 2008 and represents a significant decrease from February of 2010, when it reached 27.1%.

The AGC’s most recent construction industry employment report provides another indication that the construction industry continues to recover from the economic downturn.  The AGC’s full report is available here.

Ohio Rules Drafted for Construction of Well Sites

Ohio Rules Drafted for Construction of Well Sites

The Ohio Department of Natural Resources has drafted, for public comment, rules concerning well site construction.  The current draft requires submission of an application along with a set of detailed drawings, a sediment and erosion control plan, a dust control plan, a geotechnical report and a storm water hydraulic plan.  Babst Calland has more on the draft.

Construction Employment in Pittsburgh Grew in 2013, but Fell Overall for Pennsylvania

Construction Employment in Pittsburgh Grew in 2013, but Fell Overall for Pennsylvania

A report analyzing data from the Department of Labor posted on the Associated General Contractors of America’s website indicates that while construction employment for the Commonwealth of Pennsylvania fell by 3% in 2013, construction employment for the Pittsburgh region increased by a slight margin of 0.4%.

According to the figures in the report, which is available here, statewide construction employment in Pennsylvania dropped from 225,000 jobs in December 2012 to 217,800 in December 2013.  However, despite this overall loss of 7,200 jobs in the Pennsylvania construction industry during the 2013 calendar year, the data shows that the Pittsburgh region actually added 200 construction jobs, increasing its overall number of jobs 52,900 to 53,100 over that same time period.

Perhaps even more encouraging than the data about the Pittsburgh region, is the data from the neighboring Steubenville-Weirton, Ohio-WV region which topped the list in terms of percentage of growth, posting a growth of 31%.  However, because Steubenville is a relatively small market, its 31% growth represents an addition of only 500 construction related jobs – a number equal to the total jobs added by Pittsburgh’s neighboring market to the north in Erie.

Overall, the jobs data remains promising, with construction employment growing in 192 metro areas, remaining static in another 63, and declining in 84.  The Associated General Contractors of America’s chief economist, Ken Simonson, attributed much of the growth to the increased demand for apartment and single family housing, noting that private residential construction spending increased by 18% in 2013, while public sector spending decreased by 1% over the same time period.  Mr. Simonson remained even more optimistic about the future, stating that an unusually cold or snowy December in many regions may have artificially held employment data down, and with the weather and economy both likely to improve soon, even more areas should post employment gains in the coming months.  The Associated General Contractors of America’s press release, including quotes from Mr. Simonson, is available here.

Babst Calland will continue to monitor the construction industry economic reports, so please check back often for updates.

Allegheny County Could have as Many as 60 Bridges Constructed as Public-Private Partnership Projects

Allegheny County Could have as Many as 60 Bridges Constructed as Public-Private Partnership Projects

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.

Third Extension for Ethane Cracker Plant

Third Extension for Ethane Cracker Plant

Once again, Shell and Horsehead have extended their land option agreement for Horsehead’s zinc smelter in Beaver County, the site for Shell’s potential cracker.  This is the parties’ third extension.  Read more on this topic at Babst Calland’s Shale Energy Law Blog.

 

 

More Positive Data from the Economic Industry

More Positive Data from the Economic Industry

Recent economic data suggests that the construction industry is continuing to pull itself out of the recent economic downturn.  For example, the Associated General Contractors of America (the “AGC”), citing a data released by the Census Bureau, is reporting that construction spending increased by 5.9% between November 2012 and November 2013 despite negative growth in public sector construction.  The AGC is also reporting that construction employment increased in 211 out of 339 metro areas between November 2012 and November 2013 and that the largest percentage gain occurred in the Steubenville, OH/Weirton, WV area (posting a 29%, or 500 job increase).

This data suggests that the construction industry continues to rebound and paints a positive picture for private sector construction as we start 2014.

United States Supreme Court Delcares Choice of Forum Clauses Enforceable

United States Supreme Court Delcares Choice of Forum Clauses Enforceable

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.

Update on Shell’s Ethane Cracker Plant

Update on Shell’s Ethane Cracker Plant

Shell, which has indicated that it will decide next year whether to build a cracker in Beaver County, continues to negotiate land deals with businesses and residents in areas surrounding Horsehead’s zinc smelting plant in Monaca Borough, the site for the potential cracker.   Read more from the Pittsburgh Post Gazette.

Data Indicates that the Construction Industry Unemployment Hit a Six-Year Low in September

Data Indicates that the Construction Industry Unemployment Hit a Six-Year Low in September

According to a press release issued by Associated General Contractors of America, an analysis of the most recent government data indicates that employment in the construction industry rose by 20,000 jobs in September, and the industry’s unemployment rate dipped to 8.5%, a new six-year low.  In fact, the 8.5% unemployment rate marks a considerable improvement from the 11.9% unemployment rate for the industry just twelve months prior.  Additionally, construction spending increased for the fifth consecutive month in August.

Although all of this data paints a very positive picture of the construction industry overall, public construction remains a sector in decline.  The Associated General Contractors of America warned the data it analyzed predates the federal government shutdown, which may result in weaker industry spending numbers and hiring gains next month, and certainly will produce lower public construction figures.  Additionally, the pre-shutdown numbers still indicate that while overall construction spending increased, public spending remains down nearly 2% from the previous year.

The full press release from the Associated General Contractors of America is available here.

Federal Government Shutdown Having Limited Affect on Federal Highway Administration Construction, but Affecting Federal Contract Solicitation and Awards

Federal Government Shutdown Having Limited Affect on Federal Highway Administration Construction, but Affecting Federal Contract Solicitation and Awards

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.

Association of General Contractors’ Website Has Resource Center for Contractors Affected by Government Shutdown

Association of General Contractors’ Website Has Resource Center for Contractors Affected by Government Shutdown

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.

 

New Law Removes Cap on Set-Asides for Contracts with Women-Owned Small Business

New Law Removes Cap on Set-Asides for Contracts with Women-Owned Small Business

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.

 

Report Indicates that the Average Construction Dispute Costs Nearly $11k

Report Indicates that the Average Construction Dispute Costs Nearly $11k

A recent article in the Engineering News-Record details a report titled “The Interpersonal Cost of Conflict in Construction” issued by the Center for Construction Research and Training.  The report reviewed and analyzed 41 conflict incidents that arose on various construction projects and determined that each conflict resulted in an average of 161.25 hours (or approximately 20 days) of lost time due to managing the conflict.  The report also indicated that the average cost of a cost of each conflict was $10,948.00.  Finally, the report determined that the primary trigger of conflicts attributed to interpersonal issues is most often actually an issue stemming the construction process.

This report emphasizes the importance of coordination between the various trades and the need for open communication between the contractors and subcontractors on a project.  Based upon this report, it is clear that proper coordination and planning of the construction process can result in a considerable savings in the form of avoidance of costly and time-consuming conflicts.

The entire Center for Construction Research and Training report may be accessed by following this link.  The ENR article summarizing the report is available here.

ENR Reports that Construction Unemployment Rate Hits Four Year Low

ENR Reports that Construction Unemployment Rate Hits Four Year Low

The Engineering News-Record, citing statistics released by the Bureau of Labor Statistics, is reporting that the national unemployment rate for the construction industry dropped below 10% for the first time since September of 2008.  This marks a decrease in construction unemployment by 3% from June of last year, and 1% from the end of May, 2013.  Although all construction sectors gained jobs over the past month, the most dramatic increase is said to have come in the specialty trade contractors sector, which added approximately 7,200 jobs in June.  More information and statistics regarding the current construction unemployment rate can be found on the Engineering News-Record’s website.

Job Growth

Job Growth

According to ENR, the construction industry, as a whole, added 7,000 jobs in May.  Likewise, 4,900 jobs were added in the fields of architecture and engineering.  Read more here.

Pipeline Construction Continues In Region

Pipeline Construction Continues In Region

Rockford Corporation, a subsidiary of Primoris Services Corporation, has announced awards of five pipeline construction projects valuing approximately $92 million.  Four of the five projects will be located in Pennsylvania and/or West Virginia.  All of the projects are scheduled to be completed this year.  Read more about the company’s announcement here.

Engineering News-Record Releases Very Positive Second Quarter Costs Report

Engineering News-Record Releases Very Positive Second Quarter Costs Report

The June 24/July 1 double issue of the Engineering News-Record (“ENR”) contains a very positive cost report for the second quarter of 2013.  According to ENR, the construction industry confidence index climbed another four points to close at a 69 out of 100 points, and perhaps more importantly, ENR’s survey of 310 executives of large construction and design firms revealed that most believe that all construction market sectors are in growth mode.  In addition to industry confidence, the report contains detailed economic data on changes in construction materials prices and inflation rates as well as average paycheck information for construction professionals.  ENR’s second quarter costs report is available for download from its website.

United States Supreme Court to Hear Case Regarding Enforceability of Forum Selection Clauses

United States Supreme Court to Hear Case Regarding Enforceability of Forum Selection Clauses

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.

Much Anticipated Decision Clears the Way for Continued Shale Gas Development

Much Anticipated Decision Clears the Way for Continued Shale Gas Development

The Supreme Court of Pennsylvania issued a decision earlier this week reaffirming the distinction between the words “gas” and “minerals” as those words are used in private conveyances of land.  In Butler v. Powers, the Court made clear a reservation of “minerals” does not include the right to natural gas, unless the word “gas” was expressly stated in the reservation.  The practical effect of the Court’s decision is Marcellus Shale development will continue, i.e., the decision did not unravel the plethora of leases pursuant to which natural gas is being developed in the region.  Babst Calland has more on the decision here.

Interesting Study on Green Building

Interesting Study on Green Building

McGraw-Hill Construction has released a study examining trends – including global growth trends – in green building.  Historically, owners built green because they were environmental stewards; today, however, other business factors, including lower operating (e.g., energy) costs, are drivers.  Green building, the study continues, is becoming an industry standard.  ENR has more.

Pennsylvania to contribute $15 million to infrastructure improvements near Civic Arena site in Pittsburgh

Pennsylvania to contribute $15 million to infrastructure improvements near Civic Arena site in Pittsburgh

The Corbett administration has committed $15 million for the construction of infrastructure improvement at the former 28-acre Civic Arena site, where work is expected to start this summer.  $5 million is being released immediately, which will allow The Sports & Exhibition Authority of Pittsburgh and Allegheny County to begin work on roads and utilities as early as July 2013 as part of an office and residential development proposed by the Pittsburgh Penguins.  Read more here.

Good News for the Construction Industry in February’s Employment Report

Good News for the Construction Industry in February’s Employment Report

According to the February jobs report, released today by the Labor Department’s Bureau of Labor and Statistics, the United States economy added 236,000 jobs in the month of February, lowering the unemployment rate to 7.7%.  The Construction industry was one of the largest contributors to job growth– adding 48,000 new jobs in the month of February alone. You can find the report at http://www.bls.gov/news.release/pdf/empsit.pdf

Read CNN’s discussion of the February jobs report and the construction industry at http://money.cnn.com/2013/03/08/news/economy/construction-jobs/index.html?iid=SF_E_Lead.