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.

Federal Court in West Virginia Refuses to Enforce Choice of Law Agreement in Construction Contract

Federal Court in West Virginia Refuses to Enforce Choice of Law Agreement in Construction Contract

In Elk River Pipeline LLC v. Equitable Gathering LLC, S.D. W.Va. (2013), the United States District Court for the Southern District of West Virginia determined that West Virginia law governed a dispute between two parties to a construction contract despite the fact that the contract expressly stated that all disputes arising from that contract would be governed by the law of Pennsylvania. A copy of the Elk River decision is available here.

In Elk River, Equitable Gathering LLC (“EQT”) entered into a Master Service Agreement with Elk River Pipeline LLC (“Elk River”) for the construction of a section of pipeline in West Virginia. The Master Service Agreement stated that it would be “construed, interpreted and enforced in accordance with and shall be governed by the laws of the Commonwealth of Pennsylvania, excluding its conflict of law rules.” Despite this language, Elk River contended that West Virginia law should apply to the contract. The Court agreed, holding West Virginia law governs construction of the Master Service Agreement and requires a determination of whether a “substantial relationship” exists with the jurisdiction whose law was selected by the parties. Ultimately, the Court found that the contract did not have a substantial relationship with Pennsylvania, and therefore, the Court refused to enforce the contract’s choice of law provision.

Following the Elk River decision, contractors entering into construction contracts for projects in West Virginia should be careful to ensure that the choice of law provision in that construction contract selects the law of a state that has a substantial relationship with the contract.