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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.