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.
According to Bloomberg Businessweek, presently thirty three (33) states allow some form of private ownership of highways under each state’s public-private partnership statutes. Typically, the private investor’s return is tied to the volume of tolls that can be generated by use of the new road or bridge. However, at least eleven (11) projects have had financial problems since 1995 including bankruptcies, restructurings and credit downgrades. In response some private investors are looking for state-guaranteed returns – which means the risk falls on the state’s taxpayers. So far, at least Florida, Illinois, Indiana and the Port Authority of New York and New Jersey have agreed to financing arrangements where the private investment is guaranteed by the state.
A recent decision by the Pennsylvania Commonwealth Court casts doubt on the “safe harbor” provision of Pennsylvania’s Procurement Code. Section 3939(b) of the Commonwealth Procurement Code provides, “Once a contractor has made payment to the subcontractor according to the provisions of this chapter, future claims for payment against the contractor or the contractor’s surety by parties owed payment from the subcontractor which has been paid shall be barred.” The clear language of this section of the Procurement Code has provided a complete defense to contractors and their sureties on projects to which the Procurement Code applies when payment can be established. However, in Berks Products Corp. v. Arch Ins. Co., No. 1457 C.D. 2012, the plaintiff-claimant on the payment bond issued by defendant-surety claimed that the language of this particular bond was broad enough to effectively waive the protection of section 3939 of the Procurement Code. The Commonwealth Court found that while the “safe harbor” provisions of the Procurement Code are incorporated by operation of law into the bond, the bond language can waive the protection of that statute. In this case the operative language of the bond provided that the bond will remain “in force and effect” until such time as both the principal and any of its subcontractors makes full payment for any labor or materials supplied for the school project at issue. Based on that language the Commonwealth Court concluded that the principal and surety had waived the “safe harbor” protection of section 3939 of the Procurement Code.
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.
A non-precedential opinion issued on November 22, 2013 by the Superior Court of Pennsylvania in Advanced Construction Services, Inc. v. Cumberland Dining Group, Inc.illustrates the importance of strictly complying with the Pennsylvania Mechanics’ Lien Law’s service requirements. In reaching its decision, the Court stated that ” a mechanics’ lien is an ‘extraordinary remedy’ that should only be afforded to contractors or subcontractors who judiciously adhere to the requirements of the Mechanics’ Lien Law.”
Advanced Construction constructed a restaurant for Cumberland Dining Group in a mall in Cranberry, Pennsylvania. The mall was owned by J.J. Gumberg of Pittsburgh. Section 1502 of the Mechanics’ Lien Law requires that the owner is directly served at the owner’s residence or that the owner’s authorized agent in charge is served at any of the owner’s offices or usual place of business. In this instance, the court ruled that the contractor failed to properly serve the owner when it directed the sheriff to serve the mall owner at the address of the restaturant in the mall as opposed to at the owner’s headquarters in Pittsburgh. Directing the sheriff to serve the manager of the restaurant who did not have any connection to the mall owner was insufficient because the contractor failed to serve the mall owner or its authorized agent. Furthermore, the contractor did not demonstrate that the place of service was the mall owner’s office or usual place of business. The deed in question listed the mall owner’s address as its offices in Pittsburgh.
This case is noteworthy as it relates the 2012 ruling from the Superior Court in Bricklayers of Western Pennsylvania Combined Funds, Inc. v. Scott’s Development Co., where the court ruled that the substantive provisions, as opposed to procedural aspects, of the Mechanics’ Lien Law must be liberally construed to affect Lien Law’s remedial purpose. The Advanced Construction Services decision suggests that Pennsylvania court will still strictly enforce the procedural aspects of the Lien Law. Therefore, before filing a mechanic’s lien, claimants must be sure to completely comply with all of the many procedural requirements of the statute including the service requirements.
On October 31, 2013, the Virginia Supreme Court unanimously overruled a lower court’s decision to strike down the Virginia Public Private Transportation Act (“P3”)
In December 2011 the Virginia Department of Transportation (“VDOT”) and Elizabeth River Crossings OpCo, LLC (“ERC”) entered into an agreement pursuant to Virginia’s P3 legislation for the design and construction of a new Midtown Tunnel and the Martin Luther King Freeway Extension. Additionally, the agreement provided for the continual maintenance of the existing Midtown and Downtown Tunnels for 58 years. The total cost for completing the project was estimated to exceed $2.04 billion dollars. To assist in financing the project, the agreement provided for the imposition of tolls. Danny Meeks, along with other users of the Downtown Tunnels, filed a six-count complaint against ERC and VDOT in the Circuit Court for the City of Portsmouth, claiming, in part, that tolls on the Tunnels and MLK Freeway are unconstitutional taxes in violation the Due Process Clause of the Constitution. The Circuit Court ruled in favor of Meeks.
Elizabeth River Crossings OpCo, LLC v. Meeks, The Virginia Supreme Court overruled the lower court decision in a fifty-five page opinion, and held that “the tolls on the Midtown Tunnel, Downtown Tunnel and MLK extension, which are (1) paid in exchange for a particularized benefit, (2) not compelled by government, and (3) collected solely to fund the Project are user fees, not taxes.” You can read the full text of the opinion here.
The American Road & Transportation Builders Association (“ARTBA”), who filed a “friend of the court” brief arguing for the overturn of the lower court’s decision, issued a statement following the Court’s ruling. ARTBA stated, “[t]he ruling represents an unqualified victory for the U.S. transportation construction and Virginia’s P3 community in that it allows work on a major infrastructure improvement project to proceed and preserves the states existing tolling methods. Also, ARTBA hopes the Court’s decision sends a signal that unwarranted challenges to P3 legislation in other states will be overturned in a similarly swift and absolute manner.” You can read the full text of ARBTA’s statement here.
This case will certainly be viewed as a major victory for those in the construction industry who believe the future of highway construction rests with P3 projects.
The construction industry is likely to see an increase in the number of compressed natural gas stations to be built. Babst Calland’s Shale Energy Law Blog has more on the potential trend here.
Transcontinental Gas Pipe Line Company, LLC has applied with the Federal Energy Regulatory Commission for authorization to construct and operate the Leidy Southeast Project which would entail the installation of approximately 30 miles of new 42-inch pipeline and ancillary facilities in Northeastern Pennsylvania and Northern New Jersey. Read more from Babst Calland’s Shale Energy Law Blog.
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.
On October 1, 2013, the Pennsylvania Superior Court issued a precedential opinion holding that when determining whether to apply the 2007 Amendments to the Mechanics’ Lien Law, the key date is the date upon which the lien is filed, and not the dates on which the work was performed.
In Hogg Construction, Inc. v. YorkTowne Medical Center, L.P., 2013 Pa. Super. 263 (2013), Hogg Construction, Inc. (“Hogg”) performed work necessary to “fit-out” a condominium unit connected to the building of the YorkTowne Medical Center, L.P. Hogg substantially completed its fit out work on the condominium unit in question in September of 2006 and last billed any work to the unit on September 17, 2006. However, on November 30, 2006, Hogg returned to the unit and installed an electrical receptacle and replacement smoke detector. Hogg billed its November 30, 2006 work to the job number associated with the construction of the core and shell of the complex rather than to the unit in question.
On April 30, 2007, Hogg filed a Mechanics’ Lien Clam against the condominium fit-out. In February of 2008, Hogg subsequently filed a Complaint upon Mechanics’ Lien at the same docket number where it filed its Mechanics’ Lien Claim. In response, the condominium owners filed a motion to strike the mechanics’ lien and a motion for summary judgment. The trial court granted those motions, holding that because Hogg completed its work in 2006, the 2007 amendments to the Mechanics’ Lien Law, which extended the time frame within which one must file a mechanics’ lien claim from four months to six months from the date of contract completion, did not apply to Hogg. Thus, the trial court determined that Hogg did not timely file its mechanics’ lien within the requisite four month period. The trial court further held that Hogg failed to properly file its complaint to enforce its mechanics’ lien claim because the complaint “was not docketed to a docket number separate and distinct from that of the mechanics’ lien claim.”
On appeal, the Superior Court reversed both holdings of the trial court. First, the Superior Court concluded that when assessing whether the amendments to the Mechanics’ Lien Law apply to a lien, the relevant date is the date upon which the lien is filed, and not the dates upon which the work is performed. Thus, the court concluded that because Hogg’s lien was filed after the amendments took effect, Hogg had six months within which to file its claim. The court based its conclusion upon the fact that the Mechanics’ Lien Law provides that it applies to any lien filed “as provided in this act”, and as such, it is the Mechanics’ Lien Law as it exists on the date of filing of a mechanics’ lien claim that should govern the claim filed.
The Superior Court then reached the issue of whether a complaint to enforce a mechanics’ lien claim must be docketed at a separate docket number than the mechanics’ lien claim it seeks to enforce and held that regardless of whether or not filing both pleadings at the same docket number constitutes a procedural defect, it had no negative affect on the substantial rights of any of the litigants, and therefore should not serve as a basis for striking Hogg’s mechanics’ lien claim. Thus, while it remains somewhat unclear whether filing a mechanics’ lien claim and a complaint to enforce the same at the same docket number constitutes a procedural defect, a party seeking to use any such defect as grounds for striking the mechanics’ lien claim has the burden of establishing that the procedural defect negatively affected its rights.
Finally, the Superior Court concluded that although the facts demonstrated that Hogg did not bill any work to the condominium unit in question after September 17, 2006, viewing the evidence in the light most favorable to Hogg as the non-moving party, a genuine issue of material fact existed regarding whether Hogg’s November 30, 2006 work on the unit was a part of the work required by Hogg’s contract to perform fit-out work. Thus, the court also reversed the trial court’s grant of summary judgment.
The Hogg case is important for several reasons. First, there are currently proposals for additional amendments to Pennsylvania’s Mechanics’ Lien Law pending before the Pennsylvania General Assembly. Should those amendments pass, the Hogg decision may provide guidance regarding how to determine whether or not the new amendments apply to a mechanics’ lien claim. Additionally, Hogg confirms that the general practice of filing one’s complaint to enforce a mechanics’ lien at the same docket as the mechanics’ lien claim should not create grounds for striking that mechanics’ lien claim. Finally, Hogg indicates that regardless of billing documents, it is for the finder of fact to determine the date upon which a contractor last performs work on a project for mechanics’ lien purposes.
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.
Pennsylvania’s Public-Private Partnership (“P3”) Board recently approved three new transportation projects. Two proposals were submitted by private industry, and one project involves a partnership agreement between PennDOT and a third party to quickly replace hundreds of structurally deficient bridges. You can read more about the approved projects here.
To learn more about the P3 projects in Pennsylvania, you can visit PennDOT’s website 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.
According to new research by the Associated General Contractors of America, Pennsylvania added 2,600 new construction jobs in July, which is a 1.8 increase over previous months. The increase places the state in a tie for second in the country for increased construction employment. You can read more about this story in the Pittsburgh Business Times.