On August 27, 2013, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (the “OFCCP”) announced a final rule that makes changes to the regulations implementing Section 503 of the Rehabilitation act of 1973 (“Section 503”), which prohibits employment discrimination against individuals with disabilities. The new rule establishes for the first time a goal for government contractors to have 7% workforce be comprised of individuals with disabilities. This 7% workforce metric is not intended to serve as a quota or a ceiling for employment of individuals with disabilities, but rather “a management tool that informs decision-making and provides real accountability.” Therefore, the OFCCP has declared that failing to meet the 7% workforce utilization goal is not a violation of the regulation and will not result in a fine, penalty or sanction.
The new rule also require government contractors to invite job applicants to voluntarily self-identify as an individual with a disability at a pre-offer stage of the hiring process and to invite incumbent employees to voluntarily self-identify as an individual with a disability on a regular basis. Additionally, the rule requires government contractors to maintain several quantitative measurements and data on the number of individuals with disabilities who apply for jobs and the number of individuals with disabilities they hire. These metrics are intended to produce greater accountability for employment decisions and practices. Another new requirement imposed by the rule is that all prime government contractors must include specific language in their subcontracts that informs and alerts subcontractors about their responsibilities regarding employment of individuals with disabilities as Federal Contractors.
Although the final rule was announced on August 27, 2013, it does not take effect until 180 days after it is published in the Federal Register. The OFCCP expects that publication in the Federal Register will take place sometime within the next two weeks.
A copy of the final rule is available here.
Pennsylvania’s Public-Private Partnership (“P3”) Board has announced that it will consider two unsolicited proposals that it received during the recent unsolicited proposal period. The first proposal that will be considered involves marketing existing structures controlled by PennDOT upon which wireless antennas might be constructed to wireless service providers that may wish to construct wireless antennas on those structures. The other proposal involves replacing PennDOT’s Automated Permit Routing/Analysis System with a “fully functional special hauling analysis, routing and permitting solution that seamlessly enables multi-state permitting for haulers.” The P3 Steering Committee also recommended two unsolicited proposals for Detailed Level Screening.
A full, detailed list of all unsolicited proposals submitted to the P3 Transportation Board is available here.
The Occupational Safety and Health Administration (“OSHA”) has issued a Direct Final Rule updating its regulations on signage standards for construction projects. The new rule updates the 70 year old standards for signage at construction sites by integrating the latest version of the American National Standards Institute (“ANSI”) standards on accident prevention with signs and tags. The goal of the update is to improve workplace safety on construction projects by allowing employers to use the ANSI standards to facilitate safe practices without running the risk of being cited for OSHA violations. A copy of the new rule is available here.
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.
Kinder Morgan Energy Partners LP and MarkWest Utica EMG LLC have announced plans to construct a new natural gas processing plant and pipeline to transport liquids from Ohio, Pennsylvania, and West Virginia to the Gulf Coast region for processing. Babst Calland has more about the project here.
The United States District Court for the Western District of Pennsylvania recently issued an opinion in a diversity action dismissing with prejudice a principal’s claims for tortious interference with a contractual relationship, breach of fiduciary duty and bad faith against its surety.
In Reginella Construction Company, Ltd. v. Travelers Casualty and Surety Company of America, Civ. A. No. 12-1047, 2013 WL 2404140 (W.D. Pa. May 31, 2013), Reginella Construction Company, Ltd (“Reginella”) sued its surety, Travelers Casualty and Surety Company of America (“Travelers”) for breach of fiduciary duty, tortious interference with a contractual relationship and bad faith. The court, however, granted Travelers Motion to Dismiss all claims against Travelers with prejudice.
Regarding Reginella’s breach of fiduciary duty claim, the court looked to Pennsylvania case law regarding sureties, insurers, and commercial guarantees, and concluded that (1) surety bond agreements are standard commercial contracts; (2) imposing a fiduciary duty relationship between parties to a contract is the exception rather than the rule; and (3) a surety is not an insurer. Based upon these conclusions, the court predicted that the Pennsylvania Supreme Court would not find a fiduciary relationship between a surety and its principal. Therefore, the court concluded that Travelers owed no fiduciary duty to Reginella.
The court then turned to Reginella’s tort claims (i.e. its bad faith and tortious interference with a contractual relationship claims) and held that Pennsylvania’s gist of the action doctrine barred Reginella’s ability to assert either claim. Specifically, Pennsylvania’s gist of the action doctrine bars tort claims (1) that arise solely from a contract between the parties; (2) where the duties allegedly breached were created and grounded in the contract itself; (3) where the liability stems from a contract; or (4) where the tort claim essentially duplicates a breach of contract claim or the success of which is wholly dependent on the terms of a contract. The court found that the relationship between Reginella and Travelers was purely contractual in nature, and therefore, the gist of the action contract barred Reginella’s tort claims.
Although the Pennsylvania Supreme Court has not yet ruled upon the issue, Reginella suggests and supports the notion that a principal’s only cause of action against its surety under Pennsylvania law is one for breach of contract. Therefore, pursuant to Reginella, the terms of the contract between a principal and its surety will strictly govern the relationship and obligations between the parties.
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.
In the wake of heightened discussions over transportation funding in Pennsylvania, the Pennsylvania Department of Transportation (“PennDOT”) recently launched a new website titled “Decade of Investment” which illustrates the current state of transportation funding and potential projects that could be funded if a long-term transporation funding bill is passed. Governor Tom Corbett announced his transportation funding plan earlier this year and the State Senate and State House proposing transporation funding bills.
The Decade of Investment website includes an interactive map which allows users to view what projects are currently being funded and what potential projects could be funded if a long-term transportation funding bill is passed. The map also allows users to select counties within the state to see how local areas would benefit from increased funding.
You can link to the Decade of Investment website here.
According to a recent article in the Tulsa Business and Legal News, Williams’ board of directors has approved the development of a natural gas liquids pipeline which will primarily connect supply from the Marcellus and Utica shale formations to the demands of growing petrochemical markets along the Gulf Coast and in the Northeast. Plans for the project include construction of the pipeline, a new fractionation plant and storage facilities. Boardwalk Pipeline Partners is also involved in the project. The companies, which are currently tackling permitting, public consultation and right-of-way acquisition, expect the pipeline to be in service in late 2015.
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.
In I.J. White Corp. v. Columbia Cas. Co., 105 A.D.3d 531, 964 N.Y.S.2d 21 (2013), the New York Supreme Court, Appellate Division, held that an insurer had a duty to defend and indemnify I.J. White, the manufacturer of a freezer system that caused damages to the baked goods of the third party purchaser of the system. Although some courts hold that commercial general liability (“CGL”) policies do not insure against faulty workmanship (reasoning that there is not “accident,” which is what CGL policies are intended to cover), the court found that the damage to the baked goods constituted an “occurrence” under the CGL policy because coverage is provided for harm caused to other property as a result of faulty workmanship, rather than simply damage to the product itself.
This case is instructive on an important distinction made by courts when determining whether an insurance policy provides coverage over claims arising from poor workmanship. Many courts recognize that CGL policies do not provide coverage for faulty workmanship or the mere failure to properly perform a contract. However, when the improper work causes damage to property other than the work product itself, courts often find an “occurrence” that requires the insurer to provide defense and indemnification.
In Pennsylvania, the Supreme Court decision of Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 333, 908 A.2d 888, 898 (2006) is the primary authority on this issue. In Kvaerner, the Court held that claims for faulty workmanship do not constitute an “occurrence” under a CGL policy when the only damage caused is to the work product itself. The Court reasoned that to provide coverage to the insured for faulty workmanship would impermissibly convert a CGL policy into a performance bond. Thus, if a contractor prefers to have insurance coverage for faulty workmanship, it must pay an additional premium for a policy rider, often referred to in Pennsylvania as a “Kvaerner Rider,” to insure against faulty workmanship damages.
In B.N. Excavating, Inc. v. PBC Hollow A, L.P., 2013 PA Super 120 (May 17, 2013), the Pennsylvania Superior Court sitting en banc reached a significant decision regarding whether a mechanics’ lien claim exists for excavation work performed incident to a planned improvement that is never erected. The claimant, B.N. Excavating, completed excavation and other site work in preparation for the construction of two buildings. Despite the completion of claimant’s work, no improvement was ever constructed on the property. Based on this fact, the trial court dismissed the lien claim, finding that Sampson-Miller Associated Companies v. Landmark Realty Co., 303 A.2d 43 (Pa. Super. Ct. 1973) barred lien claims when no improvement ultimately is erected in relation to the work.
Upon review, the Superior Court reviewed the prior cases that have addressed this issue. After a careful examination, the court rejected those cases that interpreted Sampson-Miller to provide a bright-line rule that a lien rights never exists in the absence of a constructed improvement. The court first observed that “nothing in the Mechanics’ Lien Law requires that a structure actually exist” or that construction of the improvement must be completed. Rather, as the court explained, the Lien Law merely requires that excavation must be performed incidental to the erection or construction of an improvement in order to create lien rights.
Moreover, the court found that Sampson-Miller’s perceived requirement that the actual erection of an improvement must occur for lien rights to exist directly conflicts with Section 1305 of the Lien Law, which provides: “Except in case of destruction by fire or other casualty, where, through no fault of the claimant, the improvement is not completed, the right to lien shall nevertheless exist.” Therefore, the Superior Court concluded that B.N. Excavating’s lien rights must “nevertheless exist” even if no structure was ultimately constructed as contended by the owners.
The B.N. Excavating Court also proclaimed that Sampson-Miller unnecessarily restricted the ordinary meaning of the term “incidental.” If the common definition of “incidental” is employed, as the Court explained, the plain language of the Lien Law “simply requires excavation and preliminary groundwork to be connected to a structure and not merely an independent improvement” of land. Thus, the B.N. Excavating Court reasoned that Sampson-Miller’s limited definition of “incidental” erroneously forced the rule that actual construction of the improvement must occur even though the statute does not contain such a requirement.
Based on this analysis, the B.N. Excavating Court held that it remains true that when grading and excavation work is performed independent of a plan to construct an improvement, the Lien Law does not provide claim rights. However, where “excavation is performed as an integral part of a construction plan, the activity falls within [the scope of the Lien Law] regardless of whether a structure is ever erected.” The court also acknowledged that its holding is consistent with the analysis in Dollar Bank, FSB v. EM2 Development Corp., 716 A.2d 671, 673 (Pa. Super. Ct. 1998) in which the court held that a lien attaches when excavation and related site work is performed as part of a “’continuous scheme to erect’ a structure.”
Interestingly, the Superior Court in dicta also remarked on its recent holding in Bricklayers of Western Pennsylvania Combined Funds, Inc. v. Scott’s Development Co., 41 A.3d 16 (Pa. Super. Ct. 2012) (en banc), which jettisoned the long-established rule for strict construction of the Lien Law and proclaimed that a liberal construction should be employed for non-procedural provisions of the Lien Law. The B.N. Excavating Court expressed that the liberal construction standard proclaimed by the Bricklayers Court did not apply to 49 P.S. § 1202(a)(12) because it was adapted from the Mechanics’ Lien Law of 1901 and, according to the statutory comment to Section 1202, was expressly intended to retain the existing decisional law affecting that section under the Lien Law of 1901. The B.N. Excavating Court’s discussion of Bricklayers, however, had no effect on the outcome of the decision because, as the court explained, the holding would be the same whether a liberal or strict construction of the Lien Law was utilized.
With this decision in mind, the best practice going forward for lien claimants involved in failed constructed projects should be to include an express statement in their lien claim that indicates that the work was performed incidental to a planned improvement and as part of a construction plan. By including this express statement, lien claimants will put themselves in the best position to avoid any uncertainty about the existence of lien rights in cases where the improvement was never constructed or completed for reasons unrelated to the claimant’s work.