Womble Carlyle Construction Industry Blog

Following the construction industry and related legal topics in the United States.

Thursday, February 28, 2008

Homebuilders Association’s New Green Building Program: Blue Skies Ahead?

In a February 20, 2008, article, Engineering News-Record reports that the National Association of Home Builders (NAHB) is working with the American National Standards Institute (ANSI) to introduce a new voluntary and flexible green building program that will apply to both new home construction and remodeling projects. According to a home builder in Austin, Texas, "houses will be scored on a point system using a ‘Turbo Tax’ approach after being inspected by third-party verifiers trained by the NAHB Research Center."

NAHB plans to publish the new ANSI green-building standard in April or May 2008. Click here to see the latest draft.

The year-long development process has included government officials, builders and associations. The professional certification program will be open to architects, planners, lenders, suppliers and realtors.

The development of the new green standard was unveiled at the latest International Builders Show, amidst presentations pointing to a precipitous decline in housing starts over the past two years. Seeing a break in the dark clouds, homebuilders report that green-building practices sell homes. In addition to assisting new home sales, NAHB’s new green building standard will also help the industry meet a challenge by the U.S. Department of Energy for builders to produce at least 220,000 green homes by 2012. (This entry published by Ken Michael, a member of Womble Carlyle's construction law practice group).

Sources: ENR, NAHBRC

Tuesday, February 19, 2008

ABA Forum Meets in New York to Discuss New 2007 AIA Contract Documents

On January 31, 2008, the American Bar Association Forum on the Construction Industry (the "Forum") met in New York City to discuss the new 2007 American Institute of Architects ("AIA") Contract Documents. In a widely attended program with close to 1000 attendees present to enjoy the Forum's Midwinter Meeting entitled "The 2007 AIA Documents: New Forms, New Issues, New Strategies", members of the Forum spent the day parsing and dissecting the the 2007 changes to the AIA Contract Documents published by the AIA in November, 2007.

Throughout the day, presenters outlined the changes to the new Contract Documents and even engaged in an entertaining "Point-Counter-Point" debate style presentation regarding the changes made to the A201 General Conditions. After enduring a long, but very substantive, Forum presentation, the take away for this particular attendee was, for the most part, that while the drafters of the new 2007 documents have attempted to address some of the issues that caused concern for design and construction professionals during the period between the 1997 version and the most recent 2007 version of the Contract Documents, many of the problems and vagaries present in the 1997 AIA Contract Documents will endure for at at least another ten years until the 2014 version of the Contract Documents, the next opportunity for the AIA to revise the Contract Documents.

Of all of the changes discussed at the Forum, however, the discussion surrounding the changes to the Consequential Damages provision of the A201 General Conditions struck this attendee as particularly interesting. For starters, other than its new location in Section 15.1.6 of the A201, there was really only one substantive change to this section in 2007; the deletion of the word "direct" from the phrase "liquidated direct damages" in relation to the disclaimer that the mutual waiver of consequential damages does not preclude an award of liquidated [direct] damages under the mutual waiver of consequential damages provision. What I found to be, frankly, hard to believe, was the assertion made by the presenters of this topic that in the ten (10) years from 1997 to 2007 in which the A201 has contained a mutual waiver of consequential damages (there was no such waiver in the previous 1987 version of the A201) there have only been two (2) reported cases to deal with the application of the Consequential Damages provisions contained in the A201 General Conditions. What's more, the cases themselves, Commonwealth v. Cornerstone, Case No. 046-10-101 2006 WL 2567916 (Del. Super. Aug. 31, 2006), and Congress Construction Co., Inc. v. Geer Woods, Inc., Case No. 3:05cv1665, 2005 WL 3657933 (D.Conn. Dec. 29, 2005) really didn't even address or discuss the application of consequential damages in any great detail. In light of the "hot button" status of consequential damages, it is amazing that litigants have, for the last ten years, apparently been able to largely avoid judicial review of this issue.

While the author of this blog has not endeavored to verify the dearth of case law on this subject, I thought this to be one of the most interesting points to come out of the Forum Meeting in light of the amount of time and attention this provision commands in most contract negotiations. While experience suggests that most parties usually agree to include a mutual waiver of consequential damages provision in their construction contracts, the agreement to include the waiver is typically preceded by both sides outlining the doomsday catastrophic results that will occur in the event that the mutual waiver is deleted from the contract. With apparently so few reported cases on this subject it is hard to know whether these predictions hold precedential water. One must also wonder, however, whether and to what extent there have been significant awards of consequential damages during this period that were settled in order to avoid judicial review. Unfortunately, our presenters were not tasked to answer any of these questions.

Another explanation posited in the paper published in connection with the presentation (cited below) is that the drafters of the 1997 A201 achieved their stated objective in drafting the mutual waiver provision; to provide "a clear and unambiguous statement defining consequential damages ... [which] is at once both exact and comprehensive, precise and far-reaching, distinct and inclusive." See Mark J. Heley and Shannon J. Briglia, "Lessons Learned: How 1997 Revisions to A201 Have Fared After 10 Years. Litigation Experience and negotiation tips" at 12 (ABA Forum on the Construction Industry/TIPS Fidelity & Surety Law Committee's Joint Midwinter Meeting - January 2008). While there was no consensus reached at the Forum Meeting as to the reason why so few cases have analyzed the Consequential Damages provision contained in the A201 General Conditions, at least in theory, its inclusion in Section 4.3.10 of the 1997 A201 and the very minimal changes made in new Section 15.1.6 of the 2007 A201, might suggest that some consensus has been reached among design and construction professionals and that this provision is here to stay -- of course, only time will tell. (This entry published by Culley Carson, a member of Womble Carlyle's construction law practice group.)

Sunday, February 10, 2008

Collaborative Project Delivery

One of the new ConsensusDOCS contract forms is entitled "Standard Form of Tri-Party Agreement for Collaborative Project Delivery" (ConsensusDOCS 300). The tri-party, as one would expect, consists of the Owner, the Designer, and the Constructor. The contract form incorporates many concepts that are foreign, and probably antithetical, to traditional project delivery methods.

What, really, is Collaborative Project Delivery (CPD)? To understand the concept (at least from the perspective of the drafters of Form 300), a good place to start is to examine the "Collaborative Principles" set out in Article 3 of the contract form. Section 3.2 describes a number of attributes of CPD, many of which seem truly revolutionary when compared with the attributes of traditional project delivery.

Section 3.2 declares, for example, that CPD recognizes that "each Party's success is tied directly to the success of all other members of the CPD team and encourages and requires the Parties to organize and integrate their respective roles, responsibilities and expertise, to identify and align their respective expectations and objectives, to commit to open communications, transparent decision-making, proactive and non-adversarial interaction, problem-solving, the sharing of ideas, to continuously seek to improve the Project planning, design, and construction processes, and to share both the risks and rewards associated with achieving the Project objectives."

And what are the "shared Project objectives"? According to the Collaborative Principles, the Project objectives (Section 3.1) are to "design and construct the facilities called for in the Owner's Program, within the Project Target Cost Estimate and the Schedule developed under the Agreement."

Reading each phrase of Section 3.2 carefully and reflecting on the meaning of each, I think most experienced construction professionals and their advisors would agree that many controversial concepts were expressed in just these two sections; the audaciousness of the drafters of this document is truly amazing.

More about the ConsensusDOCS tri-party agreement in future blogs. (This entry published by Karen Estelle Carey, a member of the Real Estate Development group.)

Wednesday, February 6, 2008

For Sale: Reclaimed Wastewater

It is not a news flash that there has been a drought in North Carolina and many other regions in the country. Construction companies use a great deal of water, so the drought conditions and water restrictions have been a challenge to many contractors working in drought areas. According to an ENR Digital Wire report on February 3, 2008, Union County outside of Charlotte, NC is offering relief at $1.82 per 1,000 gallons of water as long as you don’t drink it.

The Monroe Water Resources Department will be selling treated wastewater, also called reclaimed wastewater. It is not for drinking or consumption, but it will not make you sick from skin contact. The reclaimed wastewater is fine for construction and pavement washers. It is also fine for landscape irrigation of golf courses, ball fields, and industrial cooling and processing.

According to the article, there are a few other North Carolina cities and counties using limited reclaimed water: Anson County, Charlotte, Goldsboro, Raleigh and Cary.

Before you drive your vehicle to the bulk water station, you will have to undergo training to obtain a certificate to transport water. Training is free.

Suffering a drought reminds us all that every little bit counts. It is inherently wasteful to use valuable drinking water good enough for human consumption for construction or irrigation purposes. Kudos to Union County for their innovative plan. (This entry published by Ken Michael, a member of Womble Carlyle's construction law practice group).

Source: ENR

Monday, February 4, 2008

Landmark Supreme Court Decision Could Expose Businesses To N.C. Consumer Class Actions And More

In a landmark decision by a divided court, the Supreme Court of North Carolina declared an arbitration clause in a consumer loan agreement unconscionable. The case, Tillman et al v. Commercial Credit Loans, Inc. et al, is important to all businesses contracting with N.C. consumers. Those who do not consider and react to its implications may find themselves, among other things, the targets of class action law suits they thought they had contracted away.

Typically, unconscionability arises where there is such inequality in the bargain that it shocks the judgment of a person of common sense. Historically, that has proven to be a high standard but the facts upon which the principal and concurring opinions in Tillman are based are not as extreme as one might expect. Thus, Tillman could mark a sea change in the way that trial and appellate courts assess and enforce contractual arbitration provisions.