CONSTRUCTION NEGOTIATIONS

Transcription

1 CONSTRUCTION NEGOTIATIONS I. Contracts November 6, 2017 Presented by: Bryan Thomas Bradley Arant Boult Cummings LLP Attorney-Client Privilege.

2 Agenda Construction Negotiations I. Contracts Know the Deal What Happens if there isn t a Contract? Where is the Leverage? What is the Governing Law? Develop a Strategic Approach What is the biggest risk? Where are your practical limitations? What are your gives? Is there a win-win pitch? What is the timeline? Attack the Clauses / Deal Points Bonds and other Security Contract Documents & Pass Through Provisions Integration & Merger Clause Can it be used to your advantage? Standards of Performance Substantial Completion Schedule (Start Date, Conditions, Duration, LDs, and No Damages for Delays) Limitations on Recovery for Changes Payment Terms (Pay-if-paid, Pay-when-paid, definition of Costs ) Changes and FM - What are you assuming and can you tweak a provision? Indemnity Notice to Cure Back Charge Policy Dispute Resolution & Attorney Fee Clauses

3 A. Know The Deal

4 Know The Deal What Happens if there Isn t a Contract? Does it have to be in writing? Signed? Oral? Is your word your bond? Does it cover every issue? Incomplete? Price Scope Time (maybe) Absent agreement, the general rule is that Contractor has the risk of performing, no matter how hard. 4

5 Know The Deal Where is the Leverage? Who is the Owner (and GC)? Is there already a contract in place? Is there a tight timeframe? Do they need you or do you need them? Is it specialty work? 5

6 Know The Deal What is the Governing Law? Public Project FAR or State Statutes Bond Requirements Private Project (What State?) Prompt Payment Act Requirements / Retainage Limitations Trust Statutes Indemnity Limitations Construction Fairness Statutes Pay if Paid Provisions & No Damages for Delay Provisions Lien Rights / Payment Security Implied Warranties Statute of Limitations / Repose 6

7 B. Develop a Strategic Approach

8 HOW TO MANAGE THE RISK Not ME! Not my responsibility! Manage Risk through your Contract Don t Accept Risk Exclude from Scope Exclude from Liability Indemnification Limit Liability Risk Allocation Take On Risk Insurance Vendors Price the Risk

9 HOW TO MANAGE THE NEGOTIATION Is the Contract Negotiable? Partially Negotiable? Is it Advantageous to Negotiate? Review Project & Identify Moderate to High Risks Items Review Contract Price Risk Develop and Rank List of Changes/Exclusions Should you limit changes, propose a new form, or work your changes through the proposal/scope documents? Consider Proposal Strategy Pricing with exclusions Pricing with VE alternatives Addressing the Draft Contract / T&Cs? 9

10 Drawings & Specs: Identifying Conflicts & Gaps Pre-Contract/Bid Review Sources of Concern Drawings Revisions which drawings? Scope of Work/Clarifications & Exclusions Budget /VE/Allowances/Alternatives BIM Coordination & Responsibility Shop Drawings Owner/Contractor Approval of Drawings Owner Provided Information RFIs

11 C. The Deal Points

12 Security & Scope Bonds and other Security Can you get out of this requirement? Discussion of Subguard? Contract Documents & Pass Through Provisions Ask for them Review them Understand them. Is the division of scope clear? Integration & Merger Clause What does it mean? Can it be used to your advantage? A reason to attach your proposal? What about conflicting terms Can you add and advantageous Order of Precedence? Standards of Performance Is there one for your scope? Is it reasonable or objective? Does it incorporate local codes & Requirements? Warranty? 12

13 Schedule Schedule Start Date Conditions & Assumptions Duration & Sequence LDs (can you make them into a shield?) No Damages for Delay Provision - Substantial Completion Why does it matter How is it Defined? Objective? Reasonable? 13

14 Payment & Changes Limitations on Recovery for Changes Payment Terms Pay-if-paid can you turn it to a pay-when-paid Is Pay-if-paid enforceable? Can this be a give? Costs? How are they defined? Can you agree on general conditions, overheads, profits? Auditable? Under what Procedure? Payment Mechanism SOV or Costs? Add A Suspension/Termination Right for Nonpayment? Force Majeure Can it mitigate a major risk with a tweak or two? How Broad? 14

15 Indemnity, Defects, and Back Charges Indemnity Limit to Insurance Limits? Can you Limit Scope? For Just Third Party Claim? Defense Obligations Backcharges Right to Cure Time Period Can you incorporate a favorable Back Charge Policy? 15

16 Termination & Dispute Resolution Provisions Termination Conversion Provisions Convenience Termination Payments Dispute Resolution- Same or Different Related Contracts? Arbitration or Litigation What Rules? Mediation Requirement? State Specific Statutory Scheme for Defect Litigation? Venue is Critical for Leverage Attorney Fee Provisions 16

17 Questions? Bryan Thomas

18 CONSTRUCTION NEGOTIATIONS II. Waivers, Changes, and Settlements November 6, 2017 Presented by: Bryan Thomas Bradley Arant Boult Cummings LLP Attorney-Client Privilege.

19 Agenda Construction Negotiations II. Waivers, Changes, and Closeout Payment Applications and Waivers What is being Requested Lien Waivers vs. Claim Waivers Carve outs, Exceptions, and the * Negotiating Changes How do You Build Your Own Evidence? Any Contract Requirements? CCD/Directive Power & Associated Payments? Scope? Be Particular What about Schedule? What about added liability? Any Horse Trading Available? What about the Waivers? Job Closeout/Settlement Considerations What is the Long-Term Relationship? Are there Back Charge Threats (Yet)? Is there Retainage Does it Provide Leverage? Does a Lien mean anything? What is your upside if you negotiate?

20 A. Payment Applications and Waivers

21 Lien/Claim Waivers Purposes: 1. Waiver of Lien 2. Representations No other Changes/Claims 3. Claims Waiver

22 Lien/Claim Waivers Purposes: 1. Waiver of Lien 2. Representations No other Changes/Claims 3. Claims Waiver 4. Warrants Downstream Payments (Past & Future) 5. Labor Law Compliance 6. Indemnity

23 Lien/Claim Waivers Negotiation Tactics Reservations Retainage Changes Change Request * Limit to known Reservation is better than nothing Releasing Lien vs. Releasing Claim

24 B. Negotiating Changes

25 Handling Changes: 25

26 Handling Changes: Be Prepared Read The Full Contract RTFC Distribute the contract appropriately. Remember and enforce the principle literacy of documentation Can you use it? Can you find it? Have you responded to content of correspondence? Is it appropriate? Documentation is how change claims are won or lost Document, document and document some more Comments on Daily Report, personal notebook, s 26

27 Handling Changes: 3 Key Questions What Causes the Change? New Scope? $$$? - So what causes the money problem? How Does the Contract Impact the Change? Contract Limitations Contract Requirements 27

28 Handling Changes: Typical Changes 1. Site Conditions 2. Plans and Specifications 3. Other Changes (Interference, Delay, Labor, Weather, Commodity Pricing, 3 rd Party Interaction) Impacts to Consider Costs (don t overlook cumulative impact) Delay Disruption & Acceleration 28

29 Handling Changes: What is a Change under your Contract? Is a Change Specifically Defined? Does it have to be a material change? Are there other provisions defining specific Changes Differing Site Conditions Force Majeure Weather Clause Price Escalation Provisions Etc. Don t forget about Constructive Changes? Proceed pending dispute? 29

30 Handling Changes: Mechanisms for Changes in your Contract? Mechanisms For Change Change Order (Explicit or Constructive) Change Directive (If in the Contract) Force Majeure (Specific Procedure?) Who has the Authority to Issue a Change? Is Notice of a Change Required? Does the Change Have to be in Writing? Is There a Writing Requirement? Waiver? What about the Release in the Change Order? (What about all the indirect costs?) 30

31 Handling Changes: Notice What Are The Contract Requirements? How Long do I have? Who do I send it to? How do I send it? Confirm Receipt Should I Provide Informal Notice First Can this be resolved short of Contractual Notice with a meeting or phone call? Careful with what you put in writing. 31

32 Handling Changes: Notice What Should the Notice Say? Keep it Simple This is an opportunity to create a great piece of evidence Something a Judge or Arbitrator will Understand Careful with Narrow Wording Do not Limit the Reasons Avoid Quantifying Damages Don t Forget Impact Provide an Opportunity to Cure? Broadly Reserve Your Rights Notice to Surety? 32

33 C. Job Closeout and Settlement Considerations

34 Post Completion Management: Contract & Legal Considerations Considerations Standards and Specifications Indemnity Limitations (Remedies & Damages) Choice of Law & Choice of Venue/Arbitration Express & Implied Warranties Warranty Periods Latent Defects Statute of Limitations / Statute of Repose

35 Negotiating the Closeout / Settlement Project Closeout Retainage Leverage? Does Final Payment Waive any Claims? Settlements Release of Lien held in Escrow for Payment? Timing of Payment Is it Conditional? What is your Remedy? How Broad is the release Known and Unknown? What Parties? What is carved-out from the waiver Latent Defects? Warranties? A Covenant not to sue? 35

36 Questions? Bryan Thomas

37 Thank You.