Thursday, 25 August 2011

What is considered a timely acceptance of a subcontractors quote?

By Matthew J. DeVries
Reprinted from
Best Practices Construction Law

If a subcontractor's quote does not contain a deadline by which it must be accepted, how late can the contractor accept the quote to be valid? And when there is a dispute, who has the burden of proving that the contractor accepted the quote in a timely manner?

The court addressed these issues in Piland Corporation v. Rea Construction Co., 672 F.Supp. 244 (E.D. Va. 1987), a Virginia case involving a contractor's bid to perform work at a government facility. The contractor solicited a quote from a subcontractor to perform certain paving work on the project. The subcontractor phoned in its quote to the contractor, and it also gave the same quote to other bidders. When the subcontractor learned that the contractor was the low bidder and had been awarded the contract, it phoned the contractor to see if it had been awarded the subcontract.

The subcontractor called a second time after waiting a week to pass without hearing from the contractor. Four more weeks ... no response from the contractor. Understandably, the subcontractor assumed that it did not receive the award for the paving work and closed its files. Several months later, the contractor sent an agreement to the subcontractor to sign. When the subcontractor refused to sign the agreement to perform the work at the earlier quoted price, the contractor filed a lawsuit for breach of contract.

At trial, the court focused on whether the contractor had notified the subcontractor in a timely manner about the subcontract award. The court looked to local industry practices, which dictated that it was customary for prime contractors to notify selected subcontractors within 30 days after notice of acceptance of its bid. The court also determined that telephone notification was an acceptable industry standard.

Ultimately, the court concluded that the contractor was unable to show by a preponderance of evidence that it timely notified the subcontractor of its acceptance of the quote. Much of the decision was based upon credibility findings, where the court found the contractor's evidence to be weak and unconvincing. The contractor's estimator could not remember details of the all and had one minor notation about notice to the subcontractor that read: "Called 2-2-84, bid okay."

On the other hand, the subcontractor's estimator was so positive in his testimony that he received absolutely no notice of acceptance and he closed out the file. The court concluded that there was no acceptance of the bid and, therefore, there could be no breach of contract without a binding contract in place.

This case outlines the problems contractors may encounter when they fail to document all their actions. The contractor should have given written confirmation of notice of the award and acceptance of the subcontractor's bid. Even if notice is given by telephone, it should be properly documented as well. Finally, as to what constitutes a "reasonable time" to accept a bid, the parties should include the time for acceptance in the written offer to avoid a determination by industry practice.
Read More.

Wednesday, 24 August 2011

USCIS expands E-Verify self-check program to more states

The U.S. Citizenship and Immigration Services (USCIS) announced it expanded the E-Verify Self Check program to include 16 more states, as well as began offering the service in Spanish and English.

The Associated Builders & Contractors reports workers in 21 states and the District of Columbia now can check their own employment status.

When individuals enter their personal information into the E-Verify Self Check program, they are informed of any mismatches between that information and the Department of Homeland Security or Social Security Administration records. If a discrepancy is found, Self Check will inform the user of how to correct the mismatch. To prevent abuse, E-Verify Self Check will confirm users’ identities through a quiz based on credit information.

USCIS is rolling out the program in phases. It has been open to residents of Arizona, Idaho, Colorado, Mississippi, Virginia and the District of Columbia since March. Now the service also is available to workers who maintain an address and are physically located in California, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, Nevada, New Jersey, New York, Ohio, South Carolina, Texas, Utah and Washington.

The program is free and voluntary, meaning an employer cannot require an E-Verify Self Check as proof of work authorization. USCIS cautioned that a worker who is asked by an employer to conduct a Self Check would have grounds for contacting the Justice Department’s Office of Special Counsel for Immigration-Related Unfair Employment Practices.

Since 2009, the original employer-based E-Verify program has been mandatory for federal contractors to use when checking a person’s employment eligibility. The program remains voluntary for non-federal contractors unless required by state law.
Read More.


Tuesday, 23 August 2011

Mebane distribution center earns LEED Silver certification

Glen Raven's distribution subsidiary, Tri Vantage, has earned LEED Silver certification for its environmentally conscious Consolidated Distribution Center in Mebane, NC, making it the only LEED-certified distribution center in the state.

Casual Living magazine quotes Glen Raven President Allen E. Gant, Jr., "Our commitment to obtaining LEED certification for the Mebane center is just one element of a much larger corporate commitment to sustainability in everything we do."

LEED (Leadership in Energy and Environmental Design) was developed by the nonprofit U.S. Green Building Council (USGBC) to provide building owners and operators with a framework for implementing measurable green building design, construction, operations and maintenance solutions. LEED certification provides points for various measures taken during construction to ensure a building is energy-efficient and sustainable.

The 100,000-sq.-ft. Tri Vantage Consolidated Distribution Center's green features are numerous, including a design that is 20% more energy-efficient than specified in building codes. The center features solar hot water, sensors in certain areas that turn lights on only when occupied and high-efficiency heating, ventilation and air conditioning systems that reduce energy consumption, increase comfort and assure air quality.

All plumbing fixtures are low-flow design; concrete rather than asphalt was used in parking areas to reduce heat gain; maintenance staff members follow green cleaning procedures; 30% of building materials used for construction contained recycled content; and adhesives, sealants, paints, fabrics and carpets used in the building contain low amounts of volatile organic compounds (VOCs), which contributes to better air quality. Nearly 90% of construction waste was recycled. The Tri Vantage facility in Mebane was built by general contractor Samet Corporation of Greensboro.

"Achieving LEED Silver certification is not only the right thing to do for our associates and community, but also good business through a highly efficient operation," said Steve Ellington, president of Tri Vantage. "Our customers and suppliers are assured of working with a company that takes its environmental responsibility very seriously."

Glen Raven is implementing a comprehensive sustainability program at all of its manufacturing and business centers, emphasizing increased recycling, reduced energy consumption and environmentally responsible product design and production.
Read More.

EPA decision to withdraw proposed limit on dirt in stormwater will help avoid new costs

The chief executive officer of the Associated General Contractors of America, Stephen E. Sandherr, issued the following statement in response to the decision by the U.S. Environmental Protection Agency (EPA) to withdraw proposed “numeric limits” on the amount of dirt the agency will allow in stormwater from construction sites:d

“The fact that the EPA recognizes the serious flaws in the data supporting its efforts to impose a rigid, one-size-fits all, limit on the amount of dirt in rainwater leaving construction sites is encouraging. Indeed, contractors are already required to take significant measures to ensure that dirt – clean, uncontaminated dirt – does not escape from project sites. Setting a specific limit on how much dirt should be in rainwater will only force contractors to spend billions more on new dirt-busting measures that may not work, expose firms to costly lawsuits from outside groups and put them at risk of receiving tens of thousands in daily fines." Read More.

Monday, 22 August 2011

NC recieves $8.8M in grants for highway improvements

WRAL.com reports North Carolina is the winner of more than $8.8 million in federal grants for highway improvements, the U.S. Department of Transportation says.

The funding will go toward 10 projects across the state, including $4.75 million to improve a stretch of Interstate 40 in Iredell County.

"Transportation investments like these will create jobs and improve the quality of life for North Carolina residents as well as strengthen the state's economy," Transportation Secretary Ray LaHood said in a statement. "The demand from the states for these funds shows just how critical the need is for infrastructure investment."

LaHood did not say how many jobs there could be as a result of the grants.

Other grants include nearly $1.2 million for a construction ramp and gantry for a ferry in Craven County and $907,609 to design and build a new phase of the South Tar River Greenway in Greenville. Read More. View a full list of projects Here.

Lawsuit against USGBC dismissed

The United States District Court in New York City dismissed in its entirety the lawsuit brought against the U.S. Green Building Council by Henry Gifford and others, holding that none of the plaintiffs in the action had alleged or could allege any legal interest to be protected by their lawsuit.

Sustainable Facility magazine reports the court dismissed the federal false advertising claims “with prejudice,” meaning that the court’s dismissal of those claims is final and that plaintiffs are barred from filing a new suit based on those claims. The court’s ruling simultaneously dismissed plaintiffs’ state law false advertising claims.

“This successful outcome is a testament to our process and to our commitment to do what is right,” said Rick Fedrizzi, president, CEO and founding chair, USGBC. “Thousands of people around the world use LEED because it’s a proven tool for achieving our mission of transforming the built environment. We’re grateful that the Court found in our favor so we can give our full attention to the important work before us.” Read More.

Saturday, 20 August 2011

Construction employment in U.S. remains stagnant; NC loses 6,300 jobs over last 12 months

Construction employment remained relatively stagnant between July 2010 and July 2011 and during the past month, according to an analysis by the Associated General Contractors of America of state employment data released by the Labor Department.

“When it comes to construction employment, for every state adding jobs there is another one shedding just as many or more,” said Stephen E. Sandherr, the association’s chief executive officer. “The fact that this industry is breaking even when it comes to construction employment is little comfort for many unemployed construction workers.”

North Carolina was among the 23 states that lost construction jobs during the past 12 months. Construction employment fell by 6,300 jobs (-3.6%). South Carolina lost 800 construction jobs (0.1%) in the same period.

North Carolina lost 200 (0.1%) construction jobs between June and July. South Carolina construction employment remained relatively the same.

Association officials noted that contractors around the country were reporting that they have been forced to reduce staff because of cutbacks in many federally funded construction projects. Read More.

Friday, 19 August 2011

Builder confidence frozen by fear of what's ahead

Builder magazine reports buyer traffic is up, sales conditions have improved, and economists have given the go ahead to consider the foreclosure situation on the mend. But despite all the good news, builders are still wary—and with good reason. Between Wall Street’s upheaval and more whisperings of a double-dip recession, consumer confidence has frozen, keeping builder confidence stagnant as well.

According to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), builder confidence stayed stuck at 15 in August for the second month in a row. Any reading below 50 indicates that more builders see conditions as "poor" rather than "good".

"While buying conditions are very favorable in terms of prices, interest rates, and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey," said David Crowe, chief economist at the NAHB, in a statement regarding the numbers today.

While two of the index’s three components saw gains for the month—prospective-buyer traffic gained one point to come in at 13, and sales conditions gained a point bringing it to 16—builders’ sales expectations for the coming six months lost two points, falling to a reading of 19.

Geographically, results were mixed, with the Northeast coming in first with a four point gain to register an August reading of 19. The West gained one point to come in at 15. The South remained unchanged at 17, and the Midwest declined two points to a reading of 10. Read More.

Thursday, 18 August 2011

Architectural Billing Index drops for fifth straight month

Following a drop of almost a full point in June, the Architecture Billings Index (ABI) fell again by more than a point in July. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending.

The American Institute of Architects (AIA) reported the July ABI score was 45.1 – the steepest decline in billings since February 2010 – after a reading of 46.3 the previous month. This score reflects a continued decrease in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 53.7, a considerable slowdown from a reading of 58.1 in June.

“Business conditions for architecture firms have turned down sharply,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Late last year and in the first couple of months of this year there was a sense that we were slowly pulling out of the downturn, but now the concern is that we haven’t yet reached the bottom of the cycle. Current high levels of uncertainly in the economy don’t point to an immediate turnaround.”

Key July ABI highlights:

◦Regional averages: South (46.9), West (46.6), Northeast (46.4), Midwest (44.9)
◦Sector index breakdown: commercial / industrial (47.9), institutional (47.2), mixed practice (47.1), multi-family residential (44.7)
◦Project inquiries index: 53.7

Read More.

Wednesday, 17 August 2011

Prices for construction services rose in July

The amount contractors pay for construction materials and charge for completed projects both increased in July, as firms were finally able to charge more for work, according to an analysis of producer price index figures released by the Associated General Contractors of America. Association officials said, however, that it was too early to tell whether contractors will continue to be able to raise prices in the face of declining public sector investments in construction.

“Contractors will have a hard time increasing, or even holding the line on bid levels if the federal government continues to cut investments in infrastructure and construction,” said Stephen E. Sandherr, the association’s chief executive officer. “That being said, anyone looking for a good deal for new construction should act now in case prices continue to increase.”

The index for new construction – what contractors charge for construction projects – increased between 1.0 and 1.3 percent in July and from 2.3 to 3.1 percent for the year, depending on building type. With the exception of school construction, the monthly increases are at their highest rate of growth in two years, and the annual increases for all types of new construction are all at two-year highs.

Sandherr noted that the producer price index for all construction materials increased by 0.3 percent in July and 8.9 percent over the past 12 months. Contractors got some relief, however, from rising diesel prices in July, as prices declined by 1.8 percent for the month, yet diesel prices are still 49.9 percent higher than a year ago. Meanwhile, prices for copper ores experienced the highest rate of increase in July, 7.0 percent, and are up 33.9 percent for the year.

Prices rose sharply in July for a number of other key materials, including copper and brass mill shapes (5.6 percent for July, 33.6 percent for the year); prepared asphalt and tar roofing and siding products (2.4 percent for the month, 4.8 percent for the year) and plastic resins and materials (2.1 percent for the month, 14.2 percent for the year).

Citing the fact that construction programs have already accounted for more than 50 percent of federal budget cuts for fiscal year 2012, association officials said declining public sector investments would make it hard for contractors to continue raising prices. “Deferring needed investments in the nation’s aging infrastructure will make it even harder for contractors to cope with rising materials prices and undermine the kind of private sector economic activity the industry is counting on to help it recover,” said Sandherr. Read More.


Tuesday, 16 August 2011

Construction backlog up 10 percent in second quarter

Associated Builders and Contractors (ABC) reports that its Construction Backlog Indicator (CBI) increased 10 percent in the second quarter of 2011 to an average of 8.1 months, up from 7.3 months the previous quarter. The CBI is 12 percent higher than one year ago. CBI is a forward-looking indicator that measures the amount of construction work under contract to be completed in the future.

“While the increase in construction backlog appears to be good news at first glance, taking a broader look reveals that the rise in the nation’s construction activity may be a reflection of the economic momentum that existed several months ago, but is now beginning to weaken,” said ABC Chief Economist Anirban Basu.

"The nation’s economic recovery has remained fragile since June 2009 and any observed recovery in construction volumes has been tentative,” Basu said. “The events of the last few weeks have had a negative impact on both the overall economy and the nation’s construction sector, with business leaders generally seeking to reduce exposure to risk and investment volatility.

“More specifically, the U.S. economy continues to be pummeled with a sea of constraining factors ranging from rising gas and food prices, to Washington’s stalemate on lowering the nation’s deficit, the downgrade of the U.S. credit rating, Europe’s growing financial crisis and the U.S. financial market turmoil,” said Basu.

“None of this is good news for construction contractors or others hoping for a far ranging, more aggressive economic rebound. Though average construction backlog has been on the ascent in recent months, future surveys are likely to reflect a reversal of the trend and may lead to a chill in the nation’s building recovery,” Basu said.

The South continued to report the lengthiest construction backlog of any major region, with project orders rising 1.87 months during the second quarter compared to one year ago. Backlog for the second quarter of 2010 was 7.43 months compared to the 9.30 months backlog for second quarter of 2011.

“With many large infrastructure projects winding to a close, the largest firms in ABC’s sample have predictably experienced some decline in average monthly construction backlog,” said Basu. “The broadening of the economic recovery during the period prior to the second quarter of 2011 helped support smaller firms, many of which are subcontractors that work on commercial and institutional projects. With the economy weakening in recent months, construction backlog among these smaller firms may begin to decline again.” Read More.

Monday, 15 August 2011

Builder confidence unchanged in August

Builder confidence in the market for newly built, single-family homes held unchanged at a low level of 15 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August.

"Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB). He noted that 41 percent of respondents to a special questions section of the HMI indicated they had lost sales contracts due to buyers' inability to sell their current homes.

"The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time," said NAHB Chief Economist David Crowe. "While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two out of three of the HMI's component indexes posted marginal gains in August. The component gauging current sales conditions gained one point to 16 – its highest level since March of this year – and the component gauging traffic of prospect buyers rose one point to 13 following two consecutive months at 12. However, the component gauging sales expectations for the next six months declined two points to 19, partially offsetting a six-point gain from the last month's revised number.

Regionally, the HMI results were mixed in August. While the Northeast posted a four-point gain to 19, the West registered a one-point gain to 15, the South held even at 17 and the Midwest posted a two-point decline, to 10. Read More.

Quarterly Market Survey shows gradual strengthening and optimism for construction industry

It is no secret that the overall U.S. economy continues to face a great deal of uncertainty and that is creating an environment that doesn’t lend itself well to much near-term optimism. However, in the architecture and engineering community a story of slow and steady growth and optimism is beginning to emerge.

According to the latest Quarterly Market Trends (QMT) report from PSMJ Resources, Inc., firm leaders have good reason to start thinking that brighter days are ahead. Since 2003, PSMJ has surveyed A/E firm leaders on a quarterly basis regarding what they are seeing in the marketplace. The survey queries respondents on conditions in a variety of markets and submarkets as well as overall health of revenue, backlog, and proposal activity. The results of this survey are compiled in the QMT report each quarter. Some of the key findings of the latest July 2011 QMT report include:

• Backlog growth accelerated, continuing the trend we have seen for the past four quarters.
• Revenue growth also accelerated, following the trend in backlog growth.
• Proposal opportunities were greater than last quarter, continuing a trend that has seen increasing proposal opportunities for the past nine quarters.
• Some of the major A/E markets, such as Housing, Commercial Developers, Industry, Energy/Utilities, Water/Wastewater, Environmental, Transportation, and Health Care, showed more proposal opportunities this quarter than last quarter.
• Proposal opportunities increased in every region. The highest rates of increase were in the Mountain Region, South Region, West Region and Canada.

Despite the encouraging news coming out of PSMJ’s latest QMT report, pockets of softness remain. More specifically, the Education and Government Buildings markets showed declining proposal opportunities. In addition, while overall proposal opportunities continue the upward movement, the rate of growth is slowing.

“This might be surprising for those who are focused on market segments that continue to struggle, but we are hearing more and more from firm leaders saying that things seem to be picking up” states Gregory Hart, a Consultant with PSMJ. “With unemployment rates creeping back up and concerns about the United States’ debt burden, there is reason for concern at the most macro level. However, the fundamentals that drive the A/E industry seem to gradually coming back to life. This growing confidence will continue to drive M&A activity and begin to get stalled ownership succession efforts moving again.”
Read More.

Friday, 12 August 2011

Federal government to spend more to maintain facilities, rather than build anew


The Washington Business Journal says federal contracts for new construction will take a major hit with pending budget cuts, as agencies opt to instead spend money to maintain and rehabilitate existing buildings, according to a market snapshot report from Deltek Inc. The federal government spent $39.4 billion in construction and rehabilitation of physical assets in fiscal 2010, but will trim that amount by nearly $2 billion in fiscal 2012, according to the Obama administration's proposed budget.

Specifically, funding for military construction and family housing in particular dropped from almost $15 billion to $12.5 billion, no doubt due in part to the temporary jump in construction that came with the defense base realignments that are supposed to be completed in September.

In contrast, the areas that saw a budget increase for construction and rehabilitation include veterans hospitals and other health facilities, from $1.81 billion to $3.06 billion, and projects that support energy initiatives, from $7.41 billion to $10.47 billion.

That said, federal spending on architecture and engineering services, in particular, will see modest growth to $9.5 billion in 2016 from $8.1 billion this year, as agencies try to extend the life of existing buildings and comply with various mandates for energy efficiency, data consolidation, physical security and teleworking, according to the report. Read More.

Thursday, 11 August 2011

NC Appeals Court restores sanity to lien priority

Guest blog from Scott Wolfe, Jr.
Construction Lien Blog

Remember when I wrote about North Carolina’s “Relation-Back” rule regarding partial lien waivers? Basically, there was a hugely controversial decision that a lower court in North Carolina rendered holding that partial lien waivers signed by a general contractor effectively change the date of the contractor’s first furnishing of labor and material on a particular project.

That decision of the lower court was very negative in its implications for contractors in North Carolina because before that decision, a lien’s priority in NC was based upon the date that labor and materials were first furnished. As we mentioned, this meant that if you furnished labor and materials on day 1 of a project and then decided to file a lien on that project on day 600, your lien would have taken priority over other liens filed after you first furnished labor and materials (way back on day 1).

It was a big deal that this well-settled NC rule was changed. And thanks to the Court of Appeals of North Carolina’s decision rendered on July 20th of this year (Wachovia Bank v. Superior Construction et al), the lower court’s decision has been reversed and the rules I just explained now apply again. All is well in the world of North Carolinian contractors once again.

This is a huge win for contractors and other similar workers in that state. And if you read the Court’s reasoning, it all comes down to interpretation of the lien waiver language. The lower court interpreted the language in that particular case to refer to the contractor’s lien priority while the Appeals Court interpreted the language to refer to the contractor’s lien rights regarding payment. The Appeals Court did not see the language as having anything to do with priority.

The first furnishing date, which once again determines priority of lien, also determines a lot of other important things, including whether or not a claimant will receive proceeds from a foreclosure. It determines your lien’s priority, which effects ultimately how much money your business will bring in.

Other implications of this new decision? Perhaps the Court of Appeals is leaving the door far too open for language to take control in allowing statutorily determined dates of first and last furnishings to be altered by contract. All we can do is wait to see how this ruling plays out over time, but it’s definitely a positive thing to return the interpretation of NC lien waiver language back to where it aligns with settled notions of NC lien law. Read More.

Wednesday, 10 August 2011

New erosion and sedimentation requirements in effect

Effective August 3, 2011, all development projects in North Carolina that disturb an acre or greater of land require a local-or-state issued Erosion and Sedimentation Control (E&SC) permit. Upon receiving that permit approval, the project will be automatically covered by a state NPDES Stormwater General Permit NCG010000 for construction-related activities from the Division of Water Quality (DWQ). Read More.


Tuesday, 9 August 2011

Federal contracting: The dollars are in the details

Guest editorial by Gregory L. Shelton
Reprinted from Construction Law Carolinas

I have been monitoring the advance sheets in North Carolina and South Carolina for an interesting case concerning federal contracting. Ask and you shall receive.

Hot off the presses, we have Stevens Aviation, Inc. v. DynCorp International, LLC, South Carolina Court of Appeals Case No. 4857, where a general contractor, DynCorp, and subcontractor, Stevens, joined forces under a Teaming Agreement to pursue a federal contract for maintenance of Army and Navy aircraft. The Teaming Agreement incorporated a “Statement of Work” attachment providing that Stevens would perform certain painting, inspection, and maintenance work on the aircraft.

The team won the contract, at which point they entered into a Subcontract. One of the recitals (the “whereas” clauses) in the Subcontract referred to the Teaming Agreement by name and date. At some point, DynCorp started using other subcontractors to perform what had been Stevens’ scope of work. Stevens sued DynCorp alleging that the Subcontract incorporated the terms of the Teaming Agreement, including the Statement of Work attachment, by reference. DynCorp argued that the Subcontract contained no terms of exclusivity such that DynCorp was bound to use Stevens for all the work.

Stevens’ prevailed at the trial court level, but the Court of Appeals reversed. The Court of Appeals first noted that recitals (“whereas” clauses in the subcontract preamble) do not constitute binding contractual language, and pointed to provisions in the subcontract where the parties incorporated specific provisions (including terms of the FAR) by expressly referring to the provisions. No such reference was made to the provisions of the Teaming Agreement relied upon by Stevens. The Court of Appeals then turned to language in the Subcontract providing that Stevens “shall provide all . . . services . . . at the direction of DynCorp.” The Court of Appeals concluded that DynCorp’s diversion of work to other subs did not constitute a breach of contract.

The result did not turn on what the parties or the Court thought was fair, or what the parties believed their agreement to be. Rather, the result turned on words and phrases, and where those words and phrases were located within the Subcontract.

Stop tossing the contract documents into the file cabinet once work begins. And start paying attention to the details. Read More.

Carolinas AGC reminds contractors to call 811 before digging

On 8/11 and throughout the year, the Carolinas AGC urges contractors to call 811 before digging—a free call that essentially saves time, money, and most of all, lives. “By calling 811 before digging on a project site, utility owners and operators can accurately locate their facilities to eliminate the risk of striking an underground utility line,” said Allen Gray, Utility Division Director for Carolinas AGC. “It really is the only way to know which utilities are buried in your area of excavation.”

When calling 811, contractors in the Carolinas are connected to either South Carolina 811 or North Carolina 811, the local one-call centers, which then notify the appropriate utility companies. Utility owners and operators then respond by having their lines marked in the area of proposed excavation. This process is a shared responsibility with excavators, utility owners and operators, and one call centers working together to ensure public and workforce safety, as well as the integrity of vital facilities.

Every digging project, no matter how large or small, warrants a call to 811 before beginning a project. This comes on the heels of a recent report by the Common Ground Alliance, which determined that nationwide an underground utility line is damaged during digging every three minutes. Read More.

Monday, 8 August 2011

Heavy construction makret drivers still strong but will weaken

Jim Haughey, Reed Construction Data's Chief Economist reports heavy construction market drivers remain positive but are expected to weaken. Highway funding is likely to continue at the current level with no increase beyond the expiration of the current funding on September 30th. Federal heavy construction funds will get little if any increase in the 2012 fiscal year budget. However, existing appropriations authority is unlikely to be retracted based on the tentative federal spending plan announced on July 31. Forced spending cuts at state and local governments will also keep this source of heavy construction funding steady to slightly down into next year. Water and sewer projects related to site development will expand with the expected subdued building construction through next year

A small share of the constraint imposed by reduced public funds will be offset by more private involvement in public facility construction in the form of toll roads and leased back buildings.

The small private heavy construction sector will expand in parallel with economic growth. This includes communication and transportation facilities and power generation. The economic growth outlook remains subpar at least through next year so growth in private heavy construction funding will be modest.

The outlook for the power sector has become fuzzy. After a four-fold jump, power construction has been ebbing erratically lower since last year. The earlier surge was driven partly by alternative fuel power stations and related transmission lines and pipelines. Much of this was funded by federal subsidies. Expansion of these subsidies is now off them table in Washington. However, the mandates to use more alternative fuel remain. This conflict has yet to be resolved. The small solar market has the most risk because of its high cost per kwh. Solar costs could drop quickly with improved technology but not in 2011-12. The much larger wind market is price competitive at $120 /bbl oil and could possible prosper with subsidies or mandates. But again this is not likely in 2011-2012. Separately, the pipelines for shale natural gas are not subsidized; spending will continue to expand even with subpar economic growth. Read More.

Friday, 5 August 2011

Construction employment inches up to 15-month high in July

Construction employment inched up by 8,000 jobs to a 15-month high in July but remained far below the peak set in early 2006, according to an analysis of new federal employment data released by the Associated General Contractors of America. Association officials said a grim outlook for public sector construction activity will act as a drag on expanding private sector construction. They urged lawmakers to pass adequate long-term funding for public projects, without unnecessary strings attached.

The industry unemployment rate fell from 17.3 percent a year earlier to 13.6 percent in July 2011, and the number of unemployed people who previously worked in construction shrank by nearly 400,000, said Ken Simonson, the association’s chief economist. However, Simonson noted that the July 2011 employment total of 5,532,000 was only 32,000 higher than in July 2010 and was almost 2.2 million, or 28 percent, below the record level of April 2006.

“It is encouraging that the construction industry has added 54,000 jobs—or 1 percent—since hitting bottom last January,” Simonson said. “However, unemployed workers are leaving the industry at seven times the rate they are finding jobs in it, which suggests future expansion will be hard to achieve.”

The construction economist noted that employment in heavy and civil engineering construction—the segment that had previously added jobs as a result of federal funding for stimulus, military base realignment and Gulf Coast hurricane protection projects—shrank for the third month in a row, by 400 jobs, although the July 2011 total was 21,000 jobs, or 2.5 percent, higher than a year earlier. Residential building and specialty trade employment dropped a combined 1,600 jobs in July and 11,700 jobs, or 0.6 percent, over the past 12 months. Nonresidential building and specialty trade contractors added a combined 10,200 jobs for the month and 22,400 jobs, or 0.9 percent, over 12 months.

“The shift in employment from heavy projects such as highways, military bases and levees to factories, power projects and hospitals will continue as government spending shrinks and the private sector gradually expands,” Simonson predicted. “But overall job creation will remain sluggish at best unless single-family homebuilding also revives.” Read More.

Thursday, 4 August 2011

Nonresidential commercial construction environment turns positive

Reed Construction Data's Chief Economist Jim Haughey reports commercial (built to lease) market drivers turned almost universally positive during the spring. The only negative drivers are office and retail rents measured on a year over year basis. Both of these rental indexes have shown quarter to quarter rises recently so they are imposing little restraint on commercial project starts.

However, very weak economic growth gains early in 2011 may stall or even briefly reverse the improvement in the starts environment for commercial properties unless economic growth is clearly stronger in the second half of the year.

The build vs. buy indicator still points at buy for real estate investors in many but not all markets. Asset prices of existing building have risen significantly from the cyclical low level and continue to improve. This metric is progressively moving to the build side as the value of existing buildings rises and improving occupancy and rental rates boost net operating income prospects. However, this is a long process with the indicator tilting to build market by market. The process will take 2-3 years in the weakest markets but has already happened in a few markets.

The market drivers for institutional construction are rapidly deteriorating. Federal stimulus funding is largely spent of committed. Congress had refocused on spending cuts which will inevitably include federal buildings and grants to lower levels of government and nonprofit institutions. Rising tax revenues will eventually offset this constraint at the state level in 2013 but funding constraints will remain at the federal and local level and with nonprofit institutions longer. Largely self funded institutions, such as hospitals and private education, will fell relatively constraints from government spending cuts.
Read More.

Sales of new homes stagnated in June


Carpenter cuts siding for a new home under construction in Raleigh. Builders have little incentive to start projects as the prospect of more properties entering foreclosure depresses home values

Lakshman Achuthan, co-founder and chief operations officer of the Economic Cycle Research Institute, discussing new home sales on Bloomberg Television's "InsideTrack," says purchases of new U.S. homes probably stagnated in June, indicating housing is still languishing two years into the economic recovery.

Sales ran at a 320,000 annual pace last month after a 319,000 rate the prior month, economists surveyed by Bloomberg News forecast. Home prices declined from a year earlier and consumer confidence fell in July to a nine-month low, other data show.

Builders have little incentive to start projects as the prospect of more distressed properties entering the foreclosure pipeline depresses home values. The figures underscore Federal Reserve Chairman Ben S. Bernanke’s comments that demand for homes has been held back by slow job growth and restrained consumer optimism.

“Sales will remain weak, not only this year but well into next year,” Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York, said before the report. “The outlook for housing is rather bleak.”

The median estimate in a Bloomberg survey was based on a poll of 71 economists. Forecasts ranged from 300,000 to 342,000. Sales last year totaled 323,000, the fewest since record-keeping began.

The S&P/Case-Shiller index of property values in 20 cities fell 4.5 percent in May from a year earlier, the biggest 12- month drop since November 2009, according to the median projection in a Bloomberg survey. Compared with a month earlier, home prices may be little changed.

Competition from cheaper previously owned homes is hurting sales of new dwellings. Distressed properties, which include foreclosures and short-sales, have made up about 33 percent of all existing-home sales since late 2008, according to the National Association of Realtors.

Limited job growth and unemployment above 9 percent for three straight months are keeping housing depressed even with mortgage rates close to record lows and lower prices. The National Association of Realtors index of housing affordability is close to a record high.

The Conference Board’s consumer confidence index fell to 56 in July from 58.5 the prior month, according to the median projection before the New York group’s 10 a.m. report.

National Association of Realtors figures on July 20 showed sales of previously owned homes dropped in June to a seven-month low. Existing-home inventories rose to 3.77 million, and it would take 9.5 months, the longest since November, to sell those properties at the current sales pace. Read More.

Tuesday, 2 August 2011

Second public comment period open for LEED 2012 draft

ECO-STRUCTURE magazine reports a second public comment period is now open for the U.S. Green Building Council's (USGBC) proposed 2012 updates to the LEED green building rating system. Comments will be accepted until Sept. 14.

An initial public comment period on LEED 2012, which ran from Nov. 8, 2010 through Jan. 19, 2011, gathered more than 6,000 comments and recommendations, according to USGBC. In reviewing the draft with this feedback in mind, the USGBC also included feedback from project teams who have been pilot testing draft credits, says Scot Horst, senior vice president, USGBC. The updated draft and responses to comments from the first round are now online for review.

Credits in the proposed LEED 2012 systems have been allocated points based on a weighting process similar to that used for updates in 2009, but also based on impact categories developed for use in LEED. According to USGBC, the weightings/point allocation process informed many changes, including organizational changes proposed for the Indoor Environmental Quality (IEQ) and Materials and Resources (MR) credit categories. In the IEQ section, changes seek to provide a more refined focus on air quality, lighting, and acoustics, as well as improved incentives for testing and verification. MR credit category changes seek to fill gaps in the data used to support life cycle assessment.

Other changes include a draft for LEED 2012 for Neighborhood Development that splits that system into two systems: LEED for Neighborhood Development Plan and LEED for Neighborhood Development.

USGBC will hold member webcasts in the coming weeks detailing the changes between the first and second public comment drafts. Members can register for the free webcasts by visiting the USGBC Members Only Page as usgbc.org.

The webcast schedule is as follows:
August 8: General Overview, Sustainable Sites, Water Efficiency
August 10: Integrative Process and Location & Transportation
August 15: Energy & Atmosphere and Performance
August 17: Materials and Resources
August 22: Indoor Environmental Quality
August 24: LEED for Homes
Read More.

Google Plus, social media and construction marketing

by Mark Buckshon, Construction Marketing Ideas

Perhaps the most significant paradigm change in marketing in the past decade has been the rapid rise of social media. Blogging, Facebook, Twitter and LinkedIn, coupled with the combination of video and podcast technologies, have created an environment where media ceases to be a gatekeeper and middleman — and where “word of mouth” recommendations (and negative reviews) can spread through the virtual space at the speed of light.

The new social media era requires an active commitment but thankfully only modest if any financial investment. You need to have the basics in place: A proper website, Facebook corporate page, some basic guidelines for your employees about social media best practices and, if you are working in the business-to-business space, a LinkedIn account and possibly a LinkedIn group are essentials — the others are, in my opinion, optional, depending on your skills, focus interest and market.

A new behemoth is about to appear on the social media space, however, Google Plus. This is Google’s strategic re-entry to the social media space after its failure with Buzz and mixed success with something called Orkut (which has, of all places, been surprisingly successful in Brazil and India, but has failed to catch on in the rest of the world.)

The Google Plus roll-out is proceeding at a controlled pace; much faster than Facebook, but still access is loosely restricted. I first heard about Google Plus through my work on one of the Google help forums, where I am a “Top Contributor” — a volunteer with some additional access to Google staff, to help others with problems that cannot be actually solved on the peer forum. Somewhat skeptical about any new product launch, I held off my excitement about Google Plus until finally opening my account last week. It is early going, but I think Google Plus will indeed give Facebook a run for its money, much as its Android phone system (along with Apple’s Ipad and Iphone) are causing havoc in Waterloo, Ontario, where Research in Motion oversees the Blackberry.

If you are engaged with social media, I think you should put the new Google tool on your radarscope and if you are not, begin to think about the consequences of not adapting and connecting to these new resources. They are essential for any frugal and effective construction marketer. Read More.

Monday, 1 August 2011

NC Contractors: Beware of interim lien waivers

by Eric Biesecker & David Luzum, Nexsen Pruet, PLLC

The North Carolina Court of Appeals recently restored order to the use of interim lien waivers in North Carolina. The Court of Appeals issued its opinion in Wachovia Bank N.A. v. Superior Constr. Corp., COA10-1158, on July 19, 2011. Eric Biesecker, Richard Wilson, and David Luzum of Nexsen Pruet, PLLC, filed an amicus curiae brief on behalf of the American Subcontractors Association and ASA of the Carolinas.

Superior Construction was the general contractor for a large condominium project on Oak Island. Superior started its work on April 22, 2005, several weeks before Wachovia recorded its deed of trust on the property. Later, though, Superior signed an interim lien waiver that released Superior’s lien rights "on account of any labor performed or [materials furnished] up to and including” May 31, 2005. In 2007, Superior stopped work and filed a claim of lien when the owner failed to pay $1,286,000.00. The owner also failed to pay its obligations to Wachovia. In the ensuing litigation, Wachovia and Superior fought over who had the better claim to the property.

Wachovia filed a declaratory judgment action seeking a determination that its deed of trust had priority over Superior’s lien. North Carolina’s lien statutes explicitly grant contractors and subcontractors the right to have their lien priorities relate back to the date of first furnishing of labor or materials. Even though Superior’s lien waiver contained no language addressing the priority of its lien for later-furnished labor or materials, the Business Court held that Superior’s interim lien waiver released Superior’s right to have its lien relate back to its first furnish date. Consequently, the Business Court held that Wachovia’s deed of trust trumped Superior’s lien rights.

The Business Court’s opinion injected uncertainty into the construction process. Interim lien waivers are commonly used on construction projects, but rarely do the parties intend the interim lien waivers to change lien priorities; parties typically employ subordination agreements to change priorities. The Business Court’s opinion made it unclear what language may constitute a waiver of lien rights going forward. In light of the Business Court’s decision, Nexsen Pruet attorneys advised potential lien claimants to add language to interim lien waivers to state specifically that the waivers did not change lien priorities.

The Court of Appeals’ opinion restored order to the process by correctly interpreting the scope of Superior’s interim lien waiver. The Court of Appeals recognized that Superior’s waiver functioned merely as an acknowledgment that the owner had paid Superior for all labor and materials furnished through a certain date and that Superior could not file a lien for that labor and material. The lien waiver did not in any way refer to or affect Superior’s “place in line.”

Although the Court of Appeals reached the correct decision, it left the door open for future interim lien waivers to change lien priorities by using more explicit language than that used in Superior’s lien waiver. Contractors and subcontractors must continue to read and analyze the language of their lien waivers before they sign them.
Read More.
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AIA survey forecasts increased spending for 2012 nonresidential construction projects

The American Institute of Architects (AIA) semi-annual Consensus Construction Forecast, a survey of the nation’s leading construction forecasters, projects a 6.4% increase of spending in 2012. However because of a multitude of factors preventing a recovery for the beleaguered design and construction industry, the AIA study projects a decline of 5.6% in spending this year for nonresidential construction projects.

“Consumer and business confidence is poor and the overall economy has yet to pull out of the downturn that began in 2008, which both add to the general sense of anxiety and uncertainty in the real estate market” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Spending on renovations of existing buildings has remained strong, but the depressed demand for new construction isn’t likely to improve until next year, led by the commercial sector: offices, retail and hotels.”

Baker added, “Steel, copper and aluminum have all increased ten percent or more in the past year, offsetting declines for lumber and concrete products. Rising energy costs have also been central to the unusual volatility in building material prices.”
Read More.

Transportation Secretary urges Congress to reopen FAA

AGC’s Stephen Sandherr joined Secretary LaHood and FAA Administrator Randy Babbitt at New York’s LaGuardia Airport to discuss the economic impacts of the abrupt halt to $2.5 billion worth of airport construction projects

Transportation Secretary Ray LaHood urged lawmakers to pass a bill to put the Federal Aviation Administration back in business and put more than 70,000 construction workers and others back on the job, the AP reports.

Nearly 4,000 FAA employees were temporarily laid off last Friday when Congress couldn't agree on an extension of the agency's operating authority due to underlying partisan disputes over labor rights and subsidies for rural communities. Air traffic controllers remained on the job..

Work on more than 150 airport construction projects nationwide has been halted, which the secretary said has left 70,000 construction workers idle. He noted that the construction industry is among those suffering from high unemployment.

LaHood said he has been talking to lawmakers from both parties. "We're right smack dab in the middle of the construction season," he said. "This is not the time to be laying of 70,000 people." Read More.

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Nonresidential fixed investment rises in 2nd quarter

While the nation’s economy is still showing signs of weakness, nonresidential fixed investment increased 6.3 percent in the second quarter of this year following a revised 2.1 percent increase in the first quarter, according to the July 29 Gross Domestic Product (GDP) report by the U.S. Commerce Department.

The Associated Builders and Contractor's Chief Economist Anirban Basu reports nonresidential fixed investment in structures jumped 8.1 percent in the second quarter following a 14.3 percent drop in the previous quarter. Fixed investment in equipment and software rose 5.7 percent in the second quarter following an 8.7 percent gain in the first quarter.

“Despite the fact that the headlines for today’s GDP report seem awful, there is actually a significant amount of decent news buried in the data,” said Associated Builders and Contractors (ABC) Chief Economist Anirban Basu. “Much of the slowdown in economic growth is due to a deceleration in consumer spending, but other aspects of the economy, including exports, investment in structures and investment in equipment and software expanded robustly during the second quarter.

“Consumption slowed largely because of higher food and energy prices. The question was whether businesses would follow the path laid down by consumers or continue to remain in expansion mode. The answer is that businesses continued to position themselves for growth opportunities,” Basu said.

“Sadly, corporate momentum and confidence may not last,” said Basu. “Given the ongoing shakiness among consumers in light of high and rising unemployment, and lingering uncertainty in Washington, inventory investment is unlikely to pick up significantly in the near-term. That will lead to weakness in orders and production. Read More.