Author Archives: Laticia King

2017 Spring Leadership Conference

Last week, COAA held the 2017 Spring Owners Leadership Conference in St. Louis. It was three days of insightful and compelling speakers and presentations. Nearly 200 design, planning, and construction industry professionals were in attendance. Key speakers included Joe Takash, Anna Leavey and Steve Jones.

2017STL_COAA_DWP©17_-3383During the three days there were educational sessions including Smart Buildings Make Smart Cities: Opportunities for Better Communities led by Paul Doherty from The Digit Group. Doherty discussed the importance of technology in design and the Smart Cities movement. Other noteable presentations included A3s and More: Start Your Lean Journey led by John Bechtel and Jack Mumma andTruth Owners Seldom Hear led by Joe Takash of Victory Consulting just to name a few.

Attendees were able to re-connect with colleagues and discuss in great detail relevant technological advancements and state of the industry. Along with the great speakers and exhibits, The Spring Leadership Conference saw the first ever appearance of the COAA Conference App and charging stations sponsored by Clayco.

2017STL_COAA_DWP©17_-3188Last week was not just about honoring those who currently work in the industry, but to also take the time to support future construction owners. COAA awarded this year’s Albert E. Phillips Scholarship to two deserving students, Saul Lopez and Curtis Lucas. These students from Texas are currently in Construction Management programs and COAA is excited to help them continue their educational journey.

Our Spring conference was a great success, and we are looking forward to our Fall Conference in Tampa in November.

Look for a full review and pics in the next issue of Owners Perspective.

COAA begins database transition

In 2016, ISSI, the company that currently supports COAA’s IMPak membership database was purchased by Impexium. As a result of this acquisition, over the next few months ISSI will begin to phase out all support of IMPak requiring COAA to move its membership database to a new and more robust platform.

Unfortunately, in order to complete this transition, the online registration portion of the COAA website will be unavailable from February 1 through February 8. We apologize for any inconvenience this may cause, however, if you’d like to complete registrations for our upcoming webinar, chapter workshops, OTI course, Spring Owners Leadership Conference, submit a new member application or renew your membership during this time–pdf registration forms will be available for you to do so and email back to COAA.

We realize there is no good time to make this transition and to have our online registrations inaccessible, but we must act now in order to ensure a smooth and seamless transition with our new vendor.

Looking ahead, we are excited that the new database management system provides enhancements that will benefit both COAA staff and members alike.
  • COAA staff will have enhanced ability to capture, segment, organize and analyze data about our membership and the association as a whole.
  • Member-facing pages and forms will be responsive and members will have access to association specific resources from any device (phone, tablet or desktop) on any browser.

If you have questions, please contact COAA at 800-994-2622.

Common Issues in Construction Claims

By Scott Lowe

There are several common issues we end up debating and that are often at the heart of a claim. These issues are:

Proper Interpretation of the Contract

Now, if the issue’s small, ultimately the interpretation issue can often be overcome, but if it’s associated with thousands, or worse, millions and millions of dollars in potential added costs, then the proper interpretation of the contract becomes a common bone of contention.

Delays

Delays are an issue in 99 percent of the claims I get involved with. It appears that it’s hard for the project team to answer questions related to delays, to come up with a way of measuring the delays that everybody can agree to, and that everybody can use as a basis for resolution of their differences.

Inefficiency

Efficiency has become more and more common of an issue. When I first started evaluating claims in 1985, inefficiencies were a rare component of a contractor’s claim. Now, it seems like virtually every claim I pick up has inefficiency as a significant component. If delays are hard to measure, inefficiencies are harder to measure.

I was in a mediation last week, and the mediator said if delays are hard to resolve or measure, then inefficiencies are the square of that in terms of difficulty. I’m not sure I quite agree with the square part, but I would say that inefficiencies are typically more difficult to evaluate than delays.

Acceleration

Tying those two things together, delay and inefficiency, is the issue of acceleration. If we have delays in a project, sometimes there’s a need to accelerate to mitigate those delays. And oftentimes, that acceleration results in alleged inefficiencies. This is often the worst case in terms of sorting out the issues between the parties.

Costs

Finally, one of the things that are often very difficult to sort out in claim situations are the costs, particularly costs related to delays and inefficiencies. And I would say probably more with regards to delays than inefficiencies.

Source: Trauner Consulting

Scott Lowe is a Principal of TRAUNER and is an expert in the areas of critical path method scheduling and construction claim preparation and evaluation, and specification writing. He can be reached at scott.lowe@traunerconsulting.com.

COAA’s 2016 Fall Owners Leadership Conference

Over 250 Owners, contractors, service-providers, and construction stakeholders joined COAA in Atlanta, Georgia this November for its 2016 Fall Owners Leadership Conference.

Dubbed “Hot Trends, Cool Ideas 2.0,” the event took over the capital city’s InterContinental Buckhead Atlanta for three days of networking, expert-led presentations, interactive sessions, trade exhibitions, and awards presentations.

“Returning to Atlanta was an inspired choice, especially during a period of tremendous growth and exciting developments which fit perfectly with our theme,” says Dean McCormick, COAA President.

conferencesession

There was no shortage of sessions to take home from this year’s conference. Among them were The Smithsonian Asks…What are you Doing to Satisfy Your Clients, led by the Smithsonian Institution’s Michael Carrancho and Client Savvy’s Ryan Suydam; a behind the scenes look at the new Children’s Hospital of Michigan’s (CHM) Specialty Center; numerous project case studies; relationship building presentations; and the always popular Owners’ Roundtable, to name just a few.

Attendees were also invited to browse the COAA Exhibit Hall,  connect with colleagues over numerous networking breaks, and conclude the event with an offsite tour of Atlanta’s Porsche Experience Center and Headquarters.

conferencespeaker

As is custom, this year’s conference included nods to COAA 2016 Project Leadership Award winners. They included:

Gold Award
Northeast Georgia Medical Center Braselton: New Satellite Hospital

Silver Awards
The City of Antonio: Henry B. Gonzalez Convention Center

Ohio State University: Biomolecular Engineering and Chemistry Building

Special Award
The Port Authoriy of New York & New Jersey: One World Trade Center

[Read the full COAA 2016 Project Leadership Awards press release]

Further recognition was paid to Larry Blouin, executive director of Capital Project Delivery at the University of Chicago, and Kyle Majchrowksi, senior project executive of Banner Health in Greeley, Colorado, who were both elected to COAA’s Board of Directors. Congratulations also went out to Lisa Berkey and Stuart Adler, who were re-elected.

Look for a full review of the 2016 Fall Owners Leadership Conference and its award winners in the upcoming edition of COAA’s Owners Perspective Magazine.

Safety First: Why Should Owners Care?

By Charlie Bacon

Why should Owners care about safety being a key driver of success on their projects? There are, in fact, very tangible benefits for virtually any project that can come with just small investment of your time and money. As such, it’s important to shift the idea of safety from a company “priority” to a company “culture,” since doing so is the key to achieving great – and incident free – project outcomes.

Twelve years ago, I took over the helm at Limbach, a national mechanical and electrical specialty contractor that offers design, construction, and service for large, complex commercial buildings. My experience since has touched on all aspects of the design, construction, and ongoing maintenance of buildings over thousands of projects.

In 2000, however, I had a wakeup call on the subject of safety after several fatalities occurred at the company where I then worked. It was then when I learned about another way to look at safety and embarked upon a transition at that firm to incorporate an integral approach to worker heath and wellbeing. That approach effectively shifted the company’s views on safety from that of a priority to a core aspect of its culture. And it has made a huge difference.

In that same year, we launched Incident & Injury Free (IIF). Today many contractors and EPC firms have adopted similar programs, driving safety in the industry to a new level. It’s wonderful to see these changes being realized since more and more people are going home at the end of every shift without incident, and more and more projects are finishing as home runs, with safety being a catalyst to those successful outcomes.

Setting a Safety Foundation

So how do Owners influence safety? Consider that outstanding project safety outcomes do not happen because safety is made a priority. Success is delivered when safety is culturally embedded in the project.

In my experience, project success is determined by the Owner. They choose the approach to a project; select the design professionals, consultants, and contractors; and determine what contracting method will be adopted. The Owner also provides expectations to the project stakeholders of what that success will look like at the end of the project or program.

Whether it’s stated or not, the Owner also defines the culture of the project. How? Design parameters are provided; the budget, schedule, and quality objectives are established; and safety is addressed as a priority since the Owner wants all the participants to deliver safe outcomes. I would hope the majority reading this would agree that their successful projects typically also enjoyed great safety outcomes. I would argue that on those projects, safety was, in some shape or form, culturally embedded in the execution of the project. A project with safety embedded in the minds of the project team and craft workers typically leads to higher execution quality, as well as on – time and on-budget project delivery. The attitude that safety costs money, which is a common response (or a typical thought that most won’t admit to), is not the case. Indeed, I would argue that safety pays huge dividends.

How is any cultural element embedded in a company, an institution, a project, or even a family? Just as the CEO of a company sets the tone for its culture, it’s determined by the leadership. It may not be written down, but the actions of the leader are adopted by the majority. So in our case, the Owner of a company defines the culture.

After all, as the head turns, the body follows. Culture is determined not by words in a Values Statement, but through a leader’s actions. Leaders are closely watched by their people, and the majority of staff fall in line while those that don’t either self-select out or are shown the exit.

Safety Culture Advantages

The tangible benefits are many when a project enjoys great safety outcomes. For one, I would start with the comments around the idea that lean management principles are naturally adopted. Lean is a growing focus in the design and construction industry. Planning one’s work around outstanding safety outcomes each and every day not only leads to the elimination of injuries, but causes foremen and craft workers to look ahead and eliminate barriers to smart and timely execution, which eliminates wasted efforts. More work in place and less rework equals better quality.

Secondly, the morale on projects improves when supervisors genuinely care about the craft workers’ wellbeing. This leads to the craft workers really caring about their work, which then leads to higher quality outcomes. Finally, as an Owner, you will feel great that you led such a successful effort. I caution you, however, that no one will thank you for getting them home safe at the end of every shift. Please take this last point as a “feel good” aspect of the job.

Getting Started

How do you create a safety culture on your projects? I could go on about each of the following points in depth, but for the sake of a quicker read, here are the basics:

1. With the Owner’s in-house team, discuss the safety goals of the project just as you would discuss budget and schedule. Then, write down your safety expectations.

2. Assign staff to come back with a plan of action around safety. I strongly suggest they employ a behavioral-based safety consultant if this is your first endeavor, so as to shift from a priority to a cultural focus, which are small dollars compared to the overall investment. If you stay true to the plan, the ROI will be present.

3. When selecting design professionals and contractors, present your project plan and start with safety, followed by budget, schedule, and quality objectives. Reinforce the plan and develop jointly agreed upon expectations. Monitor the commitment to the expectations on a quarterly basis with the principals of the firms you employ.

4. Start all meetings with a safety moment. It could be about the project or some other personal experience. It takes two minutes, but sets the tone of the session and reinforces the idea that a cultural change is in the works.

5. Remember that set backs may occur. Don’t give up; use them as a learning experience.

As noted before, as the head turns, the body follows. Owners can make a huge difference on their projects if they lead the project with a safety focus. You will realize better financial, schedule, and quality outcomes, as well as feel a sense of personal accomplishment knowing you did a great thing for the hundreds (if not thousands) of people that helped create your project.

Charlie Bacon is Chief Executive Officer of Limbach Facility Services

Owner Alerts – Fall 2016

By John Sier

Construction necessarily occurs in the legal environment, which can be unique for each state, district, or circuit. Changes and developments can take place gradually or unexpectedly, and most changes will affect contracts already in place as well as future projects. COAA is a great resource for maintaining currency on industry evolution and identifying best practices.

Delay damages are different from disruption damages, as are direct damages from consequential damages

The contractor in County of Galveston v. Triple B Services, LLP completed a road widening project according to the contract time, but sued the County for breach of contract because the County was slow in performing some of the utility relocations, which resulted in the cont ractor resequencing some of the original work and performing more hand-work and rework. The contract established a baseline schedule, and the schedule included dates by which the County was to move some utilities including gas, water and fiberoptic cables. The contractor argued that the County did not move the utilities until nearly a year later than scheduled. The contractor claimed to have incurred additional costs to timely complete the project as a direct result of the County’s alleged delay in moving the utilities. These costs included additional costs to handform manholes, set and reset barricades, extended field office overhead, additional labor, equipment, street cleaning, flagging, and traffic control, along with lost profit and markup on those costs.

The County argued that the statutory waiver of sovereign immunity in Texas only applied to “delay damages” and not to “disruption damages.” The contractor’s expert explained that delay damages were time-based costs while disruption damages were task-based, but disruption damages could result from a delay. Since the project did not extend beyond the original contract completion date, the damages were described as disruption rather than delay. The County argued to the trial court that the damages sought were not “delay damages,” so the contractor was not entitled to recover against the County. Both the trial court and the Texas Court of Appeals disagreed with the County in reviewing the statute in question and the definitions of “delay damages” and “disruption damages.”

The Court of Appeals noted that delay damages arise out of delayed completion, suspension, acceleration, or disrupted performance and compensate the contracting party that is injured when a project takes longer than the construction contract specified. On the other hand, disruption damages are for a project that may be timely completed but compensates the contractor for a reduction in the expected productivity of labor and equipment. As noted by the Court, an event could both disrupt and delay a critical path activity potentially resulting in a project that finishes on time but at greater expense because of the disruptive events or scheduling errors.

The statute in question, Tex. Loc. Gov’t Code Ann. § 262.007(b), allowed for recovery of damages against the County under limited circumstances, such as: (1) the balance due and owed by the county under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of Owner-caused delays or acceleration…

In words that only a lawyer could love, the Court described the issue: “[w]hether ‘disruption damages’ can be damages resulting from ‘Owner-caused delays or acceleration’ hinges on the interpretation of the words ‘delay’ and ‘direct’ and the phrase ‘under the contract.’” The Court then turned to dictionary definitions of delay as meaning to impede or hinder together with a review of other cases from across t he country to determine that the ordinary meaning of the word “delay” encompasses both delays to the final performance date and delays to specific tasks that must be completed under the contract.

Next, the Court examined the more challenging determination of a “direct result.” The statute has been found to exclude consequential damages, so the statute is similar in that regard to many industry contract forms. Direct damages may be recovered, but consequential damages may be waived or excluded. The Court noted that, “direct damages compensate the plaintiff for a loss that is conclusively presumed to have been foreseen by the defendant as a usual and necessary consequence of its wrongdoing.”

Again, only lawyers and judges can unabashedly get away with such circular definitions. In reviewing the elements of the claimed damages, the Court clarified by listing “direct” elements of damages such as its additional costs to hand-form manholes, set and reset barricades, and incur additional labor, equipment, street cleaning, flagging, and traffic control. However, the Court noted that lost profits are a typical example of a non-direct, consequential damage that are waived or excluded.

Both ConsensusDOCS and the AIA include some form of waiver of consequential damages. The ConsensusDOCS form allows the parties to identify particular types of damages that are not waived or are preserved. Both clauses recognize that direct damages remain recoverable by both parties. The challenge will always be definitional. While the ConsensusDOCS forms prompt the parties to have a more robust discussion of damages being waived or preserved, the categories of damages should always be a topic of discussion along with the dispute resolution mechanism in establishing the contract language.

Liquidated damages for delay in a public works contract are examined prospectively at the time of contracting, not at the time of imposition

Some contracts lend themselves to liquidated damages for delays, and the ConsensusDOCS forms contain prompts for the parties to discuss methods of calculating or agreeing to liquidated damages at the time that the contract is being negotiated or executed. The Ohio Supreme Court in Boone Coleman Construction v Village of Piketon reviewed a situation where the liquidated damages imposed exceeded forty percent of the total value of the contract and found that the daily damages were reasonable at the time of contracting, so the total damages imposed were reasonable. The contractor was awarded a contract for $683,300 to perform road widening and install a traffic light in Piketon, Ohio, with a performance period of 120 days to avoid imposition of liquidated damages of $700 per day. Piketon granted one extension, but refused f ur t her ex tensions. The contractor finished 397 days late and had not provided the contractually-required notices for additional compens at ion. W hen the contractor sought final payment following completion, Piketon asserted entitlement to $277,900 in liquidated damages. The trial court awarded t he liquidated damages, but the Ohio Court of Appeals reversed, which resulted in the review by the Ohio Supreme Court.

The contractor asserted that imposing liquidated damages of forty percent was unreasonable and disproportionate in the application of the liquidated damages to this delay and amounted to an impermissible penalty. The Ohio Supreme Court reviewed the common definition of a penalty as a “sum inserted in a contract, not as the measure of compensation for its breach, but rather as a punishment for default, or by way of security for actual damages which may be sustained by reason of nonperformance, and it involves the idea of punishment. A penalty is an agreement to pay a stipulated sum on breach of contract, irrespective of the damage sustained. Its essence is a payment of money stipulated as in terrorem of the offending party….” The Latin phrase in terrorem means exactly as it sounds – to induce fear by a threat – and provides the root for English word “terror.” A penalty is meant to scare one party into performing the contract to avoid the imposition of the liquidated damages regardless of whether the other party suffers any damages as a consequence of the breach.

However, the Court reviewed the liquidated damages as described in the contract as imposing a daily rate rather than a stipulated sum, which is more reasonable when related to the estimated damages resulting from a delay. The Court rejected a retrospective analysis looking at the total amount of liquidated damages rather than the daily rate. Instead, the liquidated-damages provision should be examined in light of what the parties knew at the time the contract was formed: “This prospective or ‘front end’ analysis of a liquidated-damages provision focuses on the reasonableness of the clause at the time the contract was executed rather than looking at the provision retrospectively, i.e., ascertaining the reasonableness of the damages with the benefit of hindsight after a breach.”

The Court noted that the amount was large only because the contractor failed to complete the project for more than a year after the agreed upon completion date, with full awareness of the consequences.

If the parties make a reasonable assessment of the potential damages resulting from a delay and identify a daily rate that is supportable, the fact that an extended delay may result in the imposition of significant liquidated damages may not invalidate those damages. However, both parties should exercise great care in formulating a realistic calculation of daily damages. Some formulae may have sliding scales of damages depending on the potential or likely losses to be experienced for extended delays. The important point is to seriously consider and discuss the applicability and desirability of liquidated damages in any particular project.

Enrolled subcontractors in an Owner or contractor controlled insurance program may be entitled to immunity from suits by employees of other subcontractors

Owner or Contractor Controlled Insurance Programs (OCIP/ CCIP ) s o m e t i m e s are implemented on larger construction projects that satisfy state statutory requirements to allow the Owner or Contractor to procure insurance, including worker compensation insurance, on behalf of all of the project participant s or “enrollees.” In exchange for reducing the subcontract price by the amount of the insurance costs provided for the project, the subcontractor is enrolled in the program and entitled to the coverages of the various policies. Many Owners experience savings in the cost of premiums and claims-handling, and litigation relating to claims by third-parties can be reduced through an OCIP/CCIP. However, each project must be assessed individually along with any state law requirements. In most states, employers are granted immunity from being sued by employees for work-related injuries, subject to certain exceptions. However, a particular subcontractor is not immune from suit by the employee of another subcontractor who may be injured on a construction project. That dynamic changes entirely for subcontractors enrolled in an OCIP/CCIP as discussed by the Supreme Courts of Texas and Ohio. In Stolz v J&B Steel Erectors, Inc., an employee of the concrete subcontractor who was injured on the Horseshoe Casino project sued the general contractor and other subcontractors for his injuries. The general contractor had implemented a CCIP under the authority of the Ohio Bureau of Workers Compensation, and the trial court granted the general contractor immunity as the “self-insuring employer” but denied that immunity to the other subcontractors. The parties sought review by the Ohio Supreme Court who found that the statute granting immunity to the “self-insuring employer” who did not actually employ all of the workers on the site compensation scheme provides immunity to “subcontractors enrolled in a CCIP from the claims of employees of other enrolled subcontractors who are injured or killed while working on the project, provided that the injury, illness, or death is compensable under Ohio’s workers’ compensation laws.”

Similarly, in TICEnergy and Chemical, Inc. v. Martin, an employee of the Owner, Union Carbide, was injured on a construction project and sued one of the subcontractors for causing his injuries. The Owner had established an OCIP, and the subcontractor was enrolled in the program. The Texas Supreme Court noted that in the absence of the OCIP, the subcontractor would have no legal basis to argue immunity, but the creation of the OCIP consistent with the statutory scheme entitles the subcontractor to the same immunity as the employer. One of the benefits of the OCIP/CCIP implementation is the presumed reduction of litigation between parties seeking indemnification since the same policy covers the third-party liability claims. These two decisions illustrate another potential benefit of an OCIP/ CCIP in reducing the litigation between injured employees and other subcontractors. This is another factor when evaluating the costs and potential savings of an OCIP/CCIP, but any decision should be made carefully and with the assistance of a skilled insurance counselor who is familiar with construction risks.

Building Collaboration Through Constructability Reviews

Article by Steven Massaro

As an industry, construction is generally a stressful experience for Owners. Building Owners rely on the expertise of architects, engineers, and contractors to manage multi-million dollar projects. They put complete faith in others to design a building to fit specific needs, develop an estimate, and plan a schedule with targeted budgets and timeframes, as well as trust that the building is delivered safely with quality craftsmanship. All of this can be overwhelming for an Owner. This is why an agency construction manager is hired.

One major function of a construction manager (CM) is to conduct a thorough constructability review. Our definition of a constructability review is the CM’s detailed review of the architects’ and engineers’ design development documents to ensure they are complete and clear so that the contractors have the best opportunity to safely complete the work with minimal interruptions or inefficiencies, and stay on schedule and within budget — all while delivering the highest quality of craftsmanship.

In theory, contractors should not begin a project without clear design documents from the architect and engineers. However, all too often that is the case, yet the constructability review eliminates this problem.

There are many benefits in conducting a thorough constructability review. In bringing the team together early, you are creating a collaborative environment where the CM and architect are on the same playing field for the core purpose of ensuring a successful project for the Owner. Within this collaborative environment, team buy-in is encouraged to produce a “tight” set of documents for the Owner.

In preparation for the constructability review, the team will meet to determine the scope of review, the CM’s deliverables, the architects and engineers deliverables, Owners’ deliverables, and to determine the schedule. When the architect has completed the design documents, they are now ready for the CM to bring their contractors’ perspective into play. The CM will utilize AIA’s best practice phase checklists and break the drawing sets into sections for site, structure, MEP/FP, data, and food service.

The overarching goal of this process is to identify potential construction risks before the construction team is mobilized. A thorough constructability review will scrub the documents to identify any gaps or unclear information that may come up in construction that will lead to RFIs and change orders. In turn, the architects and CM will spend less time answering and responding to vague information, and the work will pace ahead on schedule.

Another benefit is bid coverage. When the documents are clear, the bidder has lower risk, and therefore the competition between bidders is high. The Owner will see more buy-in from the primes and/or subcontractors, and contractors are more likely to reduce or “cut” their numbers due to good clarity in documents.

Working in collaboration does not mean that conflict will not occur, but how you choose to handle the conflict is what leads to project success. Massaro recently completed a constructability review for a high school renovation and addition project. The project is approximately $120M and close to 700,000 square feet in size. The architect, Owner, and us as the CM were all new to each other and were working through the early stages of building team trust. The timing of our review was just prior to bid and incorporated a team of designers and construction professionals focused in various disciplines. Our review became the basis for our recommendation to the Owner that the bid date be pushed back to allow more time for the design to be completed, and for the designers to coordinate documents.

In public low bid procurement, the risk is too great to leave gaps in scope at bid day. Our recommendations initially caused tension among the team and conflict arose; however, we worked through this conflict together. The postponed bid produced better bid documents and ultimately, a successful bid day for the Owner. The entire team was better for having resolved this conflict together and before bid day. More importantly, the Owner was provided with a better set of documents to start out on a forty-month construction schedule.

In identifying the obstacles before bid day, you are setting your project up for success. The project will bid better, run smoother, and will eliminate the “finger pointing”, therefore leading to a more enjoyable construction experience for the Owner.

Steven Massaro is Senior Vice President of Massaro CM Services, LLC