construction negotiations...• review contract • price risk • develop and rank list of...
TRANSCRIPT
©Bradley Arant Boult Cummings LLP Attorney-Client Privilege.
CONSTRUCTION NEGOTIATIONSI. Contracts
November 6, 2017
Presented by: Bryan Thomas
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
A. Know The Deal
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.
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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?
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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
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B. Develop a Strategic
Approach
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
RiskAllocation
Take On Risk
▪ Insurance
▪ Vendors
▪ Price the Risk
• 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
HOW TO MANAGE THE NEGOTIATION
▪ 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
Drawings & Specs:
Identifying Conflicts & Gaps
C. The Deal Points
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
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?
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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?
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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”?
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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
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©Bradley Arant Boult Cummings LLP Attorney-Client Privilege.
CONSTRUCTION NEGOTIATIONSII. Waivers, Changes, and Settlements
November 6, 2017
Presented by: Bryan Thomas
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?
A. Payment Applications and
Waivers
Lien/Claim WaiversPurposes:
1. Waiver of Lien
2. Representations – No other Changes/Claims
3. Claims Waiver
Lien/Claim WaiversPurposes:
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
Lien/Claim Waivers
▪ Negotiation Tactics
– Reservations
• Retainage
• Changes – Change Request
• ‘*’
• Limit to ‘known’
– Email Reservation is better than nothing
– Releasing Lien vs. Releasing Claim
B. Negotiating Changes
Handling Changes:
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Handling Changes:
Be Prepared
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▪ 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, emails
Handling Changes:
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▪ 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
Handling Changes:
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▪ Typical Changes
– 1. Site Conditions
– 2. Plans and Specifications
– 3. Other Changes (Interference, Delay, Labor,
Weather, Commodity Pricing, 3rd Party
Interaction)
▪ Impacts to Consider
– Costs (don’t overlook cumulative impact)
– Delay
– Disruption & Acceleration
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?
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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?)
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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.
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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?
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C. Job Closeout and
Settlement 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
Post – Completion Management:
Contract & Legal Considerations
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?
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Thank You.