construction negotiations...• review contract • price risk • develop and rank list of...

37
© Bradley Arant Boult Cummings LLP Attorney-Client Privilege. CONSTRUCTION NEGOTIATIONS I. Contracts November 6, 2017 Presented by: Bryan Thomas

Upload: others

Post on 15-Jul-2020

1 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

©Bradley Arant Boult Cummings LLP Attorney-Client Privilege.

CONSTRUCTION NEGOTIATIONSI. Contracts

November 6, 2017

Presented by: Bryan Thomas

Page 2: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

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

Page 3: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

A. Know The Deal

Page 4: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Know The Deal

What Happens if there Isn’t a Contract?

• Does it have to be in writing?

• Signed?

• Oral?

• Is your word your bond?

• Does it cover every issue? Incomplete?

• Price

• Scope

• Time (maybe)

• Absent agreement, the general rule is that Contractor

has the risk of performing, no matter how hard.

4

Page 5: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Know The Deal

Where is the Leverage?

• Who is the Owner (and GC)?

• Is there already a contract in place?

• Is there a tight timeframe?

• Do they need you or do you need them?

• Is it specialty work?

5

Page 6: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Know The Deal

What is the Governing Law?

• Public Project

• FAR or State Statutes

• Bond Requirements

• Private Project (What State?)

• Prompt Payment Act Requirements / Retainage Limitations

• Trust Statutes

• Indemnity Limitations

• Construction Fairness Statutes

• Pay if Paid Provisions & No Damages for Delay Provisions

• Lien Rights / Payment Security

• Implied Warranties

• Statute of Limitations / Repose

6

Page 7: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

B. Develop a Strategic

Approach

Page 8: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

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

Page 9: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

• 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

Page 10: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

▪ 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

Page 11: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

C. The Deal Points

Page 12: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

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

Page 13: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Schedule

• Schedule • Start Date

• Conditions & Assumptions

• Duration & Sequence

• LDs (can you make them into a shield?)

• No Damages for Delay Provision -

• Substantial Completion• Why does it matter

• How is it Defined?

• Objective?

• Reasonable?

13

Page 14: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Payment & Changes

• Limitations on Recovery for Changes

• Payment Terms • Pay-if-paid can you turn it to a pay-when-paid

• Is Pay-if-paid enforceable? Can this be a ‘give’?

• ‘Costs’?

• How are they defined?

• Can you agree on general conditions, overheads,

profits?

• Auditable? Under what Procedure?

• Payment Mechanism – SOV or Costs?

• Add A Suspension/Termination Right for Nonpayment?

• Force Majeure –• Can it mitigate a major risk with a tweak or two?

• How Broad?

14

Page 15: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Indemnity, Defects, and Back Charges

• Indemnity• Limit to Insurance Limits?

• Can you Limit Scope?

• For Just Third Party Claim?

• Defense Obligations

• Backcharges• Right to Cure – Time Period

• Can you incorporate a favorable “Back Charge

Policy”?

15

Page 16: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Termination &

Dispute Resolution Provisions

• Termination Conversion Provisions

• Convenience Termination Payments

• Dispute Resolution- Same or Different Related

Contracts?• Arbitration or Litigation

• What Rules?

• Mediation Requirement?

• State Specific Statutory Scheme for Defect

Litigation?

• Venue is Critical for Leverage

• Attorney Fee Provisions

16

Page 17: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Questions ?

Bryan Thomas

[email protected]

615-252-2318

Page 18: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

©Bradley Arant Boult Cummings LLP Attorney-Client Privilege.

CONSTRUCTION NEGOTIATIONSII. Waivers, Changes, and Settlements

November 6, 2017

Presented by: Bryan Thomas

Page 19: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

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?

Page 20: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

A. Payment Applications and

Waivers

Page 21: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Lien/Claim WaiversPurposes:

1. Waiver of Lien

2. Representations – No other Changes/Claims

3. Claims Waiver

Page 22: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

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

Page 23: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Lien/Claim Waivers

▪ Negotiation Tactics

– Reservations

• Retainage

• Changes – Change Request

• ‘*’

• Limit to ‘known’

– Email Reservation is better than nothing

– Releasing Lien vs. Releasing Claim

Page 24: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

B. Negotiating Changes

Page 25: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Handling Changes:

25

Page 26: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Handling Changes:

Be Prepared

26

▪ 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

Page 27: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Handling Changes:

27

▪ 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

Page 28: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Handling Changes:

28

▪ 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

Page 29: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Handling Changes:

What is a Change under your Contract?

• Is a Change Specifically Defined?

• Does it have to be a material change?

• Are there other provisions defining specific Changes

• Differing Site Conditions

• Force Majeure

• Weather Clause

• Price Escalation Provisions

• Etc.

• Don’t forget about ‘Constructive’ Changes?

• Proceed pending dispute?

29

Page 30: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Handling Changes:

Mechanisms for Changes in your Contract?

• Mechanisms For Change

• Change Order (Explicit or Constructive)

• Change Directive (If in the Contract)

• Force Majeure (Specific Procedure?)

• Who has the Authority to Issue a Change?

• Is Notice of a Change Required?

• Does the Change Have to be in Writing?

• Is There a Writing Requirement? Waiver?

• What about the Release in the Change Order? (What

about all the indirect costs?)

30

Page 31: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Handling Changes:

Notice

• What Are The Contract Requirements?

• How Long do I have?

• Who do I send it to?

• How do I send it?

• Confirm Receipt

• Should I Provide Informal Notice First

• Can this be resolved short of Contractual Notice with a

meeting or phone call?

• Careful with what you put in writing.

31

Page 32: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Handling Changes:

Notice

• What Should the Notice Say?

• Keep it Simple

• This is an opportunity to create a great piece of

evidence

• Something a Judge or Arbitrator will Understand

• Careful with Narrow Wording

• Do not Limit the Reasons

• Avoid Quantifying Damages

• Don’t Forget Impact

• Provide an Opportunity to Cure?

• Broadly Reserve Your Rights

• Notice to Surety?

32

Page 33: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

C. Job Closeout and

Settlement Considerations

Page 34: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

▪ 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

Page 35: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Negotiating the Closeout / Settlement

• Project Closeout

• Retainage – Leverage?

• Does Final Payment Waive any Claims?

• Settlements

• Release of Lien held in Escrow for Payment?

• Timing of Payment

• Is it Conditional? What is your Remedy?

• How Broad is the release

• Known and Unknown? What Parties?

• What is carved-out from the waiver

• Latent Defects? Warranties?

• A Covenant not to sue?

35

Page 36: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Questions ?

Bryan Thomas

[email protected]

615-252-2318

Page 37: CONSTRUCTION NEGOTIATIONS...• Review Contract • Price Risk • Develop and Rank List of Changes/Exclusions • Should you limit changes, propose a new form, or work your changes

Thank You.