Under Construction - March 2017


Letter from the Editor

Welcome to the spring 2017 edition of our Under Construction newsletter. We hope 2017 is off to a good start for you and your company.

An issue that seems to commonly come up in cost-plus contracts is whether certain insurance costs are considered a cost of the work. Typically, under a cost-plus contract, an owner pays a general contractor for all of its allowed costs. Within those costs, there are usually insurance costs and subcontractor costs. Subcontractor costs also often include insurance costs and an issue is sometimes raised by project owners when those general contractors and subcontractors utilize some form of self-insurance or large-deductible insurance coverage on a cost-plus contract. The first article in this newsletter will take a look at this dilemma, make some owners aware of the issue, and discuss things that general contractors and subcontractors can consider doing to protect themselves.

Recent industry reports indicate the business value of Building Information Modeling (BIM) for Owners is increasing. Our second article reviews this trend, discusses BIM and addresses how owners can benefit by maximizing a building’s value throughout its lifecycle.

Troubled construction projects are often marked by failures to cooperate, failures to perform or failures to generally progress the work. In these circumstances, there are as many options and remedies as there are reasons. When these conditions occur repeatedly, it is sometimes tempting for the owner to consider terminating the contractor for default. Even if the parties’ contract contains a robust default termination provision, owners should think twice before issuing a default termination. Our next article will discuss some default termination pitfalls and provide some practical thoughts based upon decisions from courts, arbitrators and boards.

A recent California Court of Appeal decision has turned the tables on a general contractor and rejected the general contractor’s promissory estoppel argument that it could enforce the subcontractor’s bid it relied upon in submitting its price to the owner. Our fourth article will discuss how the outcome of this case should alert general contractors and subcontractors regarding reviewing their procedures in making or accepting bids and awarding subcontracts, particularly when the general contractor uses standard forms at odds with material terms in the subcontractor bid.

Our final article will provide some timely information on state and federal actions to fund and streamline development of large scale infrastructure projects. The State of Utah is following the Trump administration with significant appropriations, authorization of private/public partnerships and efforts to streamline permitting for highway projects, pipelines and transmission lines.

We hope you will find these articles informative and enlightening. Please let us know if you want us to address a specific construction issue in a future newsletter. Enjoy spring!

Jim Sienicki

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