Anyone monitoring construction industry trends is aware that the prices of raw construction materials, particularly steel and lumber, have been rapidly increasing since early 2020. Earlier this year, Associated Builders and Contractors reported that iron and steel prices were up 15.6 percent from January of 2020 to January of 2021, and that softwood lumber prices had increased by as much as 73 percent during the same period.

The reasons for these price increases are varied (ranging from supply chain and shipping disruptions to the increased demand for new home construction), and many have their roots in changes introduced to the global economy by the COVID-19 pandemic. Regardless of the explanations for the price increases, the reality is that builders and owners are more frequently facing busted budgets and difficult conversations, sometimes resulting in litigation, about which party is responsible for absorbing the increased costs. As is often the case, the answer to resolving these disputes likely lies in the particular provisions of the contract for construction.

Continue Reading Revisiting Price Escalation Clauses in a Time of Skyrocketing Material Costs

Below is an excerpt of an article published in Construction Executive on April 15, 2021.

Modular construction is literally on the rise. It is rapidly displacing traditional stick-built construction for new commercial, industrial and residential buildings. Over the past decade, an increasing number of health care, education facilities and apartment buildings have been built using modular construction. As the need for housing, and especially affordable housing, has grown as a result of the COVID-19 pandemic, modular construction is becoming increasingly popular.

Recently, the Canadian government, through the Canadian Mortgage Housing Corporation, launched a “Rapid Housing Initiative,” a $1 billion program utilizing only modular construction to rapidly construct affordable housing for its citizens. Similarly, the city of Toronto (which last year approved a plan to build 250 modular homes in response to homelessness) plans to build 1,000 modular homes by 2030. The pandemic also has resulted in an urgent demand for modules for medical facilities and schools. Modular construction allows contractors to build “leaner” and “greener” buildings while increasing quality control and improving site safety and potentially saving valuable time and money.

The modular process involves unique commercial and legal challenges not present in traditional contracting. In order to successfully navigate these challenges and to properly allocate risk, a well-drafted contract is important. Key legal considerations in drafting such contracts include:  Read the article.

In an effort to keep our readers abreast of cybersecurity issues affecting companies in the construction industry, we’re sharing the below post originally published on our Data Privacy + Cybersecurity Insider blog:

The Federal Bureau of Investigations (FBI) recently issued a joint alert with the Department of Homeland Security/Cybersecurity Infrastructure and Security Agency (CISA) that “Mamba ransomware has been deployed against local governments, public transportation agencies, legal services, technology services, industrial, commercial, manufacturing, and construction businesses.”

According to the Alert, the hacking group behind the Mamba ransomware attacks is weaponizing an open source tool used for disc encryption—DiskCryptor—to encrypt entire operating systems of victims. Once the operating system has been encrypted, a ransom note appears and demands payment for the decryption key.

The Alert states, “[T]he ransomware program consists of the open source, off-the-shelf, disk encryption software DiskCryptor wrapped in a program which installs and starts disk encryption in the background using a key of the attacker’s choosing….The ransomware extracts a set of files and installs an encryption service. The ransomware program restarts the system about two minutes after installation of DiskCryptor to complete driver installation.”

The Alert lists the key artifacts, which can be accessed here.

The FBI recommends the following mitigation:

  • Regularly back up data, utilize air gap network security measures, and password protect backup copies offline. Ensure that copies of critical data are not accessible for modification or deletion from the system where the data resides.
  • Implement network segmentation.
  • Require administrator credentials to install software.
  • If DiskCryptor is not used by the organization, add the key artifact files used by DiskCryptor to the organization’s execution blacklist. Any attempts to install or run this encryption program and its associated files should be prevented.
  • Implement a recovery plan to maintain and retain multiple copies of sensitive or proprietary data and servers in a physically separate, segmented, secure location (i.e., hard drive, storage device, the cloud).
  • Install updates/patch operating systems, software, and firmware as soon as they are released.
  • Use multifactor authentication where possible.
  • Regularly change passwords to network systems and accounts and avoid reusing passwords for different accounts. Implement the shortest acceptable timeframe for password changes.
  • Disable unused remote access/RDP ports and monitor remote access/RDP logs.
  • Audit user accounts with administrative privileges and configure access controls with least privilege in mind.
  • Install and regularly update anti-virus and anti-malware software on all hosts.
  • Only use secure networks and avoid using public Wi-Fi networks. Consider installing and using a VPN.

This post was authored by Linn Freedman is also being shared on our Data Privacy + Cybersecurity Insider blog. If you’re interested in getting updates on developments affecting data privacy and security, we invite you to subscribe to the blog.

Below is an excerpt of an article co-authored with Robinson+Cole Health Law Group lawyer Conor O. Duffy and published in Healthcare Facilities Today on March 31, 2021. 

The need to update and implement new processes for delivering healthcare in response to the COVID-19 pandemic has resulted in the adoption of more automation, remote access and monitoring technologies. It also has brought data analytics into treatment and the patient environment. Healthcare providers have shifted from traditional waiting rooms and in-person visits for routine needs to remote check-ins, check-ups and updates via personal health record applications.

Providers increasingly rely on smart grid technologies, cloud computing, medical devices and health monitors connected via the internet of things (IoT), bio-sensing wearables, touchless technology, telehealth, online scheduling applications, electronic health records, virtual and remote triages, AI-based predictive analytics and machine learning, and most recently, interactive floor-plan images used by regulatory inspectors.

These technologies and care-delivery approaches depend on seamless connected systems and instant access to data that create a recipe for cybervulnerability. Decades of HIPAA and extensive penalties for non-compliance ensure that healthcare organizations are cognizant of obligations to maintain the privacy of their patients’ personally identifiable information. Read the full article.

This post is also being shared on our Health Law Diagnosis blog. If you’re interested in getting updates on developments affecting health information privacy and HIPAA related topics, we invite you to subscribe to the blog. 

 

Below is an excerpt of an article published in the Spring 2021 edition of Under Construction, a  newsletter publication of the American Bar Association Forum on Construction Law.

As the construction industry recovers from and adjusts to the effects of the COVID-19 pandemic and prepares for a new normal, post-COVID world, claims for losses of productivity on projects that were in progress when COVID-19 struck will likely increase due to contractors performing work under conditions far different than originally contemplated when they bid the project and signed the contract.  Consequently, as contractors pursue claims seeking compensation for adverse impacts to the productivity on projects shut down or slowed because of the COVID-19 pandemic, and owners defend such claims, documenting causation and accurately assessing loss of productivity will be vital to both parties. While COVID-19 has changed our lives and the construction industry in many ways, it has not changed the fact that claims for loss of productivity remain some of the most contentious, and most difficult to quantify and prove.
Today, contractors must balance common, but often competing, goals of progressing the work to complete projects while at the same time taking unprecedented steps to protect the safety and health of their workers and the public. In addition to impacts due to design errors and omissions, performing work out of sequence or in adverse weather conditions because of delays, or excessive overtime due to acceleration, contractors must recognize that a host of causes—impacts due to social distancing, labor unavailability due to illness, quarantine, owner restrictions and government restrictions, compliance with OSHA and other safety guidelines, medical testing, work stoppages and suspensions, and supply-chain challenges—may result in losses of productivity on projects. To maintain this balancing act, contractors often expend more actual labor hours on the project than planned, resulting in losses of productivity. Successfully identifying, quantifying and proving such losses is critical to a contractor’s financial success, especially in today’s economy.
While the right to recover for losses of productivity is well-settled, there is no universally accepted standard for calculating damages for these claims. Contractors and their experts rely upon various treatises and studies on loss of productivity to present such claims in mediation, litigation and arbitration proceedings. Over the years, courts have decided claims and awarded damages based on different methodologies for quantifying and proving such claims, often leading to inconsistent results. The American Society of Civil Engineers (ASCE), in conjunction with its Construction Institute, seeks to develop consistency and provide guidance through its soon-to-be-published standard “Identifying, Quantifying and Proving Loss of Productivity”.  Read the full article.

Below in an excerpt from a legal update authored by Robinson+Cole Labor and Employment Group lawyers Natale V. DiNatale and Kayla N. West that was issued on March 10, 2021.

On March 9, 2021, the United States House of Representatives passed the Protecting the Right to Organize (PRO) Act. The PRO Act (the Act), if it becomes law, would make vast, union-friendly changes to the National Labor Relations Act (NLRA). The House originally passed the Act in 2019, but it did not make any progress in the Senate. This time, its fate may depend on whether the Senate eliminates the filibuster. Even if the Act doesn’t get through the Senate in its entirety, it may be possible for parts of the Act to pass the Senate and reach President Biden, who has already spoken emphatically about his support for unions and union organizing. Passage of the PRO Act would represent the biggest change in labor law in decades.

Below is a summary list highlighting some of the changes the Act would bring to existing labor law. Read the full update.

Published in the “Legal Beat” column of the Winter 2021 issue of PE, the flagship publication of the National Society of Professional Engineers (NSPE), this article focuses on COVID-19’s impact to the common law as it affects the design professional’s standard of care. Joe and Niel offer a primer on the design professional’s standard of care and share insight on how it’s measured, how COVID-19 might change the standard of care, and how it may impact design professionals’ future engagements. Read the full article.

In December 2020, the United States Department of Transportation (DOT) amended the small business size limit under the Disadvantaged Business Enterprise (DBE) program (section 1101(b) of the Fixing America’s Surface Transportation (FAST) Act (Pub. L. 114-94, Dec. 4, 2015).  The rule, which goes into effect on January 13, 2021, increases the DBE gross receipts cap (averaged over the firm’s previous three fiscal years) to $26,290,000 for Federal Highway Administration (FHWA) and Federal Transit Administration (FTA) related work. This inflationary-based adjustment is an increase over the prior gross receipts cap of $23,980,000 enacted in 2015. The effect of this rule, which is “not considered a significant economic impact on a substantial number of size entities”, is to allow “some small businesses to continue to participate in the DBE programs by adjusting for inflation.” This adjustment should provide relief for some DBEs that were close to exceeding the limits from 2018-2020. Continue Reading DBE Gross Receipts Cap Adjusted for Inflation

In a recent decision likely to have a significant impact upon the way private construction projects in Massachusetts are managed, the Superior Court recently construed the Massachusetts Prompt Pay Statute in the way the Statute (Statute) was meant to be enforced, but contrary to most current construction practice.

In Tocci Building Corp. v. IRIV Partners, LLC, Boston Harbor Industrial Development, LLC and Hudson Insurance Co., (November 19, 2020, Sup.Ct. 19-405), the Court strictly construed the Statute’s payment provisions against a project’s owner/manager (O/M), ordering the O/M to pay the contractor the outstanding balance on several unpaid requisitions because the O/M failed to comply with certain of the Statute’s requirements.

The decision involved the construction of a $3.8M building intended to house office and lab space in the Seaport. During construction, the O/M refused to pay certain portions of seven of the contractor’s requisitions. In response to most, if not all the requisitions, the O/M provided an e-mail or a letter rejecting the invoices in some fashion, but did not comply with the Statute’s exacting requirements for a proper response.  Specifically, the Court held, “While [the O/M’s responses] may have been timely in rejecting some of the Requisitions, they did not specifically reject a Requisition in dispute, did not include an explanation of the factual and contractual basis for the rejection, and did not include a certification that the rejection was made in good faith.”

Notably, the Court rejected the O/M’s claim that its failure to comply with the Statute’s requirements were “merely technical errors”.  In awarding the contractor relief, the Court exercised its seldom-used authority to enter separate and final judgment against the O/M–even though other issues in the case remained unresolved. When ordering the O/M to pay the contractor’s outstanding invoices, the Court reasoned that the Statute’s provisions are “mandatory…and reflect a public policy to ensure that contractors receive prompt payment, or prompt and complete notice of objections to payment requests….”  Equally important was the Court’s holding that “whatever objections [the O/M] may have had under the Contract to the Requisitions were waived”. (Emphasis Added.)

The following are only some of the lessons learned from the decision:

  1. Pay attention to the Statute’s detailed requirements: E-mails vaguely objecting to or commenting upon deficiencies in a contractor’s pay requisitions are simply not enough to satisfy the Statute’s requirements.
  2. Underlying entitlement is not a factor in the Statutory analysis: While it is not clear from the decision as to whether the contractor was truly entitled to full payment on each of its requisitions, the Court’s reasoning demonstrates that entitlement was not a factor the Court considered when analyzing the Statute’s applicability and enforcement.
  3. The decision applies equally to contractors, construction managers, and subcontractors: While the decision applies fundamentally to an owner’s failure to properly respond to pay requisitions, the Statute has plenty of tripwires for contractors and subcontractors who seek to enforce their rights for payment, change orders, etc. The Court’s strict enforcement of the Statute’s requirements means that each of the primary parties to a project will be held to the letter of the law.
  4. An owner who fails to comply with the Statute waives its right to assert contract-based objections to payment: In what may be considered the decision’s biggest takeaway, the Court’s holding appears to extinguish the right of an owner who has failed to comply with the Statute to object to a contractor’s request to be paid for defective work.  More specifically, the Court’s finding that “whatever objections a project owner may have had under the Contract to the Requisitions were waived” seems to imply that a contractor who bills for defective or non-conforming work will nevertheless be entitled to payment just because the owner failed to comply with the Statute’s requisition requirements.
  5. The Statute controls: While this concept wasn’t really the subject of significant debate within the construction bar, the decision puts to rest any doubt that when it comes to contract terms that may conflict with the Statute (or are not as strict as the Statute’s requirements), the Statute controls. Further, the Statute expressly disavows any attempt to contract away its terms or requirements.

The MA Construction Bar has been waiting for a decision interpreting how strictly the Statute would be interpreted since it was first adopted ten years ago. This decision is thus a loud warning bell for owners, their construction agents, their project managers and design professionals (who have construction phase responsibilities) as well as contractors, subcontractors and CM constructors to pay close attention to the Statute’s exacting requirements.

 

[1] Mr. Barra has devoted his career to representing owners, contractors, subcontractors, design professionals and other members of the built environment in drafting contracts, defending and prosecuting claims, and advising participants whose projects are in distress.  Mr. Barra also serves as a neutral construction arbitrator with the American Arbitration Association and is certified as a Mediator with The Conflict Lab in Pittsburgh, PA.

Robinson+Cole has committed to the Culture of CARE, an initiative created in partnership between the Associated General Contractors of America (AGC) and the AGC of Washington to advance the construction industry as the industry of choice for diverse and talented workers by building inclusive work environments in construction firms nationwide.

“At Robinson+Cole we have long fostered an inclusive culture where the diverse backgrounds of all of our attorneys and other professionals are respected and each individual is empowered to succeed. That culture carries through to our client and community relationships,” said Gregory R. Faulkner, Chair of the Construction Law Group at Robinson & Cole LLP and Board Director of the AGC of Connecticut. “We are proud to join our clients and colleagues in the construction industry to build a culture that is diverse, safe, welcoming and inclusive for all.” Read more in the press release.