Articles and Publications – Page 7

Procurement Strategies for Major Rail Projects: International Railway Summit 2015

Mar 16 2015

London partner Matthew Smith recently attended the International Railway Summit 2015 in Barcelona. The International Railway Summit provides a meeting ground for senior decision makers from the world’s key rail operators, transport ministries and solution providers. Matthew had the opportunity to discuss the importance of risk assessment, project delivery structure, and risk allocation in rail contracts as a presenter at the conference.

To view a copy of the full presentation titled “Procurement Strategies for Major Rail Projects,” please click here.

Health Care Industry Finds Cure to Save Time and Money on New Facilities

Feb 05 2015

By Gregory R. Andre, K&L Gates, Chicago

To meet the demands of an aging population and health care reform, many new hospitals and other health care facilities are being built. These projects are typically large, costly and complex and, therefore, merit careful attention to cost control and efficiency. The health care industry is using new teamwork approaches to design and construct new facilities that significantly reduce project costs, shorten schedules, minimize claims and disputes and improve overall project quality.

To read the full alert, click here.

European Court of Justice overturns additional requirements for the marketing of construction products in German Building Rules List

Jan 26 2015

By Christoph Mank and Eva Hugo, K&L Gates, Berlin

On 16 October 2014, the European Court of Justice[1] (ECJ) ruled that German law, which imposes additional authorization schemes on construction products even if they already bear the “CE” mark and are lawfully marketed in other member states of the European Union, violates the right on the free movement of goods on the single European market.

The facts

In the European Union, certain products are marked with the CE symbol to certify their compliance with product requirements under European Union law. Consequently, a CE-certified product is entitled to move freely on the European market and may be freely used for its intended purpose.

Nevertheless, German law, as reviewed by the ECJ, stipulates that CE-certified construction products are subject to additional approvals before their use and sale in the domestic market; such additional approvals are listed in building rules lists (Bauregellisten) A, B and C.

The present case solely referred to building rules list B and three construction products listed therein; namely, pipeline compressions, mineral wool insulating materials and gates, windows and exterior doors. All these construction products had in common was that they were marked with the CE symbol, which meant that they complied with requirements of the Construction Products Directive[2] of the European Union and, therefore, could be marketed and used freely on the European market. However, German public building law provides for additional national approvals for marketing the construction products on the German market.

Due to this practice, the European Commission received numerous complaints from manufacturers and importers who had difficulty in placing their construction products on the German market; the European Commission, therefore, launched infringement proceedings against Germany. Since Germany insisted during the preliminary procedure that the security of buildings cannot sufficiently be achieved by the CE marking alone, the European Commission decided to bring action before the ECJ.

The decision

The ECJ held that the additional approvals set out in building rules list B infringes article 4 paragraph 2 and article 6 paragraph 1 of the Construction Products Directive. According to those provisions, member states “shall not impede the free movement, placing on the market or use in their territory of products which satisfy the provisions of this Directive,” and were, correspondingly, CE-marked. The ECJ ruled that the German approval practice constitutes such an impediment.

The Court further stated that the Directive itself provides for specific procedures in the event that a member state considers the requirements of the Directive to be incomplete and insufficient. Due to the existence of those procedures, a member state is not allowed to arbitrarily impose its own additional requirements.

Consequences

Although the present decision refers only to the three aforementioned groups of construction products, the ruling will be applicable for all CE-marked construction products that are subject to further approvals according to German law. The European Commission, correspondingly, sees a precedent.

Nevertheless, it should be noted that the Court´s decision refers to the Construction Products Directive of 1989, replaced in 2013 by the Construction Products Regulation[3]. Hereafter, the CE marking no longer serves as a proof that the respective construction product complies with the requirements of European law. Now, it only shows that a declaration of performance has been issued by the manufacturer describing the performance of the construction product and its essential features; therefore, it is not clear whether, and to what extent, the member states are allowed to impose additional requirements under the new Construction Products Regulation. However, since the new Regulation also provides for special procedures in the event of incomplete and insufficient provisions, it can be assumed that member states will also not be allowed to impose their own additional requirements beyond the provided procedures. It remains to be seen if Germany will make use of those procedures.

Reactions to the present decision are quite different: while the European Commission and European associations welcome the decision with regard to the right of free movement of goods, German associations fear a decline in quality of construction products.

[1] Case no. C-100/13.

[2] Directive 89/106/EEC.

[3] Regulation EU 305/2011.

How’s the Weather? Construction Contracts Should Be Prepared for Any Answer.

Jan 12 2015

By Ryan D. DeMotte, K&L Gates, Pittsburgh

Mother Nature can often be an unwelcome intruder on a construction project. Heavy rains, snow, ice, wind, extreme cold, extreme heat; there are any number of weather events that can delay a project. While parties to a construction contract cannot control the weather, they can and should anticipate the possibility of adverse weather and address it in their contracts. Prudent contract provisions addressing bad weather events can help owners and contractors minimize the disputes that can develop when rain, snow, ice, and other weather events delay the project.

A common approach is to give contractors additional time but not costs for weather delays. Many commonly-used contract forms provide for weather-based time extensions if the weather event was “abnormal, “unforeseeable,” or “not reasonably anticipated.” Thus, in order to evaluate a request for a time extension based on adverse weather, the parties must first establish the appropriate weather baseline against which to measure the weather event at issue. Was the rainfall unusually heavy during a particular month? Was the temperature colder than previous years? If the contract itself does not define the baseline weather measurement, this can often be a point of dispute between parties. Some parties may try to minimize these disputes by providing detailed provisions for baseline weather measurements in the contract in the form of 10-year averages or other objective measures. Whether or not these types of provisions are useful depends on the project and its sensitivity to weather variations.

The parties must also determine how the weather caused the delay. Did cold temperatures delay paving work? Did heavy winds or sandstorms prevent the delivery and installation of sensitive equipment? In trying to answer these types of questions, the parties may dispute whether the delays were the result of the abnormal weather or the result of other causes.

Finally, owners and contractors need to consider why certain work was being performed during the adverse weather. For example, if, through a contractor’s own early delays it is still working outdoors at a time when it initially planned to be completing the interior of a building, an owner may be able to argue that the contractor is not entitled to an extension for any weather-related delays to its outdoor work. Conversely, if a contractor’s work is delayed by the owner’s delays, it may have a strong argument for any delays it incurs as it tries to complete the work in less-than-optimal weather conditions. A contractor may also be able to claim costs if it is pushed by owner delays into bad weather.

Given the inherent uncertainty of the weather, some parties decide to build into the contract and project schedule a certain number of extra days to absorb any weather delays.

As the above issues demonstrate, owners and contractors should give careful thought to the various types of weather risks their project may face when negotiating a construction contract and creating the project schedule.

Technological Advances in Construction Payment Management

Jan 05 2015

By Jesse G. Shallcross and Daniel E. Raymond, K&L Gates, Chicago

A number of technology companies offer construction billing-management software designed to assist in the construction invoicing and payment collection process by electronically integrating billing, process claims, lien waiver collection, statutory declarations, sub-tier waivers, compliance management and payments.

Construction billing-management software has become increasingly popular among general contractors; a major reason is the simplification of the lien wavier collection process. Before construction billing-management software, most general contractors managed the lien waiver process manually by creating a spreadsheet of all prime subcontractors, sub-tier contractors, and suppliers. This process was time consuming, prone to error, and required updating. Construction billing-management software eases this process by streamlining the collecting and tracking of lien waivers. When a general contractor uses construction billing-management software, prime subcontractors are required to submit their contractor and material supplier information at the beginning of the project or the start of a new contract. The information input by the prime subcontractors automatically appears in the general contractor’s master tracking index. Further, the master tracking index is updated any time a prime subcontractor enters a change—thereby easing the general contractor’s burden of manually creating a spreadsheet and updating it. The real benefit to general contractors, however, comes from construction billing-management software’s automated prime and sub-tier lien waiver collection process. The software allows for electronic signature of prime and sub-tier lien waivers, and the general contractor’s master tracking sheet is updated as the electronic lien waivers are received. As a further benefit, construction billing-management software automatically prevents payments to subcontractors that are missing or include incorrectly submitted lien waivers. As a result of using construction billing-management software, general contractors can be assured a streamlined and efficient lien waiver process.

But, construction billing-management software’s efficiency does not come without a cost. Often, subcontractors are unaware that projects they are bidding on require the use of construction billing-management software; accordingly, subcontractors take a significant financial hit by being unable to include the subscription cost in their bid. The American Subcontractors Association, Inc., addressed this issue with a leading construction billing-management software company a few years ago; in response, the company altered its pricing from pre-transaction to a subscription model, with the idea this would simplify pricing.[1] With the addition of possible fees for the use of construction-billing management software, subcontractors should be even more vigilant in determining whether a general contractor requires the use of construction billing-management software before bidding on a contract.

[1] Letter from Walter Bazan Jr., President, American Subcontractors Association, Inc., to membership (September 2013), available here.

Changes to Building and Construction Industry Payments Act 2004 (Qld) Have Now Come into Force

Dec 22 2014

By Sandra Steele and Marcel Marquardt, K&L Gates, Sydney

The amendments to the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) came into force yesterday. Last minute further amendments to the BCIPA were passed on 26 November 2014, relating to the transitional provisions of the amending Act. Existing contracts are now subject to the new recovery of progress payments procedures, subject to a few exceptions. Industry participants will need to be aware of these recent amendments, particularly coming into the Christmas and New Year holiday shut down period, as the timing of all payment claims, payment schedules and adjudications will be impacted.

To read the full alert, click here.

General Contract Law Update

Dec 15 2014

As part of K&L Gates’ commitment to continuing professional development, the lawyers in our London office’s Energy, Infrastructure and Resources group regularly provide presentations and seminars on a wide range of legal issues.

The attached slides are taken from a presentation by Matthew Smith, Inga Hall and Daniel Lopez de Arroyabe on the subject of recent developments in contract law. The presentation looked at cases on general commercial and contractual issues, as well as focussing more particularly on those relating specifically to construction law matters.

To view the presentation, click here.

Federal Government Issues Advanced Release of Revised Building and Construction Code

Dec 09 2014

By Duncan Fletcher, K&L Gates, Perth and Matthew Parker, K&L Gates, Sydney

The Federal Government has issued an advance release of its revised Building and Construction Industry (Fair and Lawful Building Sites) Code 2014 (Revised Code), which will come into effect when the Building and Construction Industry (Improving Productivity) Bill 2014 (Bill) commences as an Act. Once enacted, the Bill will also reestablish the Australian Building and Construction Commission.

To read the full alert, click here.

Here’s a Tip: There are several ways contracts can help you avoid delays in design approval.

Dec 04 2014

By Ryan D. DeMotte and Richard F. Paciaroni, K&L Gates, Pittsburgh

The design/build delivery model offers owners and contractors the potential for greater efficiencies in the construction process, but if the parties do not carefully manage the design review process, the project can experience unnecessary delays to procurement and construction that can cascade throughout the project.

To read more in an article published in the November/December 2014 issue of Construction Today, please click here.

Reposted with permission.

Enforcing Notice Provisions in Construction Contracts in the United States

Oct 20 2014

By Kimberly L. Karr, K&L Gates, Pittsburgh

Notice provisions are a key part of construction contracts. These provisions typically require a contractor to notify the owner of the project (or an owner-designated representative) when the contractor believes that it is entitled to extra costs or additional time for the project. Notice provisions generally require that notice be given within a certain time period and that the contractor back its claim with supporting information.

Notice provisions are often the source of disputes between owners and contractors. This post provides an overview of common issues that owners and contractors in the United States should consider when negotiating notice provisions and addressing notice of potential claims during a project.

Catagory:Articles and Publications

The facts

The decision

Consequences