Prompt Pay Means Prompt Pay

Stan Martin – June 18, 2013

A contractor sends an inflated invoice to an owner for a completed project.  The owner fails to pay anything against that invoice – even the amount that had been agreed to.  The contractor eventually files suit, the court awards interest plus penalties of 1% per month on the unpaid balance, and the interest and penalties add almost fifty percent to the original amount due.  There’s a lesson here.

In the case of Dorr v. LaCoste,[1] the Vermont Supreme Court held that the owner had an obligation, under the VT prompt pay act, to pay undisputed amounts upon receipt of an invoice.  Thus, the contractor’s invoice, though initially inflated above what had been agreed upon as the project cost, could not simply be ignored.  The owner was obligated to withhold only that amount which was in dispute, i.e., the amount in excess of the agreed price.  It also appears that the owner did not engage the contractor in any conversation about what the owner thought should be the correct amount.  When the owner chose not to pay anything, and wait for an appropriate invoice, then the penalties of the Vermont prompt pay act came into play.

The lesson?  Ignoring an inflated invoice and not even paying undisputed amounts may result in prompt pay act sanctions, thus enlarging the amount ultimately due.

[1]  2013 Vt. Unpub. LEXIS 109 (Vt., June 2013).

via Prompt Pay Means Prompt Pay : Duane Morris Construction Law.

SB 254A and Oregon’s CMGC Rules Are Overblown

Eric A. Grasberger – June 13, 2013

Oregon Senate Bill 254A and the CMGC method generally garner more attention than is justified. Here is the background.

On a typical non-CMGC project, the general contractor will bid on a complete or nearly complete set of design documents. This is referred to as “design-bid-build.” In public construction, competitive bidding is required by statute to reduce expenditure of taxpayer funds. In the CMGC method, rather than awaiting a complete design, the contractor is chosen early and asked to (1) review the developing design of the architects and engineers, and (2) perform certain other planning and organizational work that theoretically benefits the project. The “early” work is generally considered the “CM” portion of the CMGC scope, while the post-bid or post-GMP (guaranteed maximum price) work is generally considered the “GC” portion.

What is so different about this process? Not much, really, but there are a couple of considerations that differ from traditional design-bid-build. First, because the CMGC is chosen before design is complete, the CMGC is not able to provide concrete pricing at the time it is selected; by the time the design is sufficiently complete to allow pricing, the CMGC has already been chosen. Critics argue (accurately) that this dynamic puts more leverage in the hands of the CMGC during price negotiations because the owner has now invested time and CM dollars in the CMGC and probably does not want to manage a second-round selection process to get a new contractor if the original CMGC’s price is not competitive. While this poses a theoretical problem for owners, the CMGC provides its percentage fee (markup) at the time of selection and is required to competitively bid all subcontractor work, reducing if not eliminating the concerns over cost control and negotiating leverage.

Second, a CMGC is selected not by competitive low bidding (as in design-bid-build), but by a subjective scoring process of many other factors including experience and personnel. Many in the industry criticize this subjectivity as causing favoritism, cronyism, and “beauty contests” that do not lead to the best project for the best value.

Not every project can use the CMGC process. It is typically reserved for larger, more complex projects that justify consideration of factors other than price and which beg for early involvement of the general contractor. The current restrictions on use of CMGC are reasonable and, in my experience, generally followed by public agencies. Despite the simplicity of the method and the existence of detailed statutes and regulations governing its use, the industry has needlessly tussled over CMGC for many years, and public owners have sought out highly paid “experts” in CMGC when in reality it is not substantively different from traditional project delivery methods.

I doubt the new legislation will make any significant difference in the frequency or effectiveness of CMGC in Oregon. It will continue to be a popular delivery method on the larger projects, and the better-known, more experienced contractors will continue their success in landing these projects.

via SB 254A and Oregon’s CMGC rules are overblown – Lexology.

BINGO Word of the Day – June 28th

The current game is now: T’s BINGO – make a “T” either right side up, upside down or sideways.

 

Today’s Useless Fact:  If you disassembled the Great Pyramid of Cheops, you would get enough stones to encircle the earth with a brick wall twenty inches high.

 

Here is today’s word:

 

PETER CLARK

 

Previously called words:

BRIAN MOFFITT

EXPERT WITNESS

INSURANCE CLAIMS

MERLIN TAYLOR

ROOF

ALEX WOITSCHECK

COMMERCIAL CONSTRUCTION

ELECTRICAL

GREEN ENERGY

JOEL KARR

RESIDENTIAL CONSTRUCTION

TIM PRINCE

ARBITRATION

CONSTRUCTION PLANNING

PATRICK COPPI

SOIL QUALITY

WILLIAM GORDON

DEPOSITION

FORENSIC ARCHITECTURE

CONSTRUCTION CONSULTING

expertwitnessinconstruction.com

JAMES WHITTEMORE

LEE RAINWATER

1.888.684.8305

CHARLES CASSANI

DECKS

PETER CLARK

New Case Affirms Broad Duty to Defend in Construction Defect Case Where Damage Dates Unclear

John Green – June 12, 2013

A new case from Oregon deals with a recurring problem in construction defect litigation—the absence of clear dates in the complaint regarding when damage is alleged to have occurred. Frequently, a plaintiff will allege that defects in a construction project have caused property damage to other elements of the project, but the complaint is often silent as to when the damage allegedly began. We have long argued that, since the duty to defend exists if there is any “potential” of covered liability, there is a potential that damage happened before that project was completed, or at any time after completion, triggering all policies in that time frame. This implicates the policies in effect both during the course of operations and after operations are completed. This point is particularly important if some or all of the policies exclude liability falling within the completed operations hazard. This was the situation in Breese Homes, Inc. v. Farmers Insurance Exchange, 353 Or. 112 (2012). There, the court rejected Farmers argument that a claim was excluded by a “products/completed operations hazard” exclusion unless the insured could produce facts showing that damage in fact occurred prior to the completion of the project. The Oregon Supreme Court ruled that the duty to defend was governed by the complaint, which clearly encompassed the possibility that damage occurred prior to completion, and that the insured had no burden to establish any additional facts to support that potential.

While Breese involves a simple and straightforward application of established duty to defend law, the case provides helpful authority in countering the specious positions taken by many carriers on this issue.

via New case affirms broad duty to defend in construction defect case where damage dates unclear | Farella Braun + Martel LLP – JDSupra.

BINGO Word of the Day – June 27th

The current game is now: T’s BINGO – make a “T” either right side up, upside down or sideways.

 

Today’s Useless Fact:  As a group, 18 to 24 year olds deprived of sleep suffer more from impaired performance than older adults.

 

Here is today’s word:

 

FRAMING

 

Previously called words:

BRIAN MOFFITT

EXPERT WITNESS

INSURANCE CLAIMS

MERLIN TAYLOR

ROOF

ALEX WOITSCHECK

COMMERCIAL CONSTRUCTION

ELECTRICAL

GREEN ENERGY

JOEL KARR

RESIDENTIAL CONSTRUCTION

TIM PRINCE

ARBITRATION

CONSTRUCTION PLANNING

PATRICK COPPI

SOIL QUALITY

WILLIAM GORDON

DEPOSITION

FORENSIC ARCHITECTURE

CONSTRUCTION CONSULTING

expertwitnessinconstruction.com

JAMES WHITTEMORE

LEE RAINWATER

1.888.684.8305

CHARLES CASSANI

DECKS