How Algorithmic Design Improves Collaboration in Building Design

Aarni Heiskanen | AEC Business | April 30, 2019

Design, like everything else in a construction project, is a collaborative effort. Even with digital tools, collaboration across design disciplines is not yet optimal. An experimental project thus set out to test whether algorithmic design could help streamline the interaction between architects and structural engineers.

Design data originating from an architect is used in several engineering tools for visualization, analysis, and calculation. Ideally, changes in the architect’s design would propagate automatically across all the software. Unfortunately, the process is in fact mostly manual. Hence, the design data is seldom, if ever, in perfect sync on all systems.

Two companies, A-Insinöörit and Geometria Architecture, joined forces to test algorithmic design collaboration to see if it could solve many of today’s data exchange problems. They found their solution could speed up the process, eliminate many errors, and alleviate the frustration of doing updates by hand. It could also have a positive effect on the final outcome of the project.

Karjalainen and Wikar
Petteri Karjalainen and Markus Wikar

The Emerging Algorithmic Design

Petteri Karjalainen is a structural engineer at A-Insinöörit. He has been working over the last two years in the company on international projects, especially with industrial clients. He’s also involved in developing algorithmic design process, the theme of his recently completed master’s thesis.

“We have been speeding up our efforts in this field. Our company leadership sees potential in the practice and has encouraged me and our computational design team to apply more and more of these advanced methods to company’s daily routines,” says Karjalainen.

Algorithmic or computational design uses sets of instructions to perform certain tasks, for example, to generate a digital model of a structure. The instructions have parameters that generate variations of the same code. Algorithmic design is especially suited for architectural forms that are non-conventional and that can be constructed from repeatable elements.

A design algorithm example
Design algorithm, example

Experimental Architecture

Demanding, non-traditional forms are the bread and butter for Geometria Architecture, the brainchild of two architects, Markus Wikar and Toni Österlund. The company is both a design practice and a consultant for architects, engineers, and contractors. They cover parametric modeling, algorithm-aided design, and digital fabrication.

“At Lahdelma & Mahlamäki architects, my previous employer, I was in charge of the warped geometries of POLIN, the Museum of the History of Polish Jews in Warsaw,” Wikar explains. “Today, the company is our client.”

Algorithmic design opens new perspectives for architectural expression. It makes the use of non-conventional forms feasible and cost-efficient to build. In addition, it gives designers freedom to test and present dozens of alternative solutions, which in a traditional process would be very time-consuming or simply impossible to do.

A FEM model
A FEM model

Experimenting with Algorithms

In February 2018, A-Insinöörit and Geometria Architects started experimenting with how to use algorithmic design for collaborations between architects and structural engineers. The project got funding from the national KIRA-digi digitalization program.

They chose to experiment with an imaginary building, specifically a swimming pool covered with a steel-structured curved roof. The aim was to test typical design tasks and data exchange between the designers. The platform that the experimenters used was Grasshopper, an extension of the Rhinoceros software.

The design process
The roof design process

The architect designed several variations of the roof. The final design was formed with parable arcs, generated through so-called dynamic relaxation. This resulted in an optimized structural system.

After the architect had algorithmically created the curved roof and generated the line geometry, the structural engineer took over the data. They used Grasshopper-RFEM Link; an extension developed by A-Insinöörit. This allowed them to analyze and dimension the structural steel framework created in Grasshopper. Furthermore, they used Trimble’s Grasshopper-Tekla Live Link to build a BIM model of the structure.

Making Data Flow Between Systems and Processes

The experimenters needed a way to exchange algorithmic data between the architect and the structural engineer over the design life-cycle. They chose Speckle, a cloud-based platform. It links the data intelligently between design parties and models.

Speckle allows designers to share geometric data across several design models and to create an aggregated model from discrete parts. This means that when, for example, the architect changes the original geometry, the data is automatically updated wherever it has been referenced. After the engineer has designed the structural model, they, in turn, can provide the architect with the updated data.

In its purest form, all design data resides in the algorithms and the traditional BIM model is generated only if and when it’s needed. However, at the moment, a combination of algorithms and models seem to work best.

Data transfer
Data transfer

The Automated Future

“Imagine we modeled a double-curved shell exactly as it will be built. Say, someone then comes up with a change that implies a one-degree change to every rod of the structure. With traditional methods, the change would imply a huge job, but with an algorithm, it would be a breeze,” Karjainen proclaims.

Both Wikar and Karjalainen believe that the use of algorithms and artificial intelligence represents a huge potential for the whole industry. They will not only enhance collaboration, but also free designers from routine tasks that in many cases constitute the larger part of their work. Furthermore, algorithmic design makes digital fabrication a reality. Building parts can be robotically manufactured in factories and installed at the construction site.

After the KIRA-digi experiment, Geometria Architecture has continued to collaborate with A-Insinöörit around the Helsinki–Tallinn tunnel project. It will be the world’s longest undersea railway tunnel.

“We have been thinking through the data interfaces with the around 10 disciplines involved. We’re figuring out the smallest common design denominators or parameters that need to be exchanged between parties,” says Wikar. “Our goal is to allow the experts to focus on their core competence areas and not to have to struggle with software issues,” he concludes.

Algorithmic design

The project illustrations are courtesy of A-Insinöörit and Geometria Architecture

Design Professional Asserting Copyright Infringement and Contributory Copyright Infringement

David Adelstein | Florida Construction Legal Updates | April 7, 2019

Standard form construction contracts between an owner and design professional will address copyright protection, as well as other contractual protections, associated with a design professional’s “instruments of service.”   An owner negotiating an agreement with a design professional should consider alternative language that broadens the scope of the contractual license given to it with respect to the use of the design.  Regardless, a design professional’s copyright infringement claim is still a challenging claim to ultimately prevail on.   While a design professional may likely survive the motion to dismiss stage in a copyright infringement claim, whether it survives the summary judgment stage is another, more challenging, story.

To state a claim for copyright infringement a plaintiff [design professional] must assert [and prove the following two prongs]: ‘(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.’” Robert Swedroe Architect Planners, A.I.A., P.A. v. J. Milton & Associates, Inc., 2019 WL 1059836, *3 (S.D.Fla. 2019) quoting Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361 (1991).  

In the first prong, the design professional must establish it complied with statutory formalities to own a valid copyright. Id.

In the second prong, the design professional must establish that the defendant copied constituent elements that are original.  Id.

There is also a claim known as contributory copyright infringement.  

Contributory copyright infringement occurs where a party with knowledge of infringing activity materially contributes to the infringing conduct of another.” Robert Swedroe, 2019 WL at *4.   Actual knowledge is not required – it just needs to be shown the defendant had reason to know (i.e.,knew or should have known) of the copyright infringement.  Id. (citations omitted). 

For example, in Robert Swedroe, an architectural firm was hired by a developer to prepare plans and specifications in connection with a residential building project.  The contract was based off an AIA B141 agreement between an owner and architect. The architect was to initially prepare plans to obtain approval of the governing Planning Board and, upon approval, prepare the permit plans for the residential building.    Once the Planning Board approved the project, the developer sold the property to another developer. The new developer, however, hired another architectural firm–that was provided and had access to plans from the initial architect–with the intent on moving forward with the design and construction of the residential building.

The original architect submitted its technical drawings and architectural work to the United States Copyright Office and obtained a Certificate of Registration.   (Notably, this satisfied the first prong on the copyright infringement claim as the original architect satisfied statutory formalities).  The original architect sued the new developer and new architect for copyright infringement asserting the new architect copied original elements of its design for the residential building project.  The original architect also sued the new developer for contributory copyright infringement.  The new architect and new developer moved to dismiss the copyright infringement claims. Although the trial court denied the motion to dismiss, the original architect will still need to support the burden of its copyright infringement claims.  For more information on the difficulties proving a design professional’s copyright infringement claim, review this article.  

Deconstructing Damages in Architect or Engineer Malpractice Actions

James W. Walker and J. Brandon Sieg | Vandeventer Black | April 10, 2019

No design professional is perfect all the time. At some point, they make mistakes—specify the wrong materials, leave out a required element, overlook a code requirement, bust a calculation, among other things. Sometimes they catch and correct their mistakes before any harm occurs. Sometimes, though, mistakes in construction documents cause our clients to spend “extra” money or the con-tractor to lose time, or both. What is the design professional’s financial responsibility to the client?

The standard of care for design professionals is to perform services with the same degree of care and skill as “those ordinarily skilled in the business.” See, e.g., AIA B101-2017, § 2.2 (“The Architect shall perform its services consistent with the professional skill and care ordinarily provided by architects practicing in the same or similar locality under the same or similar circumstances.”). Unless the contract says otherwise (and it shouldn’t!), the architect does not ordinarily promise a perfect plan. The cases emphasize that the owner does not ordinarily bargain for infallibility in the performance of design services.

Defense Considerations for Damages in Architect/Engineer Malpractice Cases

So this raises some interesting questions: How many mistakes can a design professional make before being financially responsible to the owner? Does it matter if the architect or engineer (A/E) makes lots of tiny mistakes or one giant one? Does it matter if the mistake is an error or an omission? Is there a dollar threshold, either by individual mistake or in the aggregate? Here are some things to keep in mind when your A/E client’s client comes asking for money.

The “Betterment” Principle

Suppose the construction documents (CDs) show a light fixture but omit wiring and a switch. The contractor’s price does not include the cost of the wiring, the switch, or the labor to install them. Naturally, the owner has always wanted a switch, so the contractor issues a change order to install one and wire it to the light. Should the design professional pay 100 percent of the change order? No. The owner received something of value in the change order—a switch and wiring—that was not included in the general contractor’s bid. Had the plans included these items, the bid would have been correspondingly higher and the owner would have paid the higher price. Should the design professional pay any of the change order? That’s more complicated…

The “Out-of-Sequence” Principle

Suppose in our example that the omission of a switch is not discovered until after the electrician has demobilized following rough-in and after drywall has been installed. Now the work required to install and wire the switch includes remobilizing the electrician and tearing out and replacing some drywall. The cost of the switch and wiring has not changed, so the owner still pays for that, but labor and material costs are higher now because the work is done out of sequence. The owner gets no value from that portion of the change that is the added costs of out-of-sequence work, so that portion of the change order is the design professional’s responsibility, unless…

The “You Didn’t Bargain for Perfection” Principle

Suppose in our example that the switch and wire change order cost is $5,000, and of that, $2,500 represents the out-of-sequence cost. Suppose also that the guaranteed maximum price (GMP) for the job is $5 million. Whether we look at the total cost of the change or just the out-of-sequence added cost, the cost of the omission is a miniscule fraction of the total job cost and should be within the expected range of added costs, given the less than perfect standard, unless…

The “Death by a Thousand Cuts” Scenario

Suppose in our example that the switch and wiring change order is one of 315 distinct change orders on the job with an aggregate total cost of $300,000 and aggregate “out-of-sequence” costs of $200,000. Now the added costs are a more sizeable percentage of the total job cost—4 percent to 6 percent, depending on what counts. Suppose the industry’s track record shows that on average, jobs of this type and delivery method typically experience change orders in the range of 2 percent to 3 percent of the cost of construction. Does that provide an allowance of sorts? Does the design professional pay for all errors and omis-sions from dollar one, or just for the compensable costs in excess of the tolerance threshold? The case law is not clear on this point.

How About Changes Originating from the Owner or the Authority Having Jurisdiction?

Suppose in our example that 212 of the 315 change orders are either owner initiated or required by the authority having jurisdiction (AHJ). Does that mean that the design professional can disregard those costs when determining whether the level of imperfection in his or her services is tolerable? With respect to owner-initiated changes, the answer should be “yes.” With respect to AHJ-related changes, the picture is murkier. There is certainly an expectation that the design professional is well versed in code requirements and preferences in the jurisdictions in which he or she practices, but we all know that sometimes there is just no predicting who will be reviewing the plans or what will be required. What if the design professional took some chances on what would get through plan review, hoping to save the owner money if successful? Again, muddy.

What About Fast-Track or Design-Build Projects?

Suppose in our example that the project was fast tracked or was a design-build project. Does that affect the tolerable error rate? The answer is definitivel…maybe! The notion of a financial error rate reflecting the expected level of imperfection in design services is not well developed in the courts. However, there is no reason why the chosen style of project delivery may not also have a higher or lower error rate associated with it. Be sure to consider your jurisdiction’s version of the economic-loss rule if your architect client is sued by a project owner in the design-build context. Similar to so many things in this area, it depends on the industry’s experience, and data of this sort is scarce. It is certainly worth considering the complexity and speed of the project when assessing the tolerance for imperfection.

Pre-litigation Considerations for Your A/E Client

Considering the legal defense issues described above, you may want to discuss the following concepts with your A/E clients to better prepare them for future claims:

  • Consider negotiating terms in the owner–architect agreement to address change order premiums. By establishing a presumption about the maximum reasonable “retail” markup, the design professional can begin to limit his or her exposure in unexpected circumstances. As a practical example, the Commonwealth of Virginia handles this issue in state-let design services contracts by establishing that the cost of work associated with a change order is presumed to be 15 percent greater than the cost that would have been included in the original bid. Commonwealth of Virginia, CO-3a, Terms and Conditions of the A/E Contract (2013). The A/E is free to prove a lower premium. In other settings, nothing precludes the owner and design professional from crafting their own unique “rules” on this issue. Because sorting out the actual retail markup can be complex and expensive, having a “default cap” can be quite useful.
  • Encourage the owner to establish, during the bid stage, maximum percentage markups to be applied in change orders to accommodate the contractor’s overhead costs and profit. Remember to apply these percentage mark-ups to deductive change orders, for which the overhead is no longer required.
  • Encourage the owner to obtain sufficient pricing information from the contractor during the bid stage to evaluate future change orders. Information such as unit pricing in the contractor’s bid will be valuable to evaluate the reasonableness of change order costs. This works best in GMP programs without competitive bidding at the owner–contractor level.
  • Discuss change order documentation requirements with the contractor early to clarify expectations.
  • Insist on documentation from the contractor and subcontractors detailing anticipated net unit costs (reflecting cost reductions available to the contractor or subcontractors and supported by quotes from suppliers and manufacturers) and labor costs (actual cost per hour) associated with proposed change orders. Discourage (and reject when appropriate) unsupported “contingency” values in the change order pricing.
  • Require the contractor to state whether change order work reflects higher unit costs. You might be surprised how many times the contractor says “no” (to look good to the owner), even if the real answer is “yes.”
  • When practical and warranted by the dollars involved, independently estimate the anticipated cost of a proposed change to compare against the contractor’s proposal.
  • Distinguish time premiums from unit-cost premiums. If the change order arises from a shortage of materials, has the contractor still provided a premium for subcontractors who are currently on-site? Are full rental costs included for on-site equipment that is not currently needed for other tasks? Even if there is a need to remobilize subcontractors, how is the cost supported?
  • After reviewing the change order documentation, clearly document to the owner, in writing, all concerns or objections with the proposed costs or need for the change order.

Conclusion Every relationship and every project is unique, so no one approach fits all circumstances. These general principles are intended as an introduction to damages considerations when defending A/E malpractice claims and counseling clients during contract negotiations.

How AB 3018 Affects California Design Professionals Performing Covered Work

D. Creighton Sebra | Clark Hill | March 18, 2019

In recent years, there has been a legislative push designed to make it more difficult for non-union contractors and design professionals, engineers, and land surveyors to compete for certain public works (construction) contracts. AB 3018 is another such example. This memorandum will explain the reasoning and rationale pertaining to the application of AB 3018 and requirements for compliance when design professionals are performing covered work, potential applicable exceptions to AB 3018, as well as recommendations for handling and dealing with this new law.

Existing statutes impose skilled and trained workforce requirements on various types of construction projects by public agencies, requiring that a certain percentage of the skilled journeypersons employed to perform work on a contract or project by every contractor, design professionals (assuming it is covered work) and each of its subcontractors or subconsultants at every tier are graduates of an apprenticeship program for the applicable occupation. The percentage required in 2019 will be 50 percent and will rise to 60 percent in 2020. AB 3018 also imposes new penalties on contractors, subcontractors, and design professionals who fail to meet the skilled and trained workforce requirements. For initial violations, penalties up to $5,000 per month may be imposed, with a second or subsequent violation within a three-year period resulting in penalties up $10,000 per month. A contractor, subcontractor, or design professional performing covered work found by the Labor Commissioner to be in violation with intent to defraud is also subject to disbarment from public works for a period of one to three years. In the event monthly reports of skilled and trained workforce compliance are not provided as required, AB 3018 also provides that public agencies shall withhold an amount equal to 150 percent of the value of the monthly billing for the entity that failed to comply.

What Does The 30% Requirement Mean?

Previously, in order to comply with the skilled workforce requirements, 30 percent of skilled journeypersons had to be graduates of an apprenticeship program, except for certain listed trades which were exempt from the apprenticeship percentage requirement. AB 3018 eliminates this exception for the listed occupations and requires 30 percent of all trades to be comprised of apprenticeship program graduates. However, in both instances, the revised exemption will carry forward in that those occupations specifically listed in the Code will now need to comply with the requirement that 30 percent of its skilled journeypersons be graduates of an apprenticeship program. These requirements apply to every contractor, design professional or land surveyor and each of its subcontractors or subconsultants (hereinafter collectively referred to as “Contractor” for ease of reference), regardless of tier.

Compliance With New Requirements

Contractors and design professionals on public works projects can meet the requirements of AB 3018 in one of two ways if, during a particular month, either:

  1. The required percentage of the skilled and trained journeypersons on the project meet the percentage requirement; or
  2. For the hours of work performed by skilled journeypersons on the project, the percentage of hours performed by skilled and trained journeypersons who met the graduation requirement is at least equal to the required graduation percentage.

An exemption to the graduation requirements applies to a contractor or subcontractor who, during a calendar month, employs skilled journeypersons to perform fewer than 10 hours of work on the project. There is a further exemption for subcontractors to comply with the graduation requirements where the subcontractor was not a listed subcontractor under §4104 of the Public Contract Code or was substituted for a listed subcontractor and the subcontract does not exceed one-half percent of the value of the prime contract.

Does AB 3018 Apply to Design Professionals?

Under California Prevailing Wage laws, prevailing wages must be paid to all covered employees of a public works project where a state, municipal, or local agency administers public funds for works of improvement which exceed $1,000. There are limited exclusions and for our purposes, we will assume that the project meets the threshold requirements and does not fall into one of the very limited exemptions to be subject to California Prevailing Wage laws.

California Labor Code sections 1720 and 1771 define public works as:

  1. Construction (includes work performed during the design and preconstruction phases of construction including but not limited to, inspection and land surveying work)
  2. Alteration
  3. Demolition
  4. Installation
  5. Repair work
  6. Maintenance work

California Labor Code further defines “construction” to include work performed during the design and preconstruction phases of construction, including, but not limited to, inspection and land surveying work and work performed during the post-construction phases of construction, including, but not limited to, all cleanup work at the jobsite.

Generally, workers such as the following would be covered trades:

  1. Operating engineer (heavy equipment operator)
  2. Surveyor
  3. Carpenter
  4. Cement mason
  5. Electrician
  6. Laborer

The following types of workers usually would NOT be covered trades entitled to payment of prevailing wages:

  1. Engineer
  2. Project superintendent / construction manager / project manager
  3. Architect
  4. Planner
  5. Computer programmer

However, California Prevailing Wage requires the payment of prevailing wage for Building/Construction Inspector, Field Soils, and Materials Tester Classifications. The covered work for these classifications can be for services related to both visual, physical and non-destructive testing and inspection that is done at a jobsite. On-site lab, fabrication site (yard), or off-site lab, are generally excluded from coverage as well, but the actual testing whether visual or otherwise would be considered covered work. Engineers, architects, project managers, and off-site lab workers would be excluded from coverage as long as they do not perform any work or services as a Construction Inspector. Further, a civil engineer or geotechnical engineer providing direction, plan interpretation and engineering-type decisions working with a Construction Inspector or Soils & Materials Tester also would be excluded from coverage. Additional documents from the Operators Engineers Union, are provided regarding information related to the Union’s position and most likely the Department of Industrial Relations’s [DIR] position concerning inspections, field soils, and materials tester. 

One thing to keep in mind as well is that a worker’s title or status with the employer is not determinative of an individual’s coverage by the prevailing wage laws. What is determinative is whether the duties performed by the individual on a public works project constitute covered work. An individual who performs skilled or unskilled labor on a public works project is entitled to be paid the applicable prevailing wage rate for the time the work is performed, regardless of whether the individual holds a particular status such as partner, owner, owner-operator, independent contractor or sole proprietor, or holds a particular title with the employer such as president, vice-president, superintendent or foreman. For example, a “working” foreman or a “working” superintendent – one who performs labor on the project in connection with supervisorial responsibilities – is entitled to compensation at not less than the prevailing rate for the type of work performed. Of course, if the person holding the status or titles as listed above does not actually perform covered work on a project, his or her presence alone does not trigger the prevailing wage requirement.

Therefore, because certain field operations are covered work under the Scope of Work Provisions for Operating Engineer, design professionals performing covered work will be required to comply with AB 3018.

If AB 3018 Only States “Contractors” Then Why Does this Apply to the Design Professional Community?

AB 3018 does not define the meaning of “Contractor” & “Subcontractor.” The Labor Code also does not define these terms. AB 1701, which modified Labor Code section 217.8, did however provide some references to these definitions.

AB 1701 references a term called “direct contractors” and the projects that would be applicable for this law are “for the erection, construction, alteration, or repair of a building, structure, or other work.” Subsection “g” of 218.7 provides: “[f]or purposes of this section, ‘direct contractor’ and ‘subcontractor’ have the same meanings as provided in Sections 8018 and 8046, respectively, of the Civil Code.” Civil Code section 8018 provides: “‘Direct contractor’ means a contractor that has a direct contractual relationship with an owner. A reference in another statute to a ‘prime contractor’ in connection with the provisions in this part means a ‘direct contractor.’” Section 8046 has a similar definition but for subcontractors.

The “direct contractor” term is still a little ambiguous, but based on the statutory language and the definitions provided in Labor Code section 218.7, AB 1701 does not apply to design professionals. However, these definitions do not apply to AB 3018, and they would be controlling or persuasive in convincing the DIR that AB 3018 does not apply to design professionals. The DIR and the Division of Labor Standards Enforcement [DSLE] frequently look to expand the reach and application of the Labor Code, and AB 3018 is no different.

What Does “Skilled and Trained Workforce” Mean for Design Professionals Performing Covered Work?

As detailed in Labor Code section 2601(d), a skilled and trained workforce is defined below:

“‘Skilled and trained workforce’ means a workforce that meets all of the following conditions:

(1) All the workers performing work in an apprenticeable occupation in the building and construction trades are either skilled journeypersons or apprentices registered in an apprenticeship program approved by the chief.”

Furthermore, section 2601 further defines “skilled and trained workforce” to mean the following:

“For work performed on or after January 1, 2017, at least 30 percent of the skilled journeypersons employed to perform work on the contract or project by every contractor and each of its subcontractors at every tier are graduates of an apprenticeship program for the applicable occupation…

“For work performed on or after January 1, 2018, at least 40 percent of the skilled journeypersons employed to perform work on the contract or project by every contractor and each of its subcontractors at every tier are graduates of an apprenticeship program for the applicable occupation, except that the requirements of subparagraph (A) shall continue to apply to work performed in the following occupations: acoustical installer, bricklayer, carpenter, cement mason, drywall installer or lather, marble mason, finisher, or setter, modular furniture or systems installer, operating engineer, pile driver, plasterer, roofer or water proofer, stone mason, surveyor, teamster, terrazzo worker or finisher, and tile layer, setter, or finisher.”

Essentially, when a professional is performing covered work on a public works project, the firm will need to maintain at least 30 percent of its “journeypersons” to be graduates from an approved apprenticeship program. Given the fact that many firms are not members of the Union, compliance seems to be an impossibility. However, there is some light at the end of the tunnel, and Section 2601(e) provides an on the job experience exemption to the requirements.

Section 2601(e) states:

“‘Skilled journeyperson’ means a worker who either:

“(1) Graduated from an apprenticeship program for the applicable occupation that was approved by the chief or located outside California and approved for federal purposes pursuant to the apprenticeship regulations adopted by the federal Secretary of Labor.

“(2) Has at least as many hours of on-the-job experience in the applicable occupation as would be required to graduate from an apprenticeship program for the applicable occupation that is approved by the chief.”

This exemption seems to be the best route for compliance with AB 3018 for design professional firms. Many firms have experienced employees that would qualify under section 2601(e) and this would seem the best way to be in compliance as it will be very difficult to secure trained apprentices or journeymen from the union hall. Recall that firms only need to have 30 percent of their work force on prevailing wage projects to meet the “skilled and trained workforce” requirement. Therefore, firms should be able to still meet the requirements of AB 3018 as long as they are able to show that “on-the-job experience” for the employee is at least equal to or more than what is required by the apprenticeship program for the application occupation.

Additional Potential Exemption To The 30 Percent Requirement

Section 2601(D)(3) provides another potential exemption to the 30 percent “skilled and trained” requirement. This section provides as follows:

“For an apprenticeable occupation in which no apprenticeship program had been approved by the chief before January 1, 1995, up to one-half of the graduation percentage requirements of paragraph (2) may be satisfied by skilled journeypersons who commenced working in the apprenticeable occupation before the chief’s approval of an apprenticeship program for that occupation in the county in which the project is located.”

To the extent an established apprenticeship program for the applicable crafts related to member firms was not established prior to January 1, 1995, then the exemption would potentially apply. However, this exemption would not completely remove the skilled and trained requirement but would reduce the requirement by one-half or from 30 percent to 15 percent.

Compliance with AB 3018

Members of the design professional community will still have the same issues of securing journeymen and apprentices from the local union halls. Even unions periodically have had a difficult time finding sufficient program graduates to meet the statutory requirements, including in 2017 and 2018 when the graduate percentage was lower. As a result, the requirements recently were amended and currently exempt certain occupations from the graduation percentage requirement, such as bricklayers, carpenters, drywall installers, roofers, and surveyors. Even with this amendment, the busy construction marketplace makes it difficult for many contractors to locate sufficient program graduates to satisfy the graduate percentage.

The difficulty finding sufficient program graduates to meet statutory percentages is exacerbated in more rural areas. On some rural government contracts, the requirements dramatically and unnecessarily increase the costs of public construction and harm local contractors and construction workers. The requirements may force government contractors to “import” labor in order to meet the graduation standards, by utilizing graduates from other areas. Some rural public entities can use only the more traditional design-bid-build method of construction contracting and must forego the benefits of early government contractor engagement.

California contractors and design professionals used to face limited consequences for non-compliance with the state’s skilled and trained workforce requirements on public works projects. The Code re-defines what constitutes a skilled/trained workforce by eliminating existing exemptions, strengthens monthly reporting guidelines and agency oversight, and empowers the Labor Commissioner and public agencies with enforcement tools that include monetary penalties and debarment. Design professionals and contractors who fail to institute a program to comply with AB 3018’s reporting requirements will be potentially subject to the penalties outlined in the new law.

In order to comply with this new law, the following items are suggested:

  • Modify and strengthen contracts:

To protect themselves, professionals should consider modifying the contract to include the following:

(1) List the skilled and trained workforce requirements within the body of any subconsultant agreements;

(2) attach full copies of Labor Code sections 2601-2603 to subconsultant agreements;
(3) strengthen indemnity provisions to ensure that subconsultant will indemnify for any violation of the new statute.

  • Continue to serve Division of Apprenticeship [DAS] 140 & 142 as previously required:

The Union rarely is able to provide apprentices in the crafts that many firms practice. However, this does not absolve the member firm from these requirements. Failure to submit these forms are violation of the Labor Code in and of themselves.

  • Continue to register with the DIR pursuant to SB 854:

In 2015, the California legislature adopted SB 854, a bill which revised the California Labor Code regarding the monitoring of California public works projects through the DIR. SB 854 creates a new public works monitoring scheme for the DIR and created a registration program to fund the DIR’s monitoring and enforcement of prevailing wage laws. Registration and renewal fees will go into the State Public Works Enforcement Fund, which is earmarked for the administration of contractor registration, monitoring and enforcement of prevailing wage laws, and the enforcement of Labor Code violations on public works projects by the DIR.

Specifically, firms working on a public works project and performing covered work for any type of public agency in California (state, counties, general law cities and special districts) are subject to annual registration.

  • Monitor compliance through the payment process:

Require each subcontractor/subconsultant to provide with each payment application a declaration from the subcontractor, signed under penalty of perjury, that the subcontractor has met the skilled and trained workforce requirements.

Conclusion

AB 3018 imposes penalties on contractors, subcontractors, and design professionals who perform covered work and who fail to comply with “skilled and trained workforce” requirements. It also requires the awarding body to forward a monthly report to the California Labor Commissioner for issuance of a civil wage and penalty assessment, if a contractor, subcontractor, or design professional has failed to comply with skilled and trained workforce requirements.

Those failing to comply with skilled and trained workforce requirements can be penalized by the Labor Commissioner up to $5,000 per month (first violation) and up to $10,000 per month (additional violations). The awarding body may withhold any progress payment from a direct contractor for failure by the contractor or its subcontractor(s) to be substantially compliant.

However, even though these penalties seem harsh and compliance difficult, most firms should be able to meet skilled and trained workforce requirements, by utilizing the on-the-job experience exemption. Moreover, it is reasonable to assume that the second available exemption (Section 2601(D)(3)) is most likely going to apply, but this would depend on the individual apprenticeship programs. Clark Hill will be providing an update to this memo, which will include a guidance document related the numbers of hours required to meet the 2601(e) exception as well as when applicable apprenticeship programs were started related to the 2601(D)(3) exception.

Teaching An Old Dog New Tricks: The Spearin Doctrine and Design-Build Projects

John Castro | Gordon Rees Scully Mansukhani | October 5, 2018

The United States District Court for the Southern District of California has now held that the Spearin doctrine applies to design-build subcontractors where the subcontractor is expected to design a portion of their work. The case is United States for the use and benefit of Bonita Pipeline, Inc., et al. v. Balfour Beatty Construction, LLC, et al. (“Bonita Pipeline”) (Case No. 3:16-cv-00983-H-AGS).

In Bonita Pipeline, a subcontractor sued the general contractor and its sureties alleging breach of contract, breach of implied warranty, declaratory relief, and recovery under the Miller Act. The subcontractor then filed a motion for partial summary judgment against the general contractor on its declaratory relief cause of action, seeking a finding that the general contractor could not shift legal responsibility for its defective plans and specifications to the subcontractor.

The evidence presented in support and opposition of the motion showed that the general contractor provided incomplete design documents to the subcontractor at the bid stage, and expressly stated they were incomplete. The subcontractor was ultimately awarded the bid, which included design-build structural steel, metal decking, and other amenities. The parties admitted that the plans and specifications could be refined with further design, whereby the subcontract contained language stating that the subcontractor would assume risk of further change (“refinement”) of the plans and specifications. Further, the subcontract stated that the subcontractor was not entitled to additive change orders or an increase in its bid price for “refinements” resulting from the design-build process. Instead, the subcontractor would only be entitled to additional compensation for enhancements requested by the owner.

During the project the subcontractor sought additional compensation for design errors and changes, with the court noting 93 requests for information and 37 change order requests. The subcontractor also finished its work 290 days late.

The Spearin doctrine (named after United States v. Spearin (1918) 248 U.S. 132) generally holds that an owner (or here, general contractor) impliedly warrants the information, plans, and specifications it provides to the general contractor (or here, subcontractor). Citing case law that state law controls the interpretation of Miller Act subcontracts to which the United States is not a party, the Bonita Pipeline court noted that the California Supreme Court approved and applied of the Spearin doctrine, citing Souza & McCue Constr. Co. v. Superior Court of San Benito County (1962) 57 Cal.2d 508, 510 and E.H. Morrill Co. v. State (1967) 65 Cal.2d 787, 792-793. Citing Coleman Eng’g Co. v. N. Am. Aviation, Inc. (1966) 65 Cal.2d 396, 404, the Bonita Pipeline court also noted that the California Supreme Court has extended application of the Spearin doctrine to construction contracts even where there is no government entity involved.

The general contractor argued that the Spearin doctrine did not apply because the project was one of design-build, and the parties expressly acknowledged that the plans and specifications were incomplete at the time of bidding. The subcontractor, in turn, argued that it acknowledged it assumed the risk that the plans and specifications would be “refined,” but the general contractor nonetheless still impliedly warranted that the plans and specifications provided would be correct, even if incomplete.

Ultimately, the Bonita Pipeline court found the subcontractor’s position persuasive, finding that the Spearin doctrine applies to design-build projects. Regardless, the Bonita Pipeline court denied the plaintiff subcontractor’s partial motion for summary judgment, finding that there were insufficient facts in the record to determine whether the contractor’s extra work was due to errors in the plans and specifications, or whether the extra work was due to the design work expected of the subcontractor.

In support of its ruling, the Bonita Pipeline court relied on a United States Court of Federal Claims case, AAB Joint Venture v. United States, 75 Fed.Cl. 414 (Fed.Cl. 2007). In AAB Joint Venture, the plaintiff contractor won a bid to construct a military storage base in Israel, whereby the project was in a design-build format. The plaintiff was provided specifications from the government, and after construction commenced the plaintiff contractor submitted a request for information questioning the accuracy of the specifications. After further requests for information and responses thereto, the plaintiff contractor (and its subcontractors) performed earthwork using 3-inch stone fill, as opposed to a 6-inch maximum stone fill as specified in the contract. The use of the smaller fill, however, precluded use of the contract-specified density test, as the test could not be used on the smaller fill. Thereafter, plaintiff contractor sought an equitable adjustment as a result of the defective specifications and increased costs, which was denied.

The AAB Joint Venture court found that the Spearin doctrine applied to the design-build project. It held that “[t]he purpose of the specifications is to serve as a guide to the contractor … The contractor should be able to rely on a reasonable interpretation of the contract.” “The standard that must be met under the implied warranty is that the specifications will result in a satisfactory, acceptable, or adequate result; short of that, the specifications are defective and the contractor is entitled to an equitable adjustment.” There, the specifications provided a range of sizes for fill that could be used by the subcontractor, though some sizes in turn precluded use of the contract-specified density test. The AAB Joint Venture court held that the fact that the specifications allowed for some satisfactory results did not preclude a finding that they were defective. In other words, “[d]efective specifications may be found when the full scope of the dimension tolerances set forth in the specifications do not produce satisfactory results.”

The Bonita Pipeline court also relied on a Civilian Board of Contract Appeals case, Drennon Constr. & Consulting, Inc. (“Drennon”), 13 B.C.A. (CCH) ¶ 35,213 (2013). In Drennon, the plaintiff contracted with the Bureau of Land Management (“BLM”) to widen a road at a campground in central Alaska. Widening the road required excavating a hillside, and building a gabion wall along the cut. The hillside ultimately collapsed, and the contractor’s work was placed on suspension. Ultimately, the road was widened without the use of a gabion wall, and the contractor sought recovery for its costs during the suspension period, as well as the cost of purchasing gabions for which it no longer had use. The contractor contended that the geotechnical information provided in the BLM’s solicitation was defective. In contrast, the BLM argued that the contract was one of design-build, and that the contractor was not entitled to any recovery because of the contractor’s own faulty design.

The Drennon panel sided with the contractor, finding that the hillside would have collapsed regardless of the approach undertaken by the contractor. The court pointed out that the solicitation included a road design and specifications from the civil and geotechnical engineer. The engineer testified that the digital terrain model it utilized for its design contained inaccurate control points, and that the BLM denied the engineer’s request to perform a survey to address the inaccuracies. On that basis, the engineer testified that they intentionally added language to the solicitation that would have warned potential bidders of the inaccuracies of the model. The Drennon panel found this directly contributed to the increased costs suffered by the contractor. The Drennon panel also found that the engineer’s geotechnical report was defective, noting that the site conditions experienced by the contractor were materially different than what was described in the report.

Bonita Pipeline shows that the Spearin doctrine is still alive and well, and even permeating into modern construction projects. The doctrine’s application to a design-build project at the United States District Court level shows that it is moving of specialized venues such as the Federal Court of Claims and Board of Contract Appeals. The Spearin doctrine reaches its centennial anniversary this year on December 9, 2018.