Archive for the 'Project Delivery' Category

Ohio Legislature to Allow Design-Build and Construction Manager at Risk on Public Projects

By: Sean T. Devenney

Ohio recently passed dramatic changes to its public works procurement statute.  In particular, Ohio authorized the utilization of both the design-build and construction manager at risk (CMAR) delivery method for construction projects.   Amazingly, Ohio has gone from only permitting public works project on a multi-prime basis into what appears to be one of the most liberal and progressive public works contracting states in the Country.  http://www.dbia.org/advocacy/ohio110701.htm   It will be interesting to see what, if any, impact the Buckeye State’s decision will have on Indiana.  While Indiana adopted the design-build delivery method in 2005, it has not moved forward on permitting public works projects to utilize the CMAR delivery method.  Perhaps the change of heart in Ohio will serve as a bell weather for similar changes in Indiana to continue the momentum gained through the adoption of the design-build statute.

Additionally, this change in Ohio law opens up another interesting point.  Indiana based CMs and design-builders may now actively seek business opportunities on public projects in Ohio.   Going across state lines for work represents an obvious opportunity to expand business, but it also presents challenges.   For those Indiana based companies considering doing work in the Ohio, they will have to comply with Ohio law, which could differ significantly from Indiana. The public works statute in Ohio serves as a prime example of one of the many legal challenges to doing work in another state.   For instance, the public works statute in Ohio requires the contractor (and its subcontractors) to be enrolled in a drug-free workplace program of the bureau of workers’ compensation for Ohio or a comparable program approved by the bureau.  The drug-free program requires among other things that the contractor have a written drug and alcohol policy and the ability to test employees for drug use.  Additionally, an Indiana contractor must take steps to make sure it has properly registered to do business in Ohio with the Ohio Secretary of State’s office, and must have a valid certificate of compliance issued by the Ohio Equal Opportunity Employer Coordinator certifying that the contractor met its obligations under affirmative action programs authorized under Ohio and/or Federal law.  These are just a few examples of the type of employment-related legal issues that must be dealt with when doing business in another state.

As business opportunities in a down economy become scarce the pressure to expand geographically increases.  However, the decision to enter new markets means the contractor or design professional may be required to meet new and different legal requirements.  This hurdle coupled with the overall general business risks associated with expansion must be carefully considered prior to moving across state lines.

Recent Market Study Shows that Design Build is Utilized in 40% of Projects

By: Sean T. Devenney

On May 31, 2011, Reed Construction Data/RSMeans Market Intelligence issued a report commissioned by the Design Build Institute of America showing that the design-build project delivery method has a 40% share of the vertical non-residential construction market as of 2010.  Interestingly, more than half of the large projects with values over $10 Million in 2010 were utilizing the design-build project delivery method.   The data also show that the use of design-build is becoming increasingly popular.  From 2005 until 2010 the use of the design-build delivery method has increased 10%.   A summary of the RCD/RSMeans report can be found at http://www.dbia.org/pubs/research/rsmeans110606.htm.

The RCD/RSMeans report can be somewhat juxtaposed against a June 1, 2011 ENR article entitled “The Top 100 Project Delivery Firms:  Design-Builders and Domestic CM-at-Risk Firms Face Continued Revenue Declines in 2010.”   ENR reports a “distinct falloff” in revenue in both 2009 and 2010 for the ENR Top 100 Design-Build Firms and the ENR Top 100 CM-at-Risk firms.  While the general downward trend in revenue should come as no surprise given the recession, it is of note that the author states that some owners are actually gravitating back towards traditional design-bid-build.  These owners believe that the traditional delivery system provides the owner with the best opportunity to capitalize on competition, obtain the best pricing, and overall squeeze what many perceive to be a “frantic industry.”

Of course, the ENR article adroitly points out that while the design-bid-build method might provide the lowest opening price – project disputes, change orders, and other inefficiencies typically encountered in the traditional delivery method should still make design-build a more attractive option for owners in the future.  The article ends with the conclusion that more collaboration among industry participants is the future of the industry- which is also consistent with the design-build delivery method.

Design-build’s increased market share in vertical commercial construction (even if it was a bigger piece of an overall smaller market in 2009-10) remains a significant sign, together with the rise of other trends such as BIM or IPD concepts, of the increased importance and role of collaboration in project delivery.  However, the fact some owners continue to gravitate towards traditional delivery methods in order to find desperate or hungry contractors that may take jobs at slim to negative margins, still signals the long and slow recovery of our industry.

Agency CM Held to Have Contractually Assumed a Duty to Injured Worker

By: Sean T. Devenney

The Indiana Courts are “on a roll” when it comes to new construction cases—there have been several big cases this year touching all levels of the construction industry.  The latest case, Hunt Construction Group, Inc. et. al. v. Garrett deals with the all important site safety roles of various construction industry participants.  This case holds that an agency Construction Manager (CM) may owe a duty to maintain safe conditions on a project site to all construction workers on the site if the Owner –CM contract contains language giving the CM site safety responsibilities vis-à-vis the Owner.

In this case, an employee of a subcontractor was hurt on the job.  The injured employee sued the CM claiming the CM had a duty to protect the worker on the site from injury.  The injured employee asked the Court to hold as a matter of law that the CM owed a legal duty to the employees on the site based upon the CM’s agreement with the Owner.  The court found that the agreement between the CM and Owner contained language (1) requiring the CM to develop a comprehensive site safety program, (2) coordinate the safety program, and (3) giving the CM the authority to remove any employee or piece of equipment deemed unsafe among other safety related responsibilities.  The Court, having gone through all the safety related provisions in the contract, determined that the CM had assumed a duty to maintain safe site conditions.

The Court reached this conclusion despite clear language in the Owner-CM Agreement that attempted to limit the CM’s obligations for safety to the Owner.  The CM argued that any safety obligations or duties ran from the CM to the Owner and not to the employees of various contractors working on the Project.  The Owner-CM contract also contained language that expressly attempted to limit the CM’s liability for site injuries.  In a dissenting opinion, Judge Friedlander found that while there was a great deal of language relating to safety responsibilities of the CM, the language limiting the liability of the CM should be enforced.  In particular the Owner-CM agreement provided that the CM’s duties were undertaken “[w]ithout assuming the safety obligations and responsibilities of the individual Contractors” and that the CM “shall not have control over or charge of or be responsible for . . . safety precautions and programs in connection with the Work of each of the Contractors, since these are the Contractor’s responsibilities.”

Moving forward, the Garrett case could potentially have an enormous impact on the contractual allocation of site safety responsibility and the duties that flow with that responsibility.  Under the Garrett holding, if a construction contract contains even general site safety obligations, there is a substantial likelihood that a contractor or CM will be held to owe a duty to all individual worker’s on the Project to maintain safe conditions, and attempts to contractually limit those responsibilities may simply be disregarded by the Court.  A link to this new case can be found at: http://www.ai.org/judiciary/opinions/pdf/12141003mpb.pdf

New Project-Based IPD Insurance

By: Daniel M. Drewry

One of the early concerns with Integrated Project Delivery (IPD) dealt with how to obtain insurance on an IPD project.  The standard insurance products, whether it be Commercial General Liability, Errors and Omissions, etc., were structured around well-defined roles of designers and contractors, fully vetted and tested standard industry contract forms, and, generally speaking, a fault-based environment of risk allocation.  With IPD, the owner, contractor and designer operate in a contractually created and enforced no-fault, collaborative environment typified by gain-share/pain-share arrangements.  New industry form contracts have been released from ConsensusDOCS and the AIA to try and standardize the new risk allocation on an IPD project.  Some of these contractual arrangements create a new, single purpose entity for carrying out the project (e.g. the AIA C-195), others are simply tripartite (e.g. ConsensusDOCS).  However, the new industry forms remain just that – new.  They have not been tested by the courts or in arbitration.  This has left many insurers slow (and cautious) to respond to taking on this new type of risk.  Early policies had to be written on a project by project basis and were costly.

In September 2010, however, Victor O. Schinnerer & Company, Inc. and CNA rolled out a new project-based IPD insurance program.  The new IPD policy will be project-based and is intended to respond to third party design claims on behalf of the project, in place of the individual policies of either the single-purpose entity (envisioned by the AIA C195, Standard Form Single Purpose Entity for Integrated Project Delivery) or the lead designer, general contractor and sub consultants.  The policy has specific limitations in terms of the types of projects on which it is available and to whom.  Also, the underwriting is still very much project-specific.  Nevertheless, this policy represents yet another step by the industry towards acceptance of the collaborative movement in construction so often discussed in connection with IPD and Building Information Modeling.  For more information and details on the IPD policy, see: http://www.schinnerer.com/risk-mgmt/Gdlns/Pages/Gdlns-4-2010-IPD-insurance.aspx; http://www.theaiatrust.com/newsletter/2010/10/ipd-insurance/

BIM Mandate – OH to join WI and TX in requiring BIM?

By: Daniel M. Drewry

Since 2008, the debate over the cost/benefits of Building Information Modeling (“BIM”) has reached a fever pitch.  What was once easier to categorize as a technology or innovation with only limited practical application outside of the large scale or institutional building taking place on the coasts has commanded an audience in the Midwest.  What has changed?  Last summer two states, Wisconsin and Texas, implemented new policies requiring the use of BIM on certain public projects.  This spring, reports indicate that Ohio may be entering the fray.

On July 1, 2009, Wisconsin became the first state to require the use of BIM on public projects.  The BIM requirement applies to the performance of A/E services under a design-bid-build delivery system on any large construction project, defined as those projects with a total funding of at least $5 million, or any new construction with at least $2.5 million in funding.  BIM use is encouraged, but not required on all other projects.  Wisconsin also issued its BIM Standard and Guidelines document to facilitate the implementation of BIM on applicable projects. For additional information, see: http://www.doa.state.wi.us/dsf/masterspec_view_new.asp?catid=61&locid=4

One month later on August 12, 2009, the Texas Facilities Commission (“TFC”) announced that it was requiring the use of BIM on all public design and construction projects.  Like Wisconsin, the TFC (through its Facilities Design and Construction division) had been studying the use and impact of BIM and developed a set of BIM standards and guidelines and an interoperable BIM template to facilitate and standardize BIM implementation.  The Texas announcement went even further than its northern counterparts by eliminating the minimum threshold project value for the use of BIM.  This requirement will extend to all real estate development (including the state university systems) for the state of Texas.

In April 2010, the Ohio State Architect’s Office (“SAO”) released a statement advising that it was “beginning a process to develop protocols for the specification of building information modeling (BIM) for design/construction projects of public facilities.”  The SAO developed a survey to evaluate the current state of BIM implementation within the Ohio AEC industry, with responses being due by April 30, 2010.  The results of the survey have not yet been released.  The SAO then plans to engage public owner representatives and industry representatives to assist in developing protocols and facilitate public input on those protocols.  The SAO anticipates issuing the proposed BIM protocols towards the end of 2010.  For additional information, see: http://www.das.ohio.gov/Divisions/GeneralServices/StateArchitectsOffice/BIMSurvey2010/tabid/542/Default.aspx

Wisconsin, Texas, and soon, Ohio are not the first governmental entities to mandate BIM on public projects.  The GSA has been requiring BIM on federal projects since 2006.  Closer to home, Indiana University adopted a BIM policy for its projects over $5 million last fall.  http://www.indiana.edu/~uao/iubim.html.  That being said, these three states are the first to implement (or in the case of Ohio, take significant strides towards implementing) BIM at a state-level.

Will Indiana do the same?  It remains to be seen.   While Indiana has shown a recent willingness to respond quickly to such industry trends as Green Building, it has also shown a certain reluctance, or at least hesitancy, to accept new or alternative project delivery platforms as shown with the somewhat delayed adoption of design/build on public projects.  However, BIM continues to gain momentum and acceptance in the construction industry.  The actions of Wisconsin and Texas, and now Ohio, further that trend and suggest that BIM is gaining a real foothold and, perhaps more importantly, a market share.  We can expect other states to watch closely what happens in these states, and eventually, follow its lead.  If Indiana’s neighbor to the east implements a formal BIM policy, and the IU BIM program succeeds, the debate over the proliferation of BIM will likely shift from a discussion of whether it will reach all Indiana public projects to when.


Daniel M. Drewry

Daniel M. Drewry

Daniel M. Drewry

About This Blog

The DSV Construction Law Blog is hosted by Daniel M. Drewry. Dan is a Partner with the law firm Drewry Simmons Vornehm, LLP and concentrates his practice in the areas of Construction Law and Litigation, and Labor & Employment Law.

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