Square (66)

Artificial Intelligence (“AI”) has roared into the discourse of the new economy. While the construction industry has lagged behind in its implementation, there is no doubt that AI has become an inescapable reality. Opportunity for improvements in efficiency make the construction industry primed for a boom in the expansion of construction-related AI applications. The Stanford Institute for Human-Centered Artificial Intelligence reports, in its seventh edition of the AI Index Report, that several studies suggest AI enables labor to operate faster and with improved outcomes.[1] Inevitably, as AI expands into new industries and erupts in existing uses, the need to assess risk and prepare for the challenges that accompany AI cannot be ignored. Contractors, design professionals, owners and construction practitioners are wise to take stock of where AI applications have materialized in the industry and how to stay ahead of the curve.

Applications of Artificial Intelligence in Construction

Estimation and Scheduling: Estimating project costs and optimizing schedules are key components of measuring a project’s success, especially in the early stages of a project. AI modeling assists in computing millions of data points to enhance existing Building Information Modeling data. Assessing criteria of a project, while accounting for external factors, additional materials, resources and waste, enables managers to more accurately predict overruns and improve the utilization of existing resources.

Risk Mitigation: Site safety is and will continue to be a priority for construction managers. AI applications have the ability to turn a job site into a smart site. Construction site analytics are collected through sensors, cameras, and other digital technology capable of generating reports on predictive and proactive safety management. For example, an existing application of AI software evaluates whether the use of personal protective equipment is properly implemented by processing images and videos of a site.

Robotics: Think 3D printing, drone mapping, and highly specialized equipment that mimics physical human actions. Machine learning in automated equipment proposes to fill a gap in the shortage of skilled labor. The construction industry is witnessing developments in machines that are capable of bricklaying, welding, performing sitework, grading, excavation, demolition and paving.

As new as AI is to the market, even more novel are the legal challenges related directly and indirectly to AI. Given the lack of a definite regulatory framework, construction professionals may look to comparisons in other industries where AI litigation grapples with unresolved questions of liability. As of yet, there is no known litigation related to the use or misuse of AI utilized in a construction project. The only known real estate specific AI litigation involves unfair competition challenges against a real estate software and data analytics company that is accused of artificially inflating the prices of residential real estate rents, creating a data-driven rental property cartel.

Litigation involving AI has been heavily characterized by privacy, copyright, and trademark claims, although there is sure to be an increase of legal theories involving the use or misuse of AI in tort, breach of contract, defective design, product liability and negligence.

Despite having reached the market several years ago, there is little guidance from courts regarding liability in the context of self-driving cars. A number of suits brought against car manufacturer, Tesla, highlight the uncertainty of outcomes in AI litigation. In at least two instances, Tesla was found not responsible following jury trials in California state courts. Tesla recently settled a case involving the death of an Apple engineer, and several other cases are set for trial this year. Outcomes of these cases and cases with similar machine learning applications, appear to hinge on whom to attribute liability for mistakes involving AI systems: the user, the developer, or the AI by and of itself?

Modeling the Future

Construction professionals are encouraged to be considerate of mechanisms to mitigate risk in the immediate future: 1) continue to follow how the courts resolve questions of liability involving AI, and how that might translate in the construction industry; 2) evaluate how insurance coverage might be leveraged to mitigate risk (although AI-specific coverage is limited, property insurance, general commercial liability, and errors and omissions coverage can play an essential role in protecting against loss); and 3) inclusion of contract language that contemplates the risks of AI (subject to a future article).

[1] “The AI Index 2024 Annual Report,” AI Index Steering Committee, Institute for Human-Centered AI, Stanford University, Stanford, CA, April 2024.

Square (60)

The Federal Trade Commission’s effort to ban non-compete agreements has been upended by a U.S. District Judge in Texas. As a result, the non-compete ban will not go into effect nationwide.

The Judge ruled the Commission lacked authority to write regulations restricting what the law calls “unfair methods of competition.” The non-compete ban, issued in April, was part of the Commission’s effort to eliminate agreements that restrict the ability of workers to switch jobs.

The Texas judge ruled the agency lacked the authority to enforce the ban, which was planned to take effect on September 4.

Hahn Loeser’s labor and employment team continues to monitor potential lawsuits, rulings and updates. For questions on potential impacts to your organization, please contact Hahn Loeser’s Labor & Employment team.

Square (44)

As many contractors know, whenever doing federal projects there might be a nagging feeling in the back of your mind.  What exactly does my contract say?  What type of plan do I need to address environmental concerns? You might even wonder, what are my environmental concerns? In an attempt to ease your mind, you flip through your Task Order or contract.  At first glance the contract seems innocuous, but hiding in plain sight are the dreaded “Clauses Incorporated by Reference” under the Federal Acquisition Regulation (FAR).  Federal contracts tend to involve a lot more than initially meets the eye.  Among those things include a thicket of environmental law ranging from Clean Water to Fish and Wildlife.  It is incredibly important to look at your contract in detail to see what environmental obligations lie in the fine print. 

Environmental Regulations Incorporated by Reference

Most government contracts contain any number of FAR provisions that are incorporated into your contract by reference without setting forth the full text of the FAR provision.  Indeed, hiding beneath a string of headers may be requirements related to everything from Pollution Prevention (FAR 52.223-5) to Protection of Existing Vegetation, Structures, Equipment, Utilities, and Improvements (FAR 52.236-9).  Not only do these provisions require a contractor to cross reference the FAR to determine its obligations under the contract, many of the cited provisions in turn reference additional statutory framework that is likewise incorporated into your contract.  For example, Pollution Prevention and Right to Know Information (FAR 52.223-5) states that “Federal facilities are required to comply with the provisions of the . . . the Pollution Prevention Act of 1990 (PPA) (42 U.S.C.13101-13109).”  As a result, what first appears in your contract as simple heading may actually incorporate the entire Pollution Prevention Act by reference.  The sheer volume of statutory rules that may be incorporated into your contract can be too much to fit onto a ream of paper.  As a result, it is incumbent upon a contractor to do the leg work and know what environmental issues are applicable to each project.

Environmental Protection Plans

Thankfully, a contractor’s Environmental Protection Plan (EPP) on applicable projects is an opportunity for a contractor to discuss known environmental issues or other environmental concerns that may be applicable to a federal project. An EPP typically requires a contractor to meet with the contracting officer to discuss environmental concerns that might arise on a project. This is the time for a contractor to review the contract, understanding which provisions have been incorporated by reference, and develop a plan to address those issues or concerns so that you are in compliance with the thicket of regulations that might be attached to your contract. 

In particular, in your general overview, your EPP should very clearly set forth each set of regulations that are addressed in the plan to ensure that you and the contracting offer are on the same page in terms of your obligations. Providing a list of the laws and regulations that are applicable to the project in your EPP both shows that you have grasp on project requirements and a solid plan in place to ensure that your work on the project is compliant with all environmental regulations. Your contracting officer can then review and discuss how or if your plan needs to be adjusted to account for any other environmental concerns.

Beware, however, that your EPP does not excuse you from any of your obligations under FAR, including any of those incorporated by reference. Again, to the extent a FAR provision related to environmental regulation is incorporated by reference into the contract, but does not appear in your EPP, a contractor is still required to follow all the terms of the contract. In other words, the obligations of the contract stay with the contractor, even after the parties have agreed to an Environmental Protection Plan.

The best time to address any of these environmental concerns is almost always before a dispute arises.  Look under every nook and cranny of your contract, find what regulations apply, and address them head on with your contracting officer. You will be doing right by your business and will be ensuring the health, welfare, and preservation of the environment.

Square (30)

For decades, employers have depended on the rule that transferring or reassigning an employee would not give rise to an actionable discrimination claim, as long as such an action did not “significantly” change an employee’s pay or benefits. Employers, however, may no longer rely on that rule following the Supreme Court’s recent decision in Muldrow v. City of St. Louis, 601 U.S. ____ (2024).

As of last week, an employee seeking to demonstrate that their employer transferred or reassigned them in violation of Title VII of the Civil Rights Act of 1964 need show only that such an action produced “some” harm or disadvantage to an identifiable term or condition of their employment. Changes in schedule, decreased opportunities to work on important projects, alteration of responsibilities, and the loss of position-related perks, such as losing access to a company-owned vehicle—which courts previously disregarded as mere de minimis workplaces issues insufficient to establish employer liability—may now be actionable discrimination under Title VII.

What the Supreme Court did not do is explain whether there are some harms that are simply too trivial or minor to support a Title VII discrimination claim. Employers and employees alike will have to define the contours of the Supreme Court’s decision in Muldrow through future litigation. 

Following Muldrow, employers should consider exercising caution before transferring or reassigning an employee to a different position, even if it does not appear that such an action will alter the employee’s pay, benefits, or significantly injure the employee.

For guidance on this development and its impact on your organization, please contact Hahn Loeser’s Labor & Employment team.

Square (29)

On April 23, 2024, the Federal Trade Commission voted 3-2 to issue a final rule that bans most worker noncompete agreements. See Fed. Trade Comm’n, Non-Compete Clause Rule, RIN2084-AB74 (Apr. 23, 2024). The final rule, which becomes effective September 4, 2024, provides that it is an unfair method of competition for employers to enter into non-compete agreements with workers. 

The final rule defines “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (2) operating a business in the United States after the conclusion of the employment that includes the term or condition.” In addition, the final rule defines “worker” as “a natural person who works or who previously worked, whether paid or unpaid, without regard to the worker’s title or the worker’s status under any other State or Federal laws, including, but not limited to, whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or a sole proprietor who provides a service to a person.” Importantly, the final rule does not apply to non-competes entered into by a person pursuant to a bona fide sale of a business entity. Moreover, the final rule does not apply where a cause of action related to a non-compete accrued prior to the effective date.

With respect to existing non-compete restrictions, specifically, non-compete restrictions entered into before the final rule’s effective date, the Commission adopts a different approach for senior executives versus other workers. Existing non-compete restrictions with senior executives may remain in force, as the final rule does not cover such agreements. The final rule defines “senior executive” as “a worker who: (1) was in a policy-making position; and (2) received from a person for the employment: (i) total annual compensation of at least $151,164 in the preceding year; or (ii) total compensation of at least $151,164 when annualized if the worker was employed during only part of the preceding year; or (iii) total compensation of at least $151,164 when annualized in the preceding year prior to the worker’s departure if the worker departed from employment prior to the preceding year and the worker is subject to a non-compete clause.”

For workers who are not senior executives, existing non-compete restrictions are no longer enforceable after the effective date. Notably, employers must provide these workers with existing non-compete restrictions notice that the non-compete restriction is no longer enforceable. The final rule includes model language that satisfies this notice requirement.

Within 24 hours of the Commission’s vote on the final rule, two lawsuits were filed challenging the Commission’s authority. At present, no court has made a ruling that would prevent the final rule from going into effect. Hahn Loeser’s labor and employment team is monitoring the status of the lawsuits and will update this alert if a court issues an injunction that stops the final rule from going into effect.

Square (28)

On April 23, 2024, the U.S. Department of Labor (DOL) announced that effective July 1, 2024, the salary threshold for the overtime exemption for employees employed in a bona fide executive, administrative, or professional capacity will increase from $684 per week ($35,568 per year) to $844 per week ($43,888 per year). The salary threshold will increase again on January 1, 2025, to $1,128 per week ($58,656). To keep pace with changes in employee pay and to remain effective in helping determine exemption status, the DOL will update the salary threshold every three years, beginning July 1, 2027, to reflect current wage data.

The salary threshold is one of three factors which determines whether an employee falls within the executive, administrative, or professional exemption from federal overtime requirements. To be considered exempt, the employee must:

  • Be paid a salary;
  • Be paid at least the specified weekly salary level; and
  • Primarily perform executive, administrative, or professional duties, as provided in DOL regulations.

The DOL also announced that the salary threshold for highly compensated employees will increase to $132,964 per year effective July 1, 2024, and to $151,164 per year, effective January 1, 2025. The salary threshold for highly compensated employees will likewise be updated every three years.

With the proliferation of wage and hour litigation, employers should take this opportunity to review employees’ primary duties to confirm continued compliance with the standard duties tests, in addition to compliance with the new salary threshold.

If you have questions regarding your wage and hour compliance, including classification of employees, please contact a member of Hahn Loeser’s Labor and Employment Practice Group.

Square (27)

Warranties provided to project owners are often some of the most-negotiated provisions in a construction contract.  What will the warranties cover?  How can they be enforced?  Perhaps most importantly: how long will they be in force? Arguments regarding one recent construction project in Ohio demonstrate the importance of knowing whether contractual language does, or does not, create a warranty—and how long the project owner can attempt to enforce it.

Ohio, like many states, has enacted a statute of repose applicable to construction matters: R.C. 2305.131.  In essence, the statute of repose bars a party from bringing claims for injury or property damage arising out of defective construction later than ten years from the date of substantial completion of the project.  See R.C. 2305.131(A).  The statute serves an important public policy goal of preventing “stale litigation” where availability of evidence may be problematic, documents may no longer be preserved, and memories may have faded due to the passage of time.  See, e.g., Board of Education of Martins Ferry School District v. Colaianni Construction, Inc, et al., 219 N.E.3d 1021, 2023-Ohio-2285, ¶ 17 (7th Dist.).  As with many statutes, however, the devil is in the details because R.C. 2305.131 contains several exceptions.  Of interest here, R.C. 2305.131(D) states that the ten-year statute of repose does not prevent an action against “a person who has expressly warranted or guaranteed an improvement to real property for a period longer than [ten years after substantial completion] and whose warranty or guarantee has not expired as of the time of the alleged bodily injury, injury to real or personal property, or wrongful death in accordance with the terms of that warranty or guarantee.”  (Emphasis added.)  Thus, if the contractor provided a warranty lasting more than ten years from the date of substantial completion, that warranty trumps the statute of repose.

In Board of Education of Martins Ferry School District v. Colaianni Construction, Inc, et al., the project at issue involved construction of two new school buildings for the Martins Ferry School District (the “District”).  The District claimed that the roofs of the buildings at issue had been defectively constructed and required complete removal and installation of new roofs.  Although the project at issue was substantially completed in 2008, the owner did not file its complaint until 2019 (i.e., beyond the statute of repose’s ten-year cutoff).  The District therefore attempted to use the exception provided in R.C. 2305.131(D) to escape application of the statute of repose.  The District argued that the project had been designed according to the requirements of the Ohio School Design Manual (“OSDM”), including, but not limited to the requirement that “[s]chool building structures and exterior enclosures shall be designed and constructed of materials which will perform satisfactorily for 40 years with only minor maintenance and repairs, and for 100 years before major repairs or replacement of primary structural or exterior enclosure elements is required.”  Id. at ¶ 45 (emphasis added).  The District also argued that one of the specification sections for fiberglass shingles required the contractors to “[p]rovide manufacturer’s 40-year transferable warranty with the first five years non-prorated and the remaining time prorated, and a 40-year guarantee for all roofing products installed under this Section.”  Id. at ¶ 93 (emphasis added).  The trial court rejected those arguments in a summary opinion without significant analysis, and the District appealed the ruling to the Seventh District Court of Appeals.

The Seventh District Court of Appeals affirmed the ruling of the trial court.  The opinion addressed many different arguments asserted by the District in its attempt to avoid application of the statute of repose, but as relevant here, the opinion explained why it rejected the arguments relating to the warranty exception in R.C. 2305.131(D).  As to the OSDM argument, the Seventh District reasoned that the design contracts only required the architects to “endeavor to ensure” that the designs complied with the OSDM, which was insufficient under Ohio law to incorporate all the requirements of the OSDM—including the alleged 40- and 100-year warranties—into the design contracts.  Id. at ¶ 92.  As to the specification argument, the Seventh District reasoned that the specification referenced only a manufacturer’s warranty and, since the District was complaining that the products installed were incorrect (as opposed to being defective), that warranty did not come into play.  Id. at ¶ 94.  The District chose not to appeal the ruling of the Seventh District Court of Appeals to the Supreme Court of Ohio, meaning that the Seventh District’s ruling became final.

Martins Ferry v. Colaianni Construction is important because it provides certainty for roofing contractors and architects under the specific OSDM provisions and specifications at issue in that case.  It also provides a useful lesson for the industry as a whole.  Contracting parties must look beyond the provisions clearly labeled as “warranties” or “guarantees” in their contracts and consider whether other provisions—although not labeled as such—could be interpreted as warranties or guarantees.  When negotiating contracts, contracting parties should consider clarifying such provisions to expressly state whether they constitute a warranty or guarantee.  After all, succession planning at any company is difficult enough—it shouldn’t require also passing on knowledge of potential risks posed by extended warranty periods that the company entered into decades ago.

This article was previously published as “Statute of Repose Warranties” in the April 2024 issue of Properties Magazine.

February properties

When it comes to risk mitigation for property investors, title insurance may be the best kept secret in the industry. While the concept of title insurance is well known and most investors understand the basic coverage offered by a title insurance policy, many don’t know about the optional – and valuable – coverage that may be available to them. Litigation over property rights occurs daily, and often the risk at issue could have been covered by title insurance.

Even if you haven’t purchased a title policy for your own benefit, if you have a mortgage, you have purchased title insurance for your lender. For even the simplest transactions with the smallest of real estate collateral, lenders routinely require specific endorsements to their title coverage. Clearly, banks and other financial institutions are on to something. So, what is it that your lenders know that you don’t?

Simply put: Lenders know to take advantage of any chance to minimize risk. They know that extended title insurance policies with appropriate endorsements may cost a bit more at closing (usually on buyer’s dime), but will save them money in the long run. From insuring that a building conforms to applicable zoning ordinances, to removing the arbitration provisions from the title policy itself, there are many ways that title endorsements can change a title policy. For instance, if you are buying an LLC in order to obtain a parcel of land, the prior owner’s knowledge of defects could be imputed to you as the new shareholder – even if you had no idea about the issue at hand. However, a non-imputation endorsement would prevent the title company from assigning that knowledge to you as a defense against your claims.

The American Land Title Association, (ALTA), is primarily responsible for creating forms of standard endorsements which states may choose to adopt. In Ohio, most endorsements available are ALTA form endorsements.   However, ALTA does not have a monopoly on title policies or endorsements in the United States. While ALTA is still the industry standard, many states have adopted their own endorsements. California, for example, issues California Land Title Associations (CLTA) endorsements in addition to ALTA endorsements. Of those states that have adopted ALTA endorsements, not all ALTA endorsements are available in each state (looking at you Florida), and some states don’t issue ALTA policies or endorsements at all (yes, of course it is Texas).

In whatever state you are in, endorsements can transform your title insurance coverage. For example, if there is an easement that runs through your property and the prior owner constructed a garage that encroaches into that easement, the easement and the encroachment would appear as exceptions to the title policy. However, you could still get coverage through endorsements over both the easement and the encroachment. With an ALTA 28.1 for instance, if the other party to the easement sued to force you to remove the garage, you could make a claim with the title company causing the title company to step in to defend you against the claim and, if their defense fails, to cover your damages.

Although title insurance is generally thought to be insuring over mistakes of the past, with certain title insurance endorsements, you can also insure the future of your property. If you are purchasing a vacant parcel of land with the express intent of building a multifamily apartment complex, there isn’t much to insure as there would be no potential encroachments, violations of restrictions or zoning issues at the time of purchase. However, if it is the future improvements that you would want to insure – you can, in fact, insure them. Through land under development endorsements, you can ensure that your planned improvement is in compliance with zoning ordinances, doesn’t violate any restrictions on record, and will not cause an encroachment (among other things) to avoid any unwanted surprises at the completion of your project. 

All investments come with a degree of uncertainty. Since 2020, real estate investments have become even more uncertain and volatile. Regardless of the security of the investor, walking away from the type of insurance offered by today’s title companies would be a mistake. Do yourself a favor: the next time you review a commitment to issue title insurance, ask what endorsements and additional coverage your insurer can provide to your project. It just may save you in the long run.  

February 2024, Properties Magazine, Pages 58-60

Square (19)

On January 26, 2024, the U.S. Department of Labor’s (“Department”) Office of Solicitor (“SOL”) published its FY2023 Enforcement Report (“Enforcement Report”). The report provides an insight into the Department’s labor and workplace safety initiatives and enforcement focus. The messaging in the Enforcement Report is consistent to what Hahn Loeser & Parks LLP has seen and been communicating to its clients for the past several years—the Department, under the current administration, is focusing on announcing enforcement goals and then compelling proactive compliance through enhanced enforcement measures. The 2022 National Emphasis Programs on Heat and Trenching are perfect examples of this approach.

In 2023, the Department’s enforcement priorities included: combating workplace retaliation, employee misclassification, child labor, and protecting immigrant and migrant workers. Of significance, the Enforcement Report also highlighted several OSHA cases demonstrating the increasing number of criminal referrals. The Department views criminal prosecution as an effective enforcement tool and believes the threat of criminal liability encourages increased compliance.

The Department’s Enforcement Toolkit in 2023 Included:

Corporate Veil Piercing

  • The SOL successfully pierced the corporate veil of a Maine contractor to hold its owner personally liable for $1.5 million in monetary penalties. The monetary penalties arose from the falling death of an employee. Prior to the fatality, the Contractor repeatedly failed to ensure the use of fall protection on its Projects. The Contractor’s prior violations and wanton disregard for employee safety allowed the SOL to pursue such action against an individual.

Criminal Referrals

  • The U.S. Attorney for the Southern District of New York charged a roofing contractor for willfully violating OSHA regulations following a criminal referral from OSHA and SOL. The New York roofing contractor had a history of willful OSHA violations following the death of two employees. The roofing contractor had received 24 willful OSHA citations between 2019 and 2023, including willful egregious fall protection citations in August 2022 and February 2023.
  • A Nebraska roofing contractor was held in criminal contempt for failure to appear at a hearing regarding the appropriate penalties and sanctions.
  • SOL assisted the U.S. Attorney’s Office of the Eastern District of Kentucky in a prosecution that successfully held a coal company and its dust examiner criminally liable for submitting false samples. The company was sentenced to two years of probation and to pay a $200,000 fine, and the certified dust examiner was sentenced to six months in prison followed by six months of home detention.

Increased Monetary Penalties

  • The Department reached a corporate-wide settlement agreement with Dollar Tree, which operates 16,000 Dollar Tree and Family Dollar stores across 48 states. The settlement required the payment of $1.35 million in penalties and put in place measures to ensure prompt abatement of safety hazards that included blocked exists and access to fire safety.

Looking Forward in 2024

We forecast that in 2024, the Department will continue its recent trend of announcing its enforcement focus and then compelling compliance through increased inspections, citations, assessment of monetary penalties, and criminal liability.

Areas of Focus:

  • Continued protection of “vulnerable workers”;
  • Continued enforcement of specific standards such as Trenching, and Fall Protection; and
  • Continued use of the General Duty Clause as it relates to Heat.

These enforcement trends are likely to continue throughout 2024 but could change depending on the results of the 2024 Presidential Election. As we’ve seen, the Department’s strategy and focuses depend largely on the interests of the presidential administration.

Conclusion

A single OSHA investigation can lead to expensive fines, loss of productivity, a damaged reputation, and even criminal liability. Therefore, employers must be cognizant of not only their own employment practices and workforce details, but also the actions of their subcontractors and even sub-subcontractors.

If you have any questions about OSHA compliance, please call or email Hahn Loeser’s Construction and OSHA Team.

Properties Magazine

Full Article in Properties Magazine

At the most basic level, contracts serve to assign, allocate, and mitigate risk. Parties—unsurprisingly—are typically unwilling to adopt greater risk than required, and often look to assign most of the risk to the other contracting party. While understandable, this approach may have unintended costs.

For the most part, the general risks associated with a construction project are commonly understood and accounted for in broad form provisions. Such provisions alone, however, may not effectively address the unique risks associated with the rise in material escalation, volatile supply chains, increased labor demand, and skilled labor shortages. In turn, disputes related to the foregoing procurement and delivery issues are on the rise.  Even when resolved, contractors and owners alike have been equally dissatisfied.

It is unreasonable to believe that all risk can be identified and assigned from the outset. However, including provisions that require proactive planning, early procurement meetings, and early deliverables may mitigate the chances of procurement issues, and certainly reduce the negative impact should they arise. The risk of the unknown does not have to be solely allocated to one party or another. Encouraging a project centric approach, obligating all parties to engage and share risk, will benefit all parties who choose to adopt such a perspective. Below are some early planning and procurement procedures/concepts that can easily be incorporated into contract terms and/or early engagement project activities.

What can Owners and their Design Teams / Consultants consider doing?

  • Foster early engagement – find a way to create a true collaborative partnership between all members of the team as early as possible:
    • This could be driven by the type of project, but is important to have ALL team members involved as early as possible, including early engagement of the construction team; and
    • For scenarios or projects where the owner is hesitant to engage team members too early for potentially losing pricing competitiveness, there are various ways for an owner to maintain cost confidence from the whole team throughout the entire process.
  • Understand the environment – look for multiple options and rely on input from all team members throughout the process:
    • Establish an environment with open communication being a critical focus piece;
    • Avoid playing the “blame game” and be understanding when difficult news is communicated to encourage continued open and transparent flow of information in real time from all parties; and
    • When soliciting for proposal requests or bids, encourage real-time feedback from contractors, subcontractors, and their material vendors.
  • Be flexible and understanding – be ready for and open to potential alternative options for final product selections:
    • Encourage a streamlined substitution process – perhaps even cater to the project and work ahead with the Design Team / Consultants so decisions can move efficiently and effectively;
    • Wherever possible, avoid sole-source manufacturers or closed-spec materials. Limiting available options in current market conditions can be a recipe for disaster; and
    • If a change is necessary, seek diligent back-up documentation so that decisions can be made quickly with reliable and appropriate information.

What can Contractors consider doing?

  • Encourage open and often communication from the outset, and continue through the entire project;
  • Offer current-trending material procurement information during the bidding process;
  • Create options for team members to evaluate – both time driven and product driven;
  • Provide potential temporary solutions that offer workarounds to achieve substantial completion with minimal, non-intrusive come-back work;
  • Include detailed assumptions and clarifications – part of winning the work is showing the commitment of your team up front, so be sure to include information to help the Owner make a selection, knowing you are the right add to the team; and
  • Evaluate if and potentially recommend that a project would benefit from lower-tier design-assist involvement for an even stronger finger on the pulse of the current market.

Working collaboratively across all disciplines from the early project development phases all the way through substantial completion will help to flush out issues driven by product availability.  It will also help to encourage alternative solutions, whether its flexibility in various materials, multiple design options for specific elements, or temporary construction solutions until those selected materials are available for final installation. 

Many organizations and projects have already adopted early strategy sessions to overcome these and other types of project issues.  With the ultimate goal in mind of mitigating risk across all interested parties, it is important to memorialize the outcome of those sessions.  For instance, consider incorporating agreed upon strategies with an amendment to the contract or a no-cost change order.   The real key is nothing new.  It goes back to what is at the core – teamwork, communication, planning, and execution.  Encouraging this throughout the entire project will create and foster an environment for overall project success with the entire team.