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The Seventh District Court of Appeals’ decision in Union Local School District v. Grae-Con Construction is another important victory for the Ohio construction industry in the ongoing debate over the proper application of Ohio’s construction statute of repose, R.C. 2305.131.  The Seventh District Court of Appeals, applying the Supreme Court of Ohio’s July 2019 decision in New Riegel Local School District v. Buehrer Group Architecture & Engineering, Inc., et al., reaffirmed dismissal of stale breach-of-contract claims under Ohio’s construction statute of repose.  The Seventh District rejected three separate arguments advanced by Union Local, which was attempting to overturn the trial court’s rejection of Union Local’s breach of contract claims against contractors and other project participants.  The Union Local opinion is yet another example of Ohio courts interpreting and applying the construction statute of repose to prevent prosecution of stale claims many years after project completion.

Union Local’s first argument was that the construction statute of repose did not apply to breach of contract claims.  The Union Local appeal had been stayed pending the outcome of New Riegel, so the Seventh District was able to swiftly dispose of Union Local’s argument based on the Supreme Court of Ohio’s July 2019 holding that Ohio’s construction statute of repose bars breach of contract claims as well as tort claims filed more than 10 years after project substantial completion.  (Hahn Loeser previously summarized the impact of New Riegel here.) …
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On September 24, 2019, the Ohio Supreme Court announced the General Assembly has broad authority to regulate public-works contracts that subject Ohio’s workers to residency preferences or restrictions. In The City of Cleveland v. The State of Ohio, the Court concluded the General Assembly properly enacted R.C. 9.75, which prohibits municipalities and other political subdivisions from requiring a contractor on a public-improvement project to employ a certain number or percentage of local residents. The statute also prohibits municipalities and other political subdivisions from providing a bid award bonus or preference to contractors as an incentive to employ a certain number or percentage of its own residents.

The decision stemmed from the City of Cleveland’s local ordinance requiring “public-construction contracts in an amount of $100,000.00 or more to include a provision mandating that city residents perform 20 percent of the total construction work hours under the contract.” The purpose of the ordinance was to help alleviate unemployment and poverty in Cleveland and included penalties for a contractor’s failure to comply with the contractual provision. In 2016, the General Assembly enacted R.C. 9.75, which was in direct conflict with the city’s ordinance. The city of Cleveland sought an injunctive relief and a judgment declaring R.C. 9.75 to be unconstitutional because it conflicted with the Home Rule Amendment, Article XVIII, Section 3 of the Ohio Constitution, which reserves all powers of local self-government to municipalities that are not in conflict with general laws. The Eighth District Court of Appeals affirmed the ruling of the trial court permanently enjoining enforcement of R.C. 9.75, finding the statute was not within the General Assembly’s authority under Article II, Section 34 of the Ohio Constitution, and violated the Home Rule Amendment.

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The most common types of “differing and changed conditions” in construction contracts deal with subsurface issues such as inadequate support, unanticipated groundwater, or unanticipated natural or artificial subsurface obstructions. But what happens when an unusual differing and changed condition, such as an endangered species, or even an unexpected burial ground, impacts your project?…
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Hahn Loeser’s Construction Team is a proud leader in a major victory for Ohio contractors and their sureties. The Fifth District Court of Appeals of Ohio issued a recent decision confirming that Ohio’s construction statute of repose, R.C. 2305.131, applies to breach of contract claims. It also confirmed that sureties are entitled to rely on the statute of repose as a defense to claims under the bond.
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Steel and other construction material tariffs necessitate careful evaluation and allocation of project cost and schedule risks. For example, when steel costs increased suddenly based solely on presidential executive orders, the building trades and owners saw drastic increases in costs, shop drawing review times and delivery dates. In many instances, contract documents failed to account for such risks.

Another factor that can significantly increase the price of material, and even the market price for labor, include catastrophic weather events. When bad weather occurs, contractors may no longer be able to obtain the material at originally budgeted pricing, or secure necessary labor forces to perform the work. Labor and material shortages domino into project delays, potential liquidated damages and claims.

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While electronic funds transfer is considered a convenient and quicker way to process payments and receive funds on construction projects, this practice presents significant risk to project participants. Contractual and processing controls are necessary to prevent fraud, which is on the rise locally and nationally.
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Many of us have heard the old saying that “decisions are made by those who show up.” The Ohio Facilities and Construction Commission (“OFCC”) is currently giving design and construction professionals involved in the construction of public schools the opportunity to show up, or more accurately speak up, to provide comments on contract general conditions and specifications of OFCC, including those in the Ohio School Design Manual (“OSDM”), as well as on the materials and methods of design used in the OSDM. This comment period offers industry professionals an important chance to provide input on the construction documents that control school construction projects throughout Ohio. It is crucial that design and construction professionals take this opportunity to give its opinion on current issues, as well as potential issues that may impact the industry in the coming years. Interested parties have until February 15, 2019 to submit comments on materials and methods of design used in the OSDM, and until March 1, 2019 to provide comments on OFCC’s contract documents.
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Strict Application of Claims Waiver Provisions Bars Surety Payment Claims

In Berkley Ins. Co. v. Kent State Univ., Ohio Ct. of Cl. No. 2018-00579JD (Jan. 14, 2019), the Ohio Court of Claims expanded its prior rulings strictly enforcing contract dispute resolution provisions in the public construction contract arena. The Court ruled, despite the circumstances that actually existed between the contracting parties, that a contractor’s surety who takes over and completes a project after the contractor’s default and termination is likewise bound by the contract’s dispute provisions. The ruling reinforces the significant risk of waiver of claims by contractors and their sureties when claims are not promptly submitted in accordance with contract provisions governing disputes, even though all parties are aware of the dispute and claim.

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