Tag Archives: design professional

Surety Bond Now a Valid Performance Guarantee for NC Developers (guest post)

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subdivision

Welcome summer days!  Today we have a guest post by Todd Bryant, president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping contractors get bonded and start their business.  While design professionals generally don’t have to deal with performance bonds directly, they are often at the front lines of advising owners as to various Requests for Proposals submitted by hopeful contractors.  In that spirit, be sure to read how the new law changes security requirements.

 Take it away, Todd!

Last year wrapped up with some good news for North Carolina subdivision developers: House Bill 721 confirmed that construction bonds are, in fact, a viable form of performance guarantee. Previous legislation was ambiguous on this point, but the new bill– which took effect last October– sought to clear up the confusion.  Although the new rules have been in effect for eight months, there’s been scant coverage of the changes, and what they mean for developers.

City Ordinances for Subdivisions

HB 721 is a revision to a section of North Carolina General Statutes, which authorizes cities to regulate land development with their own subdivision control ordinances. Ordinances are meant to ensure that land is developed in an organized fashion, to avoid overcrowding and congestion.

Cities have the discretion to set their own requirements for developers. Usually, cities ask developers to include certain features in new subdivisions, to fit in the city’s infrastructure. These might include recreational space for residents of the development, or building easements for existing roads and utilities. Some cities will allow developers to furnish funds for these public improvements, instead of building them themselves. Often, ordinances ask for detailed, up-to-date plans throughout project construction, so any changes can be approved by the city in advance.

To prove that they will follow local ordinances, subdivision developers must usually furnish the city with some kind of performance guarantee. According to the new bill, a surety bond officially meets the criteria for this guarantee.

The Facts on Surety Bonds

If you’re a design professional or developer in North Carolina, you’re probably familiar with these bonds already. Construction bonds, also known as contract bonds, are usually required of contractors who take on public construction projects. More and more, large private projects are requiring these bonds as well. There are a few different types of contract bonds, including bid bonds, payment bonds, and performance bonds, but they all serve a similar function. Contract bonds work like a line of credit for the developer, to ensure the project is completed on time, and according to the stipulations of the contract.

North Carolina HB 721 relates primarily to performance bonds, which are the type of contract bonds that cities will most often require from subdivision developers. With this new law, construction bonds are officially recognized as a valid form of performance guarantee that North Carolina subdivision developers can submit to demonstrate that they will follow all city ordinances.

HB 721 also includes some guidelines about how big this surety bond must be. Although cities will have the authority to set the bond amount on a case-by-case basis, it can’t exceed 125% of the estimated project cost.

Of course, surety bonds aren’t the only kind of performance guarantee that’s acceptable. Developers will still have the option to submit a letter of credit instead, or some equivalent security. However, the amount of credit that’s needed to satisfy this requirement is usually out of reach of some smaller developers.

Posting a bond requires much less capital than submitting a letter of credit, since the bond cost is only a small percentage of the total bond amount. The clarifications in HB 721 could be a boon for North Carolina developers who want to grow their business, as it could enable them to take on bigger projects. City officials in North Carolina are pleased with the new law, as well, as they believe this will make compliance and accountability easier, for government officials and subdivision developers.

If you’re a developer with questions about local ordinances, make sure to check with zoning officials in your subdivision’s city or county.

Thanks Todd for your article!  Readers, if you have questions or comments about how HB 721 affects your projects, feel free to share in the comments.

 Image source: https://flic.kr/p/9KpZH

With Construction, Compromise is Always an Option (guest post)

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Chris Hill, attorney, construction law.

Chris Hill, attorney, construction law.

Today, we have a guest post from one of our favorite  Virginia lawyers- Chris Hill. 

As always, he knocks it out of the park with another worthy post explaining why biting the bullet and settling your claim sometimes is the way to go. 

Here is Chris’s official bio:  Christopher G. Hill, LEED AP is Virginia Supreme Court certified mediator, construction lawyer and owner of the Richmond, VA firm, The Law Office of Christopher G. Hill, PC.  Chris authors the Construction Law Musings blog where he discusses legal and policy issues relevant to construction professionals.  His practice concentrates on mechanic’s liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals. 

Without further adieu, take it away Chris!

As always, thanks to Melissa for letting a Blue Devil invade her blog. I always enjoy the opportunity. Now, on with the post.

I know, you read a title like this and your first thought is “I’ll never have to compromise, if I get into trouble, I’ll be in the right!” You followed your friendly construction attorney’s advice, drafted a great contract (using a “belt and suspenders” approach) and do good work! What could possibly go wrong?

Well, among other things: 1. An owner may not pay the general contractor that you subcontracted to, 2. Weather could cause delays beyond your control, or 3. (yes, I’ll say it here) the architect may not like your work and what you did with his or her masterpiece of design. [Editor’s note: architectural plans exist for a reason, people!]. These three were just off the top of my head. Given that “Murphy was an optimist,” there are many other things totally beyond your control as a construction pro that can and likely will go wrong. The question is how to make the best of that bad situation.

Lets skip the easy points and head straight for the title of the post. You’ve already done all you can to “fix” the situation: increased manpower, shuffled your workforce, and gotten the work done as soon as possible. The party that should be paying you has decided not to do so. You decide that you need to do something besides beg for your money.

At this point you have a couple of options (not mutually exclusive): Mediation or Litigation/Arbitration. The second option is the “nuclear” option and to be used as a last resort. Remember, this is a zero sum game with no winners once the lawyers start filing papers. You will spend money that you didn’t plan to spend and take focus away from your business.

The first option is where you compromise. While you may not get the result that you may get by going to the mat in litigation, namely a judgment for everything that you would have gotten had you been paid in full, mediation has its advantages.

What are they? 1. The big one is control. With litigation or arbitration, you are turning your fate (and possibly the fate of your business) over to a third party. In mediation, you get some control and get to creatively determine the best way to solve the problem. 2. After anywhere from a few hours to a day, the dispute is resolved. Compare this to the several months to several years of litigation and you see where this would help. 3. It cuts off the attorney fee spigot much sooner than the alternative. While I as a construction attorney don’t mind being paid, you can’t run a business profitably with a monthly legal bill.

While a compromise is never the ideal, it is in most cases far better than the alternative.

Thanks, Chris!  It is a tough message to hear when you are in the thick of battle, proving that you are right, but the economic realities should always be considered before starting down the long path toward a court trial. 

Now it is your turn.  Have you settled or mediated a claim purely to put the economic pain of litigation to rest?  Do you regret that decision, or feel it was for the best?  Share in the comment section below.

PS:  Final reminder to VOTE for this blog in the “Best Legal Blog” competition. TODAY IS THE LAST DAY!  It takes, literally, about 1 second, and does not require your name, email, or anything else.  (It tracks IP numbers only).  THANK YOU for your vote!!!!!

 

Wake County Justice Center- a LEED Silver Project done right!

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Justice Center

The atrium

Yesterday evening, I had the privilege of attending the Triangle USGBC’s  “Talk & Walk” at the Wake County Justice Center.  The 576,996 square foot Justice Center was completed 6 months early and over 30 million under budget.  (The final cost, including soft costs, came in at ~$141,000,000).  Now that’s what I call a LEED project done right!

Interestingly, the County did not endeavor for a LEED Silver rating– the plan was to aim for a Certification.  However, as the process unfolded, the Team kept meeting the goals and points for a Silver certification without any appreciable additional costs.

The end result?  An “iconic but energy efficient building,” according to Tim Ashby, current Wake County Facilities Project Manager.  Tim was initially involved in the Project while working at O’Brien Atkins, which served as the architecture firm for the Project under the direction of Architect Andrew Zwiacher.

The Project was a Construction Manager at Risk project, involving a joint venture between Balfour Beatty Construction and Barnhill Contracting Company.   Did the contract type contribute to the success of the Project?  According to Project representatives, it likely was responsible for the 6 month early completion due to the high level of coordination.

Energy efficiency in the Building comes from the low flow plumbing (total water savings of 45%, 15% more than LEED requires), programmable and natural daylighting, and almost 98% construction waste diversion.

Jury Room

The large & relaxing Jury waiting room

Another interesting legal factoid: BIM (Building Information Modeling) was utilized.  Through BIM, a conflict was discovered in the space allocated for the air handling units versus the planned size of those units.  This discovery enabled a change to the AHU units (to make them wider and shorter) prior to manufacturer, saving untold delays in time and increases in cost.  We’ll talk more later about the pros (and cons) of BIM, but suffice it to say it worked very well on this Project.

If you haven’t been by to see the Justice Center yet, please do.  It’s a great design (17 elevators!), and a great change from the old Courthouse across the street.

Have you seen the Justice Center yet?  Thoughts on the design?  Share in the comments below.

Photos (c) Melissa Brumback. .Creative Commons License

 

 

Is your design professional construction contract too friendly? (law note)

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not friendlyMy husband often travels the back roads between Chapel Hill and Fuquay Varina to visit friends.  En route (a circuitous route that goes past Sharon Harris Nuclear Power Plant, among other places), he passes by the “Friendly Grocery”.  For those who haven’t had the pleasure, here is a photo of the side of the building in all its glory.

In case you cannot read the list of forbidden activities, I’m re-printed them here (complete with spelling error):

not friendly sign

I’m not sure which is the “friendly” part of that sign.  In fact, the sign seems to be the antithesis of friendly.

What does this have to do with your construction contracts?  Sometimes, in an effort to please the client and/or secure the project, architects and engineers have the habit of being too friendly in their contract language.  That is, you make promises or proposals that may promise too much of a good thing for the client.  This can cause big problems.  Bigger than being towed away from a rural grocery store in the middle of nowhere.  You could be putting your insurance coverage at risk.

Have you ever promised to use “best efforts” in your design or plans?  Promised to design to a specific LEED standard?  Guaranteed 100% satisfaction?  You might be putting your errors & omission coverage at issue.  By warrantying or guaranteeing something, you are assuming a level of liability well beyond the standard of care required by law.  By law, you only need to conform to the standard of care, and your insurance will only provide coverage up to that standard of care.  In other words, if you make guarantees or promise “best efforts,” you are contracting to something that will *not* be insured.  If something goes wrong, you will be without the benefit of your professional liability coverage.

Instead, make sure that your contracts, and proposals, are not too friendly to the client.  Sure, agree to work in accordance with the standard of care of professional architects/engineers.   But don’t make guarantees, or promise “best” efforts.  In fact, you might want to educate your client on why you cannot make such guarantees, and why anyone who does (i.e., your competition) is putting their insurance coverage at risk.  Owners want and need you to stay within the bounds of your coverage.  You need to, also.  Maybe the owner of the Friendly Grocery was on to something there.

Your turn.  Have you ever used language that jeopardized your insurance protection?  Uncertain if you have?  Drop me a line and we can talk.

Photo (c) Melissa Brumback  Creative Commons License

New Green Standards; Same Green Warnings for Architects & Engineers (law note)

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The newest version of the LEED ratings system, LEED v4, has officially been released.  For a comparison of the major changes between LEED 2009 and LEEDv4, check out this downloadable form from the USGBC.LEED croppee

As the folks at Schinnerer’s pointed out, there is one major change that is fraught with peril for design professionals– the requirement for increased transparency concerning the composition and performance requirements of composition materials.

Notes the insurance carrier:
While design firms always had a level of responsibility for ongoing product research, the lack of standardized, affirmative industry data made it difficult for design firms and project owners to assess the impact of building materials on human health.
As with many aspects of sustainability in design and construction, the danger to design firms is likely to come from self-inflicted perils. When a firm accepts responsibility to “ensure that a project meets its goals by using the best products that align with project requirements,” it is essentially giving the project owner a guarantee that is both beyond the firm’s control and uninsurable by any insurance carried by a firm.

 

What is an architect or engineer to do?  NOT make guarantees.  That’s the easiest way to avoid potential problems and lawsuits down the road.

Inform your client that any green design guarantees may cause an otherwise covered claim to be denied by your errors & omissions insurance carrier.  Show them this post, or the Victor O. Schinnerer (CNA) blog article.  Whatever you do, do not make guarantees related to green design.

Your turn.  What has been your experience educating clients concerning green “guarantees” and the uninsurable nature of any such contract provisions?  Share in the comments section.

Photo adapted from (c) Albert Herring.