September 29, 2023

The Site Report - Construction Law Insights - Issue 9, September 2023

Jonathan Deasy, Stephanie Eaton, Steven Hemric, Steven Lee, Michael Lockaby, Julian Neiser, Alexander Turner

Spilman Thomas & Battle, PLLC

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Issue 9, 2023

Welcome to our ninth issue of The Site Report for the year.

We hope you enjoy this issue and, as always, thank you for reading.

Stephanie U. Eaton - Co-Chair, Construction Group; Vice Chair of Southern Offices, Litigation Department; Editor, The Site Report

and

Julian E. Neiser - Co-Chair, Construction Group; Vice Chair of Northern Offices, Litigation Department

Why Preconstruction has Stolen the Project Spotlight

“Clients are asking for more communication, too, with owners requesting to meet the preconstruction and estimating and management teams before a project begins.”

Why this is important: We have often advocated that our clients – and construction industry companies in general – seek legal input as early in a project as practicable to avoid potential misunderstandings and problems with plans and specification, contracts, surveys, and other documents or physical aspects of a project that lead to claims and litigation. Project success by the contracting team can also follow this more proactive approach, whereby the “preconstruction” phase of the project becomes more collaborative among the owner, design and/or engineering team, key suppliers, and the construction team. This series of articles stresses the importance of preconstruction collaboration by the project team to eliminate, or at least mitigate, the impacts of “plan and drawing inconsistencies, inefficient supply and material purchasing, poor trade coordination and . . . heavy cost and schedule” issues. In particular, preconstruction collaboration is important to address known and anticipated supply chain issues that have remained following the initial pandemic restrictions, so that schedule modifications (even out of normal sequence construction) can be made in advance of physical construction. The more communicative the project team members are with each other – especially about expectations, acceptable alternatives to building materials and/or design elements, time constraints from other projects, labor shortages, and material cost concerns – the more likely the project is to be successfully completed.

Some construction teams are turning to technological solutions, such as Autodesk Revit’s building modeling to address conflicts among the various disciplines to avoid clashes on site, or software from AGTEK to more accurately estimate costs of earthwork before construction work begins. Other construction companies are turning to AI to analyze financial data and complex plans to develop lower cost products and/or optimize scheduling. The use of technology during the preconstruction phase can certainly impact the timing, costs, and buildability of the project as a whole.

Moreover, owners are coming to expect “real-time” communication about the construction progress, and the sooner the parties establish good lines of communication, the more able they are to meet owner expectations. The articles do note that, despite the increased use of preconstruction collaboration, project timelines and budgets do not always achieve improvements; according to KPMG’s 2023 global construction survey, 37 percent of owners and contractors missed budget or schedule targets over the last year as a result of ineffective risk management. Therefore, it will remain important to seek legal counsel if preconstruction expectations are not being met during the project, again with the hope that claims and litigation can be avoided. --- Stephanie U. Eaton

Will the Supreme Court Soon Undermine Minority Contractor Programs?

“Opponents are targeting disparity studies used to justify MBE rules.”

Why this is important: In the wake of the Supreme Court’s recent ruling on affirmative action programs in college admissions, the construction industry has quickly begun to question how the Supreme Court’s ruling will impact M/WBE programs in public contracting. Several lawsuits focusing on precisely this issue have already begun, and the recent results are mixed, with some challenges to M/WBE programs succeeding in the lower courts and others failing. A major target of challenges to M/WBE programs is the underlying methodology of the disparity studies used to justify M/WBE programs, which highlights the importance of disparity studies including robust data collection and analytical frameworks for M/WBE programs to withstand challenges. Given the Supreme Court’s recent ruling and the number of challenges being brought against M/WBE programs, while the overall future of M/WBE programs is unclear, it is almost certain that the programs will undergo changes over the coming months and years as proponents look for methods and opportunities to preserve the economic benefits M/WBE programs provide and opponents attempt to limit or eliminate the programs. --- Steven C. Hemric

OSHA Proposes New Regs for Safety Gear in Construction Industry

“A perfect fit isn't required, but the gear needs to fit well enough to provide the necessary protection to the worker.”

Why this is important: Earlier this year, OSHA announced a notice proposing to clarify its rule that PPE must fit construction workers properly. Historically, manufacturers and suppliers have produced and sold equipment designed to fit average-size men. However, this is no longer the case for U.S. construction workers. The rule will therefore require employers to pay more attention to the needs of employees who may be too large or too small to properly wear certain types of PPE, which, according to OSHA, will likely to have a significant impact, as more women and other employees who typically have smaller features begin to work in construction jobs. In light of the proposed rule, employers should keep a variety of sizes of PPE and remind employees about how to raise concerns when their PPE doesn't fit or is worn out and needs to be replaced. Employers should also make sure the equipment does not fall off, slip down or feel so tight that it restricts a person's movements. --- Jonathan A. Deasy

Appeals Court: Contractor Liable for Economic Losses Arising from Pensacola Bay Bridge Damage

“Skanska’s barges got loose during Hurricane Sally in 2020.”

Why this is important: Last year, we discussed in a two-part article (part one and part two) residents’ lawsuits stemming from the damage and closure of the Pensacola Bay Bridge following Hurricane Sally in 2020. It was alleged in these lawsuits that the contractor that constructed the new bridge, Skanska, failed to properly secure its constructions barges prior to the arrival of Hurricane Sally. During the storm, some of the barges broke loose and struck the newly constructed bridge, which caused part of the bridge to collapse into the bay. As a result, local residents on the barrier island were significantly inconvenienced because they had to take a long detour to access the mainland, and those who wanted to access the barrier island had to take the same lengthy detour. The question became whether Skanska could avoid paying economic losses arising from the bridge collapse by relying on an 1851 federal admiralty statute, the Shipowners’ Limitation of Liability Act. When we wrote our articles last year, the federal District Court had ruled that the admiralty statute did not apply to limit Skanska’s liability, and Skanska had just appealed that ruling to the 11th Circuit.

Now, the 11th Circuit has weighed in on this matter. Skanska argued that its liability was limited to the value of the errant barges, which was $1.2 million, pursuant to the Shipowners’ Limitation of Liability Act. A three-judge panel recently handed down a 40-page opinion affirming the District Court’s decision that the 1851 admiralty statute did not apply to limit Skanska’s liability. The panel also affirmed the District Court’s decision holding Skanska responsible for spoliation damages resulting from destruction of incriminating communications evidence.

While this is significant win for the residents and businesses that relied on the Pensacola Bay Bridge, the litigation is likely not over. In response to this decision, Skanska can ask that the entire 11th Circuit hear the case and issue an opinion. While it is anticipated that Skanska will appeal this decision, Skanska’s counsel have no comment on how they plan to proceed in light of the three-judge panel’s decision. --- Alexander L. Turner

US Solar installations Expected to Jump 52% to Nearly 32 GW in 2023

“The industry outperformed SEIA’s March forecast, which predicted the best case scenario would see 2023 installations grow to 28.4 GW.”

Why this is important: The article discusses a report issued by Solar Energy Industries Association ("SEIA") and Wood Mackenzie that details the growth of U.S. solar installations in 2023 to date and expected in the years to come. Supply chain challenges have persisted since the pandemic, and new tariffs applied to solar cell and module imports from Southeast Asia are expected to begin in 2024. Despite these headwinds, nearly 32 GW of solar capacity is expected to come online this year and the report expects gigawatts-direct current to nearly triple in the next five years. The article explains that a major contributor to this growth is the passage of the Inflation Reduction Act. While growth is still expected, the article noted that the anticipated tariffs on solar materials will increase the cost of solar installations in the short term, which in turn will create financial pressure for consumers. --- Steven W. Lee

The Virginia Clean Economy Act, the Botetourt County Battery Power Facility and the Impact on the Commonwealth

By Michael W.S. Lockaby

The Virginia Clean Economy Act (“VCEA”) mandates that Dominion Energy Virginia and Appalachian Power, the two largest electrical utilities in Virginia, move to 100 percent renewable energy by 2045 and 2050, respectively. Because they also provide much of the generation capacity used by smaller utilities such as cooperatives and municipals, this effectively means most of the electrical power in Virginia will need to be generated by renewable sources by those dates. The VCEA also provides that much of this renewable generating capacity must be located inside the Commonwealth, and that 35 percent must be privately owned and purchased by the utility, rather than utility-owned. Each utility must provide regular reports to the Virginia State Corporation Commission (“SCC”) on their progress toward these goals.

The utility-based problem with this is that Virginia’s geography is really only well-suited to solar generation.

Click here to read the entire article.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.