PDCA Committee Update: Associate Member Council
By Diane Fischer, Chairwoman
The April meeting of the PDCA Associate Member Council recapped 2019 initiatives, and discussed new initiatives for 2020. Chairwoman Diane Fischer (pictured, left) presided over the meeting where the participants reached a consensus to continue assisting the Association increase its membership. In addition to building new membership, the committee members also talked about encouraging other PDCA members to participate in the standing committees.
The committee discussion turned to PDCA's response to the ongoing health crisis stemming from the Coronavirus Disease. It examined the steps the organization has put forth to provide members support, information, and resources. One committee member went so far to say that "during these times, being a PDCA member is more valuable than ever." The Associate Member Council Committee meets quarterly; if you would like to join, please email firstname.lastname@example.org.
Managing Risk: Liquidated Damage Clauses For Delay In Construction Contracts
By Tiffany Harrod, Attorney at Munsch Hardt Kopf & Harr P.C., Houston, Texas
Chair-Elect, the Construction Law Section of the Houston Bar Association and
Carrie Schadle, Senior Attorney at Munsch Hardt Kopf & Harr P.C., Houston, Texas
With the on-going shortage of construction workers in the industry and other factors ranging from weather to procurement problems, the threat of project delay is real. When a contract contains a liquidated damages clause for delay, there can be real financial consequences for contractors. Courts have long allowed parties to apportion contractual risks as they see fit, especially in the commercial context where the parties are usually considered to be sophisticated, even if their bargaining power is not always equal. Liquidated damage provisions, such as those found for delay in construction contracts, are common, but must be crafted in such a way as to be enforceable and not against public policy.
Liquidated damage clauses in construction contracts are a common way for the parties to deal with the possibility of delay in the completion of a project and associated potential losses flowing from the delay. In their most basic form, the party in breach, which is most often the contractor, is obligated to pay the non-breaching party, usually the project owner, some fixed sum of money per set time period that has been agreed upon in advance and memorialized in the contract. (It is, after all, no secret that these provisions are meant to protect the owner.) The non-breaching party is then compensated for losses associated with the delay without the time and expense of having to prove what the actual damages were, in either a civil suit or an arbitration proceeding. This option is particularly attractive to project owners, because the money can simply be withheld from money owed to the contractor once the agreed-upon completion date has been passed.
However, like any provision in a contract, a liquidated damages provision should be the product of negotiation to ensure not only that it is fair to both parties, but that it is enforceable in the relevant jurisdiction if a dispute about payment of the liquidated damages should arise. Disputes regarding liquidated damages generally arise when the breaching party argues that the provision is not enforceable, in which case courts will generally consider several factors in deciding on enforceability: the difficulty in measuring the kind of losses an owner suffers because of delay and the reasonableness of the amount of damages in relation to the anticipated or actual damages suffered. Despite the possibility of a provision being found unenforceable, when entering into a contract that contains a liquidated damages clause, a contractor should presume that it is going to be enforceable.
Liquidated Damages Must Measure Losses That Are Difficult To Prove
Liquidated damages only apply to the exact type of breach specified in the contract. In its most common form, a provision providing liquidated damages for delay is an agreed upon substitute for actual damages an owner might suffer but that could be extremely difficult, and probably expensive, to prove in court. These can include many types of damages such as lost financing cost, missed opportunities, or lost rent.
While very real, these types of damages can be difficult to quantify because questions such as what revenues were lost, the time period during which revenues were lost, and extra costs incurred or costs avoided will have to be answered. Agreeing to liquidated damages relieves the owner from being able to prove these types of damages, and may also allow a contractor to factor the cost of the contract completion date into its bid.
In some states, liquidated damages provisions may not be enforceable after substantial completion where the owner has been able to occupy and use the project before the final completion date, as after this time period, damages are no longer difficult to calculate.
Liquidated Damage Must Be Reasonable In Proportion To Anticipated Or Actual Harm
If the liquidated damages do not reflect a reasonable estimate of the loss incurred due to delay, they may be deemed an unenforceable penalty, and could be struck down by a court as against public policy. In short, they should reflect a loss that is based on what an owner would lose if the project could not be used as intended by the time promised. This prevents liquidated damages from being seen as a punishment. Whatever the amount agreed upon, in the end it must have been considered reasonable at the time of contracting or bear some relation to the actual loss, and cannot be merely an arbitrary number chosen by the owner that it thinks is big enough to ensure that the job gets done in time. In other words, the rate must somehow be related to the contract, and not be designed to spur performance. The downside to this for the contractor is that even if the owner incurs only nominal administrative charges because of a delay, an amount of liquidated damages that was properly established courts will still find the damages reasonable because they were based on foreseeable actual damages.
Negotiating Liquidated Damage Provisions
While it is the party challenging the validity of the liquidated damage provision, usually the contractor, that has the burden of proving that the provision is unenforceable, if a court were to find a liquidated damage provision unenforceable, the owner would then be in the position of having to prove its actual damages. For this reason, it is in both parties' best interests to craft a fair and enforceable liquidated damages provision. So even though these provisions are primarily designed to protect owners, contractors should remember that a liquidated damage provision also prevents them from being exposed to lengthy and expensive court battles and actual damages, which could easily exceed the agreed-upon amount of liquidated damages. With liquidated damages, at least a contractor will know what its exposure is, and can take that into account when negotiating the rate for liquidated damages. This is especially true if the liquidated damages are capped.
Parties should consider and try to factor in all potential costs that may be incurred if a project is delayed so that if a dispute arises, the amount will be considered reasonable. This might include financing costs past the completion date, additional management or overhead costs, upstream liquidated damages clauses, or pre-scheduled uses to which the project has already been committed. Parties may also agree to place a cap on the amount of the liquidated damages, whether it is a sum certain or a percentage of the final contract price or the contractor's fee.
Another important factor to consider is how the liquidated damages provision will be triggered. This includes a consideration of whether it will be based on substantial completion, important milestone dates, a date certain, or a certain number of days from a notice to proceed, and the impact of schedule adjustments requested either by the owner or the contractor. It is important defense for a contractor to ensure that there is a workable mechanism for contract deadlines to be extended when delays are caused by things not in the contractor's control such as delays caused by the owner or weather events. This is why it is important to document delays and provide notice to the owner when they are not caused by the contractor.
Lastly, in some states, the liquidated damages specified for a particular breach will be the exclusive remedy available for that breach. This means that if the breach, for some reason, caused actual damages greater than those provided by the liquidated damages provision, the non-breaching party's damages will still be limited to the amount agreed to in the contract for the liquidated damages. In those states where this is not the automatic rule, a contractor may want to keep this in mind and specify in the contract that the liquidated damages are the exclusive remedy for a project delay.
Flow-Down Liquidated Damage Provisions
General contractors usually try to pass some of the liability for project delays to their subcontractors. When acting as a subcontractor, it is important to pay attention to liquidated damage provisions in the prime contract that may be incorporated by reference and flow down into the subcontract, as they may be assessed at a higher rate than those the subcontractor has agreed to. Generally, for damages to be assessed under these provisions, the subcontractor must have been responsible for the delays, and may not be the result of either other subcontractors or the general contractor. And to collect the flow-down liquidated damages, the owner must have actually assessed liquidated damages to the general contractor. A subcontractor should make sure that it is responsible only for those delay damages it causes.
Chris Pashkevich, Clark Construction
By: Natalie Pressman
Having worked for Clark Construction for 45 years, Chris Pashkevich says that friends and family are probably getting sick of him pointing out jobs he's worked on in the Maryland and Washington, D.C. areas.
"I did a job recently where I stood on one corner and saw ten different buildings that I had worked on," he said. "I've done a hundred or so jobs, easily, just in D.C."
Construction, for Pashkevich, is a family affair.
His father was a pile driver beginning in the early '50s until he retired in 1992, and his older brother started in 1971 until his 2016 retirement. Likewise, Pashkevich's younger brother started at Clark Construction in 1980 and still works there today.
"My family has always been here," he said. "We all drive pile."
Even with retirement on the horizon, driving pile will continue to stay in the family. Pashkevich has a son and stepson who are both foremen at Clark Construction, in addition to another stepson who works for the company as a foundation superintendent.
In spite of his long career and family legacy in the industry, Pashkevich didn't always see himself working in construction he originally wanted to be a police officer. But when he went down to the police academy in 1973, he was told that at 5'7", he was two inches too short. That's when he decided to join his family in construction.
Click here to read more in PileDriver Magazine, 2020 Issue #2
What we once considered normal no longer exists. The COVID-19 pandemic which has gripped the globe is requiring cancellations, postponements, closures, quarantines which present mounting quagmires to society as we know it.
PDCA has compiled legal resources from some of the PDCA Member law firms which have developed online guidance for employers and businesses. These law firms work extensively in construction, contracts and employment law. Business owners, human resources officers and families can find useful information within the links below. The current state of affairs around the world presents everyone a lot of uncertainty. Hopefully the provided legal documentation can help you understand some of the changing laws, grasp legal complexities that might relate to your business or simply give you definitions to some of the terminology that is regularly used in news reports that continue to bring coverage of the COVID-19 health crisis.
- Benesch Law (international): COVID-19 Publications
- Issue highlights: Families First Coronavirus Relief Act, revenue protection plan
- Carlson Dash, serving Illinois and Wisconsin: Coronavirus in Construction: What to Do Now to Plan for Beyond the Outbreak
- Jimmerson Birr serving Florida: 'Mitigating Commercial Losses from Reaction to the Coronavirus'
- Munsch Hardt Kopf & Harr P.C. serving Texas: COVID-19 Business Response Team
- Issue highlights: insurance concerns, leasing, immigration changes
- Seyfarth Shaw LLP (international): COVID-19 Resource Center
- Issue highlights: emergency childcare, government construction contractors, high deductable health plans
Over the past few weeks, we have all seen an impact within our communities and across the nation due to the potential presence of COVID-19. As this situation evolves, all of us are assessing how to best keep ourselves and those around us healthy and safe.
Our thoughts continue to be with you during this challenging time and we're here to help. Like most Americans, many of our colleagues' lives have been impacted by the important precautions and measures taken to limit the spread of the coronavirus.
To better assist you during this time, we want to remind you that we have tools that will allow you to interact with the staff of PDCA virtually, such as chat, app and our website, as well as, contacting our office by phone.
At its meeting held March 18, 2020, the PDCA Executive Committee took the extraordinary step to cancel the 23rd PDCA Annual Conference that was scheduled to be held May 6-9, 2020, in Phoenix, Arizona. Based on current Centers for Disease Control guidelines this measure was taken to help reduce the risk that a participant in the Annual Conference would be exposed to the Coronavirus.
Additionally, here are several links that might be of assistance to you:
Meeting the needs of our members is what we do every day. Please rest assured that even during these trying times that will require a "new" approach, we will continue to meet your needs with confidence, care, and commitment. Finally, we will work hard to keep all PDCA members updated as our work practices evolve during this challenging time. You can look for these updates via email, social media, and our web site at www.piledrivers.org.
Thank you for your continued support. Let's all be sure to wash our hands thoroughly!
Orlando, FL (March 13, 2020): PDCA, in collaboration with Pile Dynamics, Inc., presents DFDTA to practitioners in deep foundations. It is a multi-faceted, technical conference which begins with a one-day seminar titled Deep Foundation Integrity Testing and Wave Equation Analysis followed by a two-day workshop titled High Strain Dynamic Foundation Testing. At the conclusion of the seminar, attendees can opt to take the Dynamic Measurement and Analysis Proficiency Test, a 90-minute, multiple-choice exam that covers the theory of Wave Mechanics, Case Method (PDA) equations, data quality assessment, data interpretation and basic CAPWAP analysis.
The first of the two 2020 DFDTA events took place March 11 - 13, 2020 in Orlando, FL. Twenty five different companies from throughout the world sent employees to gain the valuable, technical training. Six PDCA Member companies including Braun Intertec, Fugro USA Land, Inc., Geostructural Engineering, Gerhart Cole, Insight Group and Terracon, sent staff for the three day seminar. Garland Likins and Ryan Allin of Pile Dynamics, Inc. conducted all programming.
The highly anticipated, 2020 CONEXPO-CON/AGG has come and gone. As it is billed, it was a major industry event attracting more than 100,000 men and women from all over the world who work in the construction industry. PDCA Members were present at the event, both as exhibitors and as attendees. Here are a few of the Members and other industry partners who were caught on camera during the March 10-13 event in Las Vegas, NV:
Career Story on Dylan André, Patriot Deep Foundations
By: Jess Campbell
Dylan André is a lover of the outdoors, so it makes sense that he would get into a job that allows him to work outside. With a degree in construction management from Louisiana State University, André has worked in construction since graduating in 2012, but is new to the deep foundations industry.
"I didn't get to work in deep foundations until I came to work for my current company, Patriot Deep Foundations, which was only about a year and a half ago. So, I'm pretty fresh," he said. "But I absolutely love it."
Coming to work for Patriot may have been an easy decision for André, but that doesn't mean there wasn't any hesitation. Patriot had just formed their deep foundations division and André was very up front about his lack of knowledge. Yet his boss, Patriot Deep Foundations president Kevin Gourgues, encouraged André to take the leap.
"It was scary to say yes to the deep foundations opportunity," said André. "I said to Kevin, 'Man, I don't know anything about this.' And Kevin said, 'Look, you ain' got a thing to worry about. You sit next to me and I'll lead you to the promised land. I'll teach you everything I know and you'll learn from the people around you.' And that's exactly how it's been the last year and a half."
It's clear that André is grateful for every learning opportunity that comes his way, no matter who it's coming from. As project manager and estimator, he works with many different types of people. But he's always willing and open to learning from everyone, which he feels is an important aspect of being successful at the work he does.
"I don't look at it like there's a hierarchy and the superintendents that I work with work for me. Those guys know way more than I will probably ever know. It's been fun learning the ropes from people who have years of experience and know what they're doing." Continued, read the remainder of the story in PileDriver magazine.
- Coronavirus Safety Best Practices
- A Pile of News - July 2020
- ICYMI: DFDTA Fall Seminar Moves to Orlando
- GET: Steel Sheet Pile Guides Review Webinar (1 Hr. PDH)
- WATCH: Legal resources for subcontractors, suppliers
- GET: Jobsite appropriate shirts for sale at The PDCA Store
- A Pile of News - June 2020
- Special Edition PDCA Logo Marks 25th Anniversary
- Summer Professional Development for Engineers
- Webinar: Steel Sheet Pile Guides Review, May 19th