Christopher Hill (no relation to yours truly) is a longtime construction law attorney and mediator practicing out of Richmond, Virginia. His blog, Construction Law Musings, has always been one of my must-read sources of news and insight pertaining to construction law ever since he started it in late 2008. Be sure to follow @constructionlaw on Twitter for the latest updates from a true thought leader in the art and science of resolving construction disputes. Without further ado, I am proud to present Mr. Hill’s guest post on a topic that I couldn’t agree with more — the business case for why the mediation process is so critical to the A/E/C industry.
My wife and I have been lucky to have three kids that (so far) haven’t ever played with fire, or knives, or consumed dangerous cleaning supplies, or anything like that. It didn’t take burning down the house, stitches, or stomach pumping to teach each of them the danger inherent with certain things—a quick touch to a hot oven provides instantaneous feedback.
The Leadenhall Building at 122 Leadenhall Street in London, also known affectionately as the Cheesegrater due to its unique shape, is 47-stories tall and is the UK’s 4th largest building. Featuring a cutting edge high-performance building envelope incorporating passive heating and cooling elements, 85% of its construction took place off-site, making it one of the largest and most complex prefabricated projects to date. (more…)
Things seem to have gone from bad to worse for administrators at LA Unified School District over a $70-million iPad program, as the FBI executed a subpoena to seize about 20 bankers boxes of documents this week.
Previously, I wrote about the LAUSD’s decision to end their iPad program amidst allegations of an improper bidding process. According to the story I referenced from the LA Times, it sounded as if district officials had fallen victim to Apple’s notorious reality distortion field. (more…)
I’m a huge fan of Gary Vaynerchuk and have been following his work for the better part of a decade. If you’re like most people, you might be thinking to yourself, “Who is Gary Vaynerchuk?” The short version: Gary took his family’s liquor store from $3M per year to over $60M per year by leveraging social media to establish himself as a leading expert in his field. (more…)
One of my great pleasures working for Xpera Group is being surrounded by some amazing industry thought leaders. Economist and real estate guru Alan Nevin is one of those individuals that constantly inspires as well as informs. A regular fixture in the media, Alan was asked for his take on a somewhat unorthodox move by a local builder.
Real estate, construction, and even the litigation that often follows, generally follow some fairly predictable cycles. One such cycle is the conversion by real estate developers of apartments to for-sale condominium units. Often, converters simply spruce up the finishes and appliances, create an HOA, hold a sales blitz targeted primarily at first-time buyers, and then rush to the bank to cash out the LLC before the first claim is filed. (more…)
On July 29th, the San Diego chapter of the Associated General Contractors (AGCSD) held its annual “Hot Summer Nights” event. Featuring dozens of restored/modified classic cars owned by members of the organization, the event is a fun way to see some of the toys that AGCSD members are so passionate about.
While I’m not a “car guy” per se—I don’t watch NASCAR or Formula 1—this was still a very fun event, as the majority of the cars I’ve owned over the years were at least 30 years old. My first vehicle, one that I was very sad to give up possession of, was a 1959 Jeep Willy’s pickup truck.
Side Note: I am one of a small number of people that can truly appreciate a line from the Grateful Dead’s tune, Sugar Magnolia:
Well, she can dance a Cajun rhythm, jump like a Willys in four wheel drive.
She’s a summer love for spring, fall and winter. She can make happy any man alive.
But I digress… Another reason I enjoyed the event so much, is the attention to detail that the owners of these vehicles put into them. Most contractors enter the trades to work with their hands. Restoring and modifying a vehicle that (in some cases) rolled off a production line nearly 100 years ago, requires dedication and craftsmanship—making this a very fitting event for the AGCSD to host.
Supporting the Local Construction Professionals
I was at the AGCSD’s event, with an assortment of some of my colleagues from Xpera, as a show of support for the local contracting professionals in the San Diego area. Like most anything Xpera does, we aren’t just passive participants, we take an active role. The Hot Summer Nights event was no exception.
Ted Bumgardner, Xpera’s president, was invited to showcase his meticulously restored 1957 Chevy pickup. To learn more about his truck, and to see pictures I took of it, read the write-up I did on it at the Xpera website.
Without further ado, here are some of the better pictures from the cars in the event:
Tamara Boeck, writing for the Stoel Rives blog, Ahead of Schedule, has written an excellent analysis on a very important appellate decision in the state of California. The case: Regional Steel Corporation v. Liberty Surplus Insurance Corporation (PDF) (May 16, 2014, No. BC464209) Cal.App.2d. [2014 WL 2643242]
The facts of this dispute are not unfamiliar, and could be substituted for many projects by changing the name, location, and nature. Here, the owner/GC of a 14-story mixed-use apartment project hired a subcontractor to erect the steel and another subcontractor to pour concrete.
The owner also retained Quality Assurance, presumably, to do just that. As a part of the construction process, the steel subcontractor (Regional) submitted shop drawings during a four-month period. The owner/GC and the owner’s engineer approved the drawings, which identified two types of seismic hooks. Four months after the last shop drawing approval, the City issued a correction notice requiring the exclusive use of only one type of hook. The owner became aware of the problem four months after the correction notice, and thereafter stopped further concrete pours until the hook issue was resolved.
The City then notified the owner/GC that the first three levels and part of the fourth level of the building had defective hooks and required repairs. The owner/GC withheld $545,000 of Regional’s progress payments as a result. Not surprisingly litigation followed, including a claim against Regional for the defective hooks, the engineer for approving the shop drawings, the concrete subcontractor for not catching Regional’s error, and Quality Assurance for, well, not providing quality assurance.
The owner/GC alleged that it was damaged because completion of the project was delayed, resulting in loss of use, loss of rental income, and other damages. Thereafter, the owner/GC filed a first amended cross-complaint adding claims based upon theories of negligence and negligent interference with economic advantage, and asserted claims against the parties’ performance bonds.
Ultimately, the insurer denied coverage for Regional (the contractor) because there was no evidence established of resultant damage. This is a critical element in construction defect claims in the state of California, and unfortunately, poorly understood in the building industry outside of the realm of construction defect litigation.
The actual workmanship of a contractor is not covered by standard CGL policies, unless it results in damage to another component. According to the Court in this case, “The risk of replacing and repairing defective materials or poor workmanship has generally been considered a commercial risk which is not passed on to the liability insurer.”
Lessons Learned; Best Practices
Boeck offers some recommendations for both owners and general contractors, stating that this case highlights some important concepts:
- The importance of good project contract documents
- The importance of good “hands on” project risk management
- The importance of understanding what insurance covers
- The importance of bonds
- Considering coverage in claims
Back to the “Quality Assurance” issue…
I just want to point out that in this project, “the owner also retained Quality Assurance, presumably, to do just that.” I have been involved with a number of cases recently where third-party “quality assurance” had been retained, yet failed to live up to their stated goal of actually assuring quality.
As Boeck says:
[W]hy didn’t anyone catch the hook error until the fourth floor had been built? Paper management is one thing, active and effective quality control is another. Even if the “catch” wasn’t in the shop drawing phase, there were plenty of potential “eyes” that could have caught the error on the first floor and saved substantial time and money. I’m sure everyone is grateful the “catch” wasn’t delayed until the 13th floor, but were there qualified personnel randomly verifying basic work?
Not all QA/QC companies/approaches are created equal. In the ensuing weeks and months, expect much more digital ink on this important topic.
Please take the time to read all of Boeck’s article, as I think it is an outstanding analysis on a crucial issue impacting California’s built environment.
Source: Ahead of Schedule
Image courtesy Wikimedia
My colleagues and I from Xpera Group will manning the booth at the 2014 PCBC show. The event takes place June 25th and 26th at San Francisco’s Moscone Center, and is billed as “The Art, Science + Business of Housing.”
If you are attending this year’s conference, make sure to drop by the Xpera Group’s booth on the main exhibit floor.
We will be showcasing our new Real-Time Quality Assurance Reporting tool called InSpec®. Available for iOS and Android devices, the software is also available as a web application.
The real power of InSpec® isn’t necessarily the technology behind it—what makes the app special is the way in which it facilitates communication. Xpera’s QA team are able to get the right information into the hands of the contractor immediately, so that they can make better informed decisions.
If you are interested in seeing how InSpec® fits in with our comprehensive Quality Assurance offerings, stop by our booth and ask for a demo, or drop me a line and I’ll try to set something up.
To paraphrase Gary Vaynerchuk (who will be the keynote speaker on Thursday morning):
You, with a little bit of me, are going to change the construction industry, whether they like it or not.
I just got done posting my first news update for the Xpera Group website. The title: The Next Wave of Condominiums and Other Updates. The article contains a number of updates which I’d like to highlight here.
The Next Wave of Condominiums
Our resident Economist, Market Research Analyst and Forensic Expert, Alan Nevin wrote an outstanding article on multifamily housing in California. He notes that there is typically a five to eight year delay between when a condo project is constructed and when litigation is likely to occur.
Of the 57 condo projects built in San Diego from 2000 to 2007, 41 ended up in litigation and of those, Xpera was retained for expert services on 32. After 2007, new condos and conversions stopped almost completely. According to Nevin:
My take is that new condominium development and conversions in California most probably will gradually ramp up during the next several years, but most activity will be in the Bay Area and western Los Angeles. I do not anticipate that condominium activity will reach the levels of the past decade. In fact, I project that the levels in the 2010-2020 period will be less than 50% of what we saw in the last round.
From Litigating the Boom to Litigating the Bust
Xpera Group founder and president Ted Bumgardner wrote an article that picks up where Nevin’s article leaves off:
Back in 2011, we discovered an interesting correlation between residential permits issued in California and defects lawsuits filed six years later. Between 1995 and 2006, we saw the number of residential building permits issued in California double in volume. According to Westlaw, the number of construction defect cases filed in California doubled from 2000 to 2011, similar to the growth that occurred in residential construction, just shifted five years.
He notes that in 2005, towards the end of the residential building boom in California, 155,000 permits were issued. That number dropped 86% by 2011 to just 22,000 housing permits. However, there was only a 26% drop in construction defect lawsuits filed from 2012 to 2013.
Why is that? According to Bumgardner, “we have now moved from litigating the boom to litigating the bust. Over the next few years, several factors will affect the number of homes ultimately ending up in defects litigation.”
Source: Xpera Group News