June 2009

In This Issue

• New ConsensusDOCS on the Way
• Stimulus Monies Slow to Arrive
• Certain Specialty Trade Contractors Have Lower Failure Rate
• General Contractors Still Potentially Responsible for Sub’s OSHA Violations
• Firm News

New ConsensusDOCS on the Way

Donald W. Gregory, Construction Law Chair

“Green building” has increasingly been the subject of much discussion and has dramatically increased in market share.  That trend is expected to continue, but despite the unique aspects of green building, there was no model contract document addressing the unique issues associated with this type of construction.  That void will soon be filled through the issuance of a Green Building Addenda by ConsensusDOCS, an umbrella organization consisting of more than two (2) dozen endorsing construction trade associations.  The Addenda will be able to be utilized in conjunction with contract documents at all tiers on a green building project.

Subcontracting has become increasingly specialized and it has become more and more common for subcontractors to subcontract with sub-subcontractors “downstream” in the “construction food chain.”  However, a readily available sub-subcontract form did not exist and many subcontractors simply “customized” subcontracts to serve as sub-subcontracts or just used purchase orders to memorialize these arrangements.  Now ConsensusDOCS has prepared a Sub-subcontract form (no. 725) that specifically addresses the relationship in an equitable manner.  By properly using this sub-subcontract form, both subcontractors and their sub-subcontractors may better memorialize their respective contract rights and responsibilities without confusion.

Don Gregory will be presenting a national webinar on the new Sub-subcontract for ConsensusDOCS on August 5, 2009, and is serving on the task force drafting the ConsensusDOCS Green Building Addenda.

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Stimulus Monies Slow to Arrive

During the past year, the construction industry has suffered tremendous job losses perhaps unparalleled in the history of the industry and more dramatic than just about any other industry segment.  Therefore, the industry was relieved to see the American Recovery and Reinstatement Act pass and commit billions of dollars to infrastructure improvements.  However, that relief has been slow to arrive, particularly in Ohio.

While 92% of the federal stimulus dollars allocated to transportation has been committed nationwide, only 50% of the dollars allocated to Ohio have been approved so far.  And of those approved Ohio projects, virtually none of the contract dollars have percolated down to the contractors to date.  It is hoped that this process can be accelerated so that work can actually proceed on much-needed projects in 2009.  State transportation departments that do not timely use the federal funds will lose them to other states.

Certain Specialty Trade Contractors Have Lower Failure Rate

As current economic conditions place unusual pressure on the construction industry, it is interesting to see which segments have seen the lowest failure rates.

A recent D&B study found that general building contractors had a lower failure rate (.30%) than heavy construction firms (.35%) and specialty trade contractors (.34%).  However, certain specialty trades had a significantly lower failure rate, with the two (2) lowest being water well drilling (.22%) and plaster, drywall, insulation (.28%).  Kegler Brown is pleased to serve both trades by representing their trade associations as General Counsel, including the Association of the Wall and Ceiling Industry (AWCI), Ceilings & Interior Systems Construction Association (CISCA), and National Ground Water Association (NGWA).

These statistics may suggest that core trades with lower capital demands have a greater chance to survive current financial challenges facing the industry.

General Contractors Still Potentially Responsible for Sub’s OSHA Violations

Recently, the U.S. Court of Appeals for the Eighth Circuit ruled in favor of OSHA against a general contractor, finding the contractor liable for the unsafe practices of his subcontractors.  Solis v. Summit Contractors, Inc.  This long-awaited decision determined whether a contractor could end up on the hook for his subcontractors’ safety violations when the contractor did not create the hazard or subject his own employees to it.

The OSHA regulation being construed provides:

“Each employer shall protect the employment and places of employment of each of his employees engaged in construction work by complying with the appropriate standards prescribed …”

While the dissent accepted the general contractor’s argument that he should only be responsible when he subjects his own employees doing construction work to an unsafe condition, the majority in its decision said that so long as the contractor has employees on site, he has exposure for citations.  This “multi-employer policy” exposes the contractor or construction manager to risk for hazards created by subcontractors, and means that contractors have a great incentive to monitor all safety aspects of any jobsite where they have supervisory personnel, even if no work is being self-performed.

This case also emphasizes the need to specifically address the issue of OSHA violations in any subcontract document.

Firm News

Kegler Brown is pleased to again be listed in Chambers USA as one of Ohio’s leading construction law firms.  Chambers mentioned that “the team is best known for its litigation work.”  Group chair Don Gregory was singled out for being “practical and forceful” in providing the full range of services to his clients.

Don Gregory will be presenting a seminar for National Business Institute on September 2, 2009, on Construction Defect Litigation.