More than a year has passed since Congress enacted the Build America, Buy America Act (“BABA”)—a sweeping change to domestic sourcing requirements for federally funded infrastructure projects. BABA, which was included as part of the November 2021 Infrastructure Investment and Jobs Act (“IIJA”), materially changes the way many companies must source supplies for federally-funded projects; however, implementation has not happened overnight. With a phased approach, piecemeal guidance from the federal government on how to interpret certain requirements, and a host of waivers that vary by agency, the implementation of BABA can be difficult to track. This post provides a refresher on BABA’s requirements and a status update on how these requirements are being implemented on federally-funded infrastructure projects.Continue Reading What’s the Status of Buy American Requirements for Public Infrastructure Projects?
Celebrating Women in Construction Week 2023: “Many Paths, One Mission”
The week of March 5-11, 2023 marks the 25th annual Women in Construction Week, which celebrates and promotes the role of women in the construction industry. Seyfarth is proud to co-sponsor a networking event on March 9th. The event is hosted by Women in Construction, Inc. and National Association of Women in Construction (NAWIC). More details about the event are available here.
Seyfarth takes great pride in the women of our Chambers and Legal 500 ranked Construction group, many of whom chair or co-chair sub-practices. These include transactional, litigation, international dispute resolution, and public procurement.
Our firm routinely represents both developer and contractor clients on a wide variety of industrial, commercial, retail, residential, infrastructure, entertainment, hospitality, and energy projects. Between Alison Ashford (current chair of Construction), Sara Beiro Farabow (former chair of Construction), Wendy Wendrowski, and 11 other women, we offer deep experience and sophisticated transactional advice, drafting, and negotiation on a variety of projects across the country.
Construction Disputes and Litigation
We offer a powerful team of litigators, who are prepared to advocate zealously for our clients. Seyfarth’s women comprise a formidable practice of advocates on the East Coast (Rebecca Woods and Elizabeth Harraka), the West Coast (Meghan Douris, Ashley Sherwood, and Loni Hinton), and everywhere in between (Suzanna Bonham and Kay Hazelwood).
International Construction & Dispute Resolution
Headed by Sara Beiro Farabow, our International Dispute Resolution Group is devoted to counseling clients on international arbitration and other cross-border dispute resolution proceedings. Building upon our top-ranked construction, product liability, intellectual property, trade secrets, employment, international corporate, and complex commercial practices, Seyfarth’s international dispute resolution and arbitration group represents clients across the globe in cross-border disputes.
Seyfarth is a proud signatory of the Equal Representation in Arbitration Pledge. This Pledge seeks to increase, on an equal opportunity basis, the number of women appointed as arbitrators in order to achieve a fair representation as soon as practically possible, with the ultimate goal of full parity.
Government Contracts in the Construction Industry
Between Amy Hoang, Stephanie Magnell, Erica Bakies, Sarah Burgart, and others, we offer some of the finest advisors and counselors in the country. Whether it is advising on complex regulatory issues, pursuing bid protests, or prosecuting and defending claims on state and federal construction projects, there are virtually no client needs we cannot meet.
Seyfarth’s Women Leaders in Construction
Alison Ashford is the co-chair of Seyfarth’s Construction group and Seyfarth’s Infrastructure & Project Finance team. From a public project perspective, Alison has represented clients in the procurement of projects, including via public-private partnership; in the sectors of economic infrastructure (rail, aviation, transportation, waste water, and desalination projects); and in social infrastructure (education, housing, and health projects).
Sara Beiro Farabow is the leader of Seyfarth’s International Dispute Resolution group and former co-chair of the Construction practice group. Her practice is devoted to counseling clients on international arbitration and other cross-border dispute resolution proceedings, as well as complex domestic and international procurement issues, contract administration, claims, insurance, cross-border transactions, risk management, and project finance.
Rebecca Woods chairs the Seyfarth Atlanta Litigation group and co-chairs the Commercial Litigation practice group. She “majors” in three overlapping areas: real estate (joint ventures, residential and commercial leases, boundary lines, development agreements, and purchase and sale agreements), construction (design and construction defects, including in commercial and manufacturing settings), and insurance (advice and counseling regarding CGL, professional liability, errors and omissions, representations and warranties, D&O, and property coverage).
Meghan Douris assists clients through the unique legal complexities in the construction industry, particularly the challenges associated with constructing heavy civil infrastructure and high-rise buildings. She also helps organizations understand and secure government contracts in the construction and service industries, including a focus on AbilityOne providers.
Ashley Sherwood represents general contractors, subcontractors, and developers of all sizes on complex private and public construction projects at the state and federal level, as well as internationally.
Suzanna Bonham partners with clients to develop practical approaches and strategies to meet their corporate goals and needs. Commercial clients in health care, energy, construction, real estate, transportation, and many other industries trust Suzanna with high-stakes litigation.
Wendy Wendrowski prepares, negotiates, and assists with the implementation of construction contracts and other related agreements for entities involved with or impacted by construction projects. She also advises clients about potential claim matters and other disputes arising during the construction process, so they may be effectively resolved, prosecuted, or defended.
Kay Hazelwood advises companies and individuals in a constantly expanding and diverse range of industries including health care, energy, insurance, and construction.
Amy Hoang is co-chair of Seyfarth’s Government Contracts practice group, and is renowned in the market for her exceptional ability to represent contractors in bid protests and internal investigations, as well as provide compliance counsel. She advises her clients on federal procurement matters, with a focus on bid protests at the US Government Accountability Office and Court of Federal Claims, corporate ethics and compliance, internal investigations, and required disclosures under the FAR Mandatory Disclosure Rule.
Stephanie Magnell specializes in representing government contractors in bid protests before the Government Accountability Office (GAO), the Court of Federal Claims (COFC), and state courts, where a nuanced framing of the bid protest is essential.
Future Women in Construction Leaders
Loni Hinton is a “dirt to done” construction attorney who helps her clients find cost-effective legal solutions that mitigate risk and avoid expensive, time-consuming litigation.
Elizabeth Harraka brings a passion for nuance to construction matters involving litigation and alternative dispute resolution.
Erica Bakies advises clients on complicated compliance issues, such as classified contract requirements under the National Industrial Security Program, supply chain risk management, access restricted information like Controlled Unclassified Information, cybersecurity requirements, and SBA small business requirements and disputes.
Sarah Burgart focuses on US national security matters, bringing together her government contracts and international trade work.
The EEOC Targets Construction Industry For Heightened Enforcement
Seyfarth Synopsis: On January 10, 2023, the Equal Employment Opportunity Commission (EEOC) released for public comment its draft 2023-2027 Strategic Enforcement Plan (“SEP”)—a document that will guide the Commission’s enforcement priorities for the next five years. The EEOC’s prior Strategic Plan described how it would pursue its enforcement goals. (See our earlier blog on the Strategic Plan here). The Strategic Enforcement Plan, on the other hand, describes what the EEOC’s enforcement priorities will be. Earlier actions by the EEOC suggested that it might be turning its attention to the construction industry. In the SEP, the EEOC makes its intentions explicit, putting the construction industry—and especially those receiving federal funding—squarely in its sights.
History of the SEP
The EEOC’s first SEP covered Fiscal Years 2013-2016 (the EEOC’s fiscal years begin on October 1) and identified six broad subject-matter priorities. The EEOC’s second SEP set the course for enforcement priorities for FY2017-2022. The latest proposed SEP, published in the Federal Register for comment for the first time, provides notable additional details that put the employer community on notice of the Commission’s intentions for FY2023-2027.Continue Reading The EEOC Targets Construction Industry For Heightened Enforcement
California Court Confirms Surety’s Right to Recover Attorney Fees and Costs Incurred by Its Principal
In Cell-Crete Corp. v. Fed. Ins. Co., a California court awarded a surety attorneys’ fees and costs that its principal incurred defending the surety against a claim on a public-works payment bond. This is good news for sureties and their principals, who commonly defend sureties against such claims pursuant to a general indemnity agreements (“GIA”).
The payment bond and related litigation
Granite Construction Company (“Granite”) entered into a contract with the County of Riverside to complete a roadway project (“Project”). Granite subcontracted with Cell-Crete Corporation (“Cell-Crete”) for installation of light weight concrete at the Project. Granite obtained a payment bond (the “Bond”) from Federal Insurance Company (“Federal”) pursuant to the California Little Miller Act, which requires payment bonds for any public project in excess of $25,000. As Granite’s surety, Federal required that Granite sign a GIA obligating it to defend, indemnify, and hold Federal harmless against claims made against the Bond.Continue Reading California Court Confirms Surety’s Right to Recover Attorney Fees and Costs Incurred by Its Principal
New Statutory Payment Regime for Public and Private Works in Virginia
For general contractors working in Virginia, 2023 marks the end of one of the more prolific contractual rights available—the pay-if-paid defense. Until now, pay-if-paid clauses were a valid means of shifting to subcontractors the risk of owner insolvency or wrongful withholding. In the spirit of freedom of contract, Virginia courts historically held that unambiguous language rendering owner payment a condition precedent to the contractor’s duty to pay subcontractors was enforceable. Not any more. Under the new statutory regime, contractors must pay subcontractors regardless of whether the owner has timely made payment to them. Notably, however, contractors retain general withholding rights arising out of subcontractor default and, on private projects, have been afforded a new 60-day pay period in which the owner is obligated to deliver progress payment or notify them of withholding.Continue Reading New Statutory Payment Regime for Public and Private Works in Virginia
Jason Smith to Speak At AGC Surety Bonding and Construction Risk Management Conference
On January 30, 2023, Seyfarth’s Jason Smith will be speaking at a 3-day Associated General Contractors (AGC) panel discussion titled: “Navigating the Challenges of Complex Claims Involving Multiple Coverage Lines.” Using real claim examples, this session will focus on understanding and addressing the challenges associated with complex claims involving multiple lines of insurance. Experienced risk managers and counsel will impart practical advice about dealing with the competing requirements of different policies, as well as the potential conflict between liability and coverage theories and common exclusions. Ultimately, the session will talk about how to form and execute a sound strategy and manage the process and the people necessary to achieve a successful outcome.
The AGC conference will be held at the Hyatt Regency Coconut Point in Bonita Springs, Florida. Those interested in attending may register for the conference at: https://na.eventscloud.com/ereg/index.php?eventid=700881&. Registration must be received before December 9, 2022.
Federal Government Considering Inflation Relief for Contractors
Both the General Services Administration (“GSA”) and the Department of Defense (“DOD”) are recognizing the impact of the eight percent rate of inflation on federal contractors. On September 9, 2022, DOD released a memo providing guidance to contracting officers “about the range of approaches available to them” to manage the effect of inflation on existing firm fixed price contracts. Similarly, GSA provided new direction to its contracting officers permitting easier access to the economic price adjustment clause in GSA contracts.
Unfortunately for contractors, this does not mean an automatic, or necessarily an easy, path to recouping the costs lost to inflation. However, it does mean that the government is recognizing the concerns and considering avenues of relief on firm-fixed price contracts, perhaps providing some wiggle-room on the long-held position that contractors bear the risk of cost increases under firm fixed price contracts, even with the onset of extenuating circumstances.
The memo from DOD’s Principal Director, Defense Pricing and Contracting (DPC) states that where there are “extraordinary circumstances” effective immediately, DOD will consider adjustments to the contract price in order to “address acute impacts on small businesses and other suppliers.” Notably, while calling out small businesses, the Memo leaves the door open to other contractors and does not limit the application. DOD advised that it will contemplate these upward adjustments under Part 50.101 of the Federal Acquisition Regulation (FAR), which governs relief under Public Law 85-804. Traditionally, obtaining relief under Public Law 85-804 (a 1958 law allowing amendments to contracts to facilitate national defense) is an incredibly challenging path. The applicable sections of FAR Part 50 permit contracting officers to demand detailed supporting documentation in furtherance of any request for relief, including details on the impacts to contractor profits for approval or denial of the request, company financial statements, analysis as to how the adjustment was determined, interviews with personnel with personal knowledge, analysis of any mitigation steps taken by the contractor and any other “contemporaneous evidence” that supports the request. The recent DOD memo does not change those requirements, nor does it alleviate the likelihood of a DCAA audit. Contractors will need to be prepared to show what inflation rate was assumed at the time of bid, and any other underlying bid assumptions as to their pricing, as well as any documentation they have that substantiates the increase of the firm-fixed price contract. In short, the DOD’s Memo reminds contracting officers that avenues for relief do in fact exist for contractors, and that the traditional government position that contractors bear all of the risk for their firm fixed price contracts, need not necessarily be the case in the face of the current economic circumstances.
On September 12, 2022, the leading procurement executives at GSA informed their contracting officers, that they no longer needed “additional approvals” to invoke the economic price adjustment clause (GSAR Clause 552.216-70) contained in the GSA contracts.
In GSA contracts, a ceiling percentage for upward adjustments is usually set forth in the solicitation. However, in March of this year, GSA issued a memorandum establishing “temporary flexibility” and lowered the approval level to “one level above the contracting officer” and also relaxed the time limitations and constraints on the number of price adjustments that a contractor could request. Now, with the most recent memorandum, the authority to consider the equitable price adjustment rests directly with contracting officers, and there is an emphasis on the quick review and resolution of the requests.
Yet, despite this optimistic news from GSA, unlike DOD contracts, the GSA changes are not applicable to firm fixed price contracts, unless the contractor can establish government-caused delay. GSA’s senior procurement official clarified:
“In a fixed-price contract lacking an EPA clause, the contractor is obligated to perform at the fixed-price, and can only recover for increases to the fixed price that are the result of changes or other actions/inactions by the government. As a general rule, since inflation is not a government-directed change, it cannot form the basis for an equitable adjustment. However, if the inflated costs are the direct result of government action (for example, when government delays the work into a period when higher costs are encountered), compensation is appropriate.”
Practical Effects for Contractors
Contractors with GSA supply contracts need to verify the presence of the economic price adjustment clause in their respective contracts. The inclusion of this clause opens the door to the contracting officer’s ability to provide pricing relief beyond the ceiling percentage contained within the applicable solicitation. However, despite the temporary moratorium on time limitations, contractors should promptly make the requests for adjustment including detailed analyses explaining the necessity of the adjustment.
Those contractors with firm-fixed price contracts for DOD should also promptly make any inflation or supply chain related requests for equitable adjustment, as DOD warned that such requests were “subject to available funding.” In making these requests contractors must outline the basis for the request, including the underlying bid assumptions, and provide a clear and detailed supporting package in order to minimize the back and forth with the contracting officer. The more thorough and supported the request, the more likely the contracting officer will approve and the quicker the contractor will experience relief. Contractors should meticulously prepare both the package for submission, and the relevant team members for interviews with DOD and DCAA.
As inflation continues to rise, and the fear of recession looms, there is likely to be more relief from other federal agencies and/or updated guidance from DOD and GSA. In the interim, careful job cost records should be maintained to document the need for any future requests and contractor teams should regularly be tracking their bid assumptions against the current market costs to ensure they are not missing an opportunity to recoup lost costs.
Fraud and Forfeiture: Cautionary Tales of a Construction Claim Gone Wrong
In Lodge Construction, Inc. v. United States, the US Court of Federal Claims (“COFC”) prefaced its 46-page opinion by stating: “This case should serve as a cautionary tale to government contractors.” Our ears perk up any time we read that kind of admonition in a published decision. The Lodge holding is, indeed, loaded with lessons on what to do, and what not to do, when presenting Contract Disputes Act (“CDA”) claims to the government. In particular, federal construction contractors and their performance bond sureties should take heed of the court’s holding in this highly-illustrative fraud case.
Background of the case
In 2010, the Army Corps of Engineers (“Government”) awarded Lodge Construction (“Lodge”) a fixed-price contract to rehabilitate a levee in Florida. To accommodate subsurface work, Lodge designed and constructed a temporary cofferdam based on a geotechnical site inspection and analysis furnished by the Government. The Government accepted Lodge’s final cofferdam design in July 2011. In March 2012, however, water breached two sections of the cofferdam’s sheet pile wall, after which the Government retroactively disapproved of Lodge’s cofferdam design. The Government requested that Lodge submit a new sheet pile design by May 29, 2012. Continue Reading Fraud and Forfeiture: Cautionary Tales of a Construction Claim Gone Wrong
Surety Liability Under the False Claims Act
The federal Miller Act requires government construction contracts over $100,000 to be bonded. This process involves insurance companies, known as “sureties,” who issue payment or performance bonds to contractors, who in turn furnish the required bonds to the federal government. The bonds guarantee that the contractor will comply with the terms of the contract and perform as required. Although the sureties do not interact directly with the federal government, a recent decision from the US District Court in DC suggests that sureties could face liability where the bonded contractor violates the civil False Claims Act (“FCA”), 31 U.S.C. § 3729. In Scollick ex rel. United States v. Narula, No. 1:14-CV-01339-RCL, 2022 WL 3020936 (D.D.C. July 29, 2022) the court held, under the facts of that case, that the sureties had no knowledge of the fraud allegedly committed by the bonded contractor, and thus did not violate the FCA. Although the sureties escaped in this instance, this case demonstrates the expansive reach of the FCA and puts the insurance industry on notice that they are not immune from FCA liability. Continue Reading Surety Liability Under the False Claims Act
Supreme Court Rejects Prejudice Element of Waiver Analysis When Enforcing Agreements to Arbitrate
The Supreme Court on May 23, 2022, in its decision in Morgan v. Sundance, Inc., rejected the “arbitration specific waiver rule demanding a showing of prejudice” to the party opposing the petition to enforce the arbitration agreement. That rule had been followed for decades by nine Circuits. Post Morgan, the analysis reverts to the standard contract waiver analysis “focus[ing] on the actions of the person who held the right; … [rather than] the effects of those actions on the opposing party.” Although the case is an employment matter, the new rule applies whenever a party seeks to stay litigation and send the matter to arbitration under Sections 3 and 4 of the Federal Arbitration Act in essentially all commercial litigation contexts. Continue Reading Supreme Court Rejects Prejudice Element of Waiver Analysis When Enforcing Agreements to Arbitrate