Archive for the ‘Uncategorized’ Category

Proposed rule expands Clean Water Act jurisdiction

Monday, March 31st, 2014

AGC of America reports that the Environmental Protection Agency (EPA) and US Army Corps of Engineers (USACE) proposed their new rule aimed at clarifying the definition of “waters of the U.S.” and which bodies of water fall under federal jurisdiction. This definition is critical to many of the Clean Water Act programs affecting how contractors perform their work, such as the Section 404 Dredge and Fill Permits, Section 402 Stormwater programs, and Section 311 Spill Prevention, Control, and Countermeasures plans.

At this point, the proposed rule appears substantially similar to a previously leaked version, a massive – and unnecessary – expansion in Clean Water Act jurisdiction. Ditches, ephemeral and intermittent streams, tributaries, and isolated waters located in a floodplain or riparian area (which have no defined limit in the rule) are all now potentially jurisdictional.

The rule is expected to be published in the Federal Register soon, with a 90-day comment period in effect after publication.

IMCO shows students construction in action

Monday, March 24th, 2014

imcoOur thanks to IMCO General Construction, Superintendent Joe Lupo and his outstanding crew for hosting a group of Bellingham High School students at Imco’s Lynden Wasterwater Treatment Plant expansion project today.

AGC’s Northern District provided lunch for the whole gang, and Joe had their attention every step of the way on his site tour. Thanks again, Joe!

State Senate considering public works funding bill

Thursday, February 20th, 2014

The Public Works Assistance Account (PWAA) is a mechanism to provide low interest loans to local governments to help them build major infrastructure projects that they would not otherwise be able to afford.

Between 1985 and 2013, the PWAA was used to make loans totaling $2.84 billion for approximately 1,975 local government public works projects. These include the acquisition, construction, repair, replacement or improvement of bridges, streets and roads; water systems; storm and sanitary sewage systems; and solid waste facilities, including recycling.

However, last year the Legislature redirected the Public Works Assistance Account’s funding streams away from capital projects and into the general budget, until 2019.  The unintended consequences of this action are now becoming clear:  Several local infrastructure construction projects have been put on hold because market interest rates for loans for these projects have added millions of dollars to the costs, making them unaffordable for many local governments.

The State House of Representatives recently passed a bill, SHB 2244, which would restore funding to the PWAA in 2015.  This bill passed the House with a strong bipartisan vote of 87-11. By making local infrastructure construction projects feasible, the bill helps spur private economic development which, in turn, boosts state funding for education and other needs.  In addition, this bill will create jobs. Employment in the construction industry in Washington State grew by only 0.2% in 2013, one of the slowest rates in the nation.  This bill will help the industry in its recovery.

Now, attention turns to the Senate.  With the legislative session set to conclude March 13, there isn’t much time for the Senate to act. Everyone is encouraged to contact their State Senators and urge them to support SHB 2244.

Blind Acceptance of Evidence of Insurance is Asking for Trouble

Monday, February 3rd, 2014

Last year, I wrote an article published in Engineering News Record entitled “Understanding Insurance: A ‘Must” for Every Construction Professional.” In that article, I discussed how my thinking about construction insurance issues has been forced to evolve from my days in the 1980s as a construction project engineer and project manager, up to an including my role today advising clients on construction issues. My theme was that contractor’s insurance is no longer a “one size fits all” item, and that construction professionals, in addition to understanding labor, materials, equipment and scheduling, have to now be passably fluent in insurance, too.

Illustrative of my point is Delean’s Tile & Marble v. American States Insurance, approved for publication last week by Division I of the Washington Supreme Court. In that case, a general contractor was engaged to perform repairs on a condo project after the original developer settled with the Homeowner’s Association over claims for defects in the original construction. The general, in turn, hired a subcontractor to perform some of the repair work, which it apparently did not do well. When the subcontractor refused to fix its allegedly flawed work, the general hired a replacement subcontractor and made a claim against the original sub under the terms of their subcontract that required the sub to indemnify the general. The dispute resulted in a lawsuit.

The insurer provided a defense to the subcontractor, and represented the sub throughout the proceedings, up to and including the time that the sub settled with the general for something north of $150,000. However, the insurer refused to pay the settlement amount, and began a declaratory action, seeking a ruling from the court that no coverage for the settlement amount was available, even though the general was an “additional insured” under the requirements of the subcontract.

The general also filed a claim with the sub’s comprehensive general liability insurance carrier, asserting that it has been named an “additional insured” under that policy pursuant to the requirements of the subcontract. Obviously, if unable to obtain indemnity for its damages from the original subcontractor, the general contractor was expecting the insurer to pick up the tab for the defects in the sub’s work. However, the insurer denied the claim, asserting that the multifamily exclusion in the sub’s policy precluded coverage.

The general had the defective work repaired at a total cost (including attorney’s fees) of more than $170,000, and sued the sub. Eventually, the general obtained a judgment against the sub (presumably under the indemnity provision of the subcontract) in that action. The sub was defended by its insurer under a reservation of rights in that action.

However, before the judgment was entered against the sub, the insurer began a suit of its own—a declaratory action asking the court to determine that there was no insurance coverage under its policy from which the general (or the homeowners) could recover. Each party filed a motion for summary judgment in the declaratory action, and the court ruled that the multi-family exclusion barred a recovery from the insurer for the damages associated with the sub’s work, and that the general was entitled to no defense against the homeowner’s actions against it., And, all because of the multi-family exclusion.

On appeal the Court of Appeals affirmed, rejecting the general’s attempts to parse the definitions in the policy upon which the insurer relied, repeatedly holding that those attempts “lacked merit.” Marching through the general’s assertions one by one, the Court of Appeals provided either definitions from the policy itself or common usage of the terms on which the general (unsuccessfully) relied to attempt to avoid the multi-family exclusion.

Gone are the days when receiving the Accord form “evidence of insurance” was enough to check off that requirement from a subcontractor. The enormous condominium litigation industry that has evolved over the past 15 or so years has prompted nearly every CGL carrier to exclude multi-family construction from its contractor policies. In fact, these exclusions are what has given rise to the “wrap up” and “Owner Controlled Insurance Plans” (OCIP) we see on nearly every condo project built over the last several years.

We now all expect that original condo or apartment construction will have some version of an OCIP these days. What’s interesting about Delean’s, however, is that it is not about the original construction of a condo, it’s about the second-tier repair construction to a condo. Yet, the same lessons with regard to the availability of multi-family insurance apply. Moreover, it’s highly possible that whichever sub repaired the Delean’s sub’s bad work had a similar exclusion in its policy, and the specter exists that the pattern of no coverage for defects might just continue.

Insurance literacy then involves more than just getting an Accord form in the mail, seeing that your company has been named as an “additional insured,” and filing that piece of paper. Literacy today requires not only an understanding that the insurance exists, but of what it consists, and perhaps more importantly, what is excluded from it. General contractors who work on any aspect of multi-family projects, including in particular the repairs being made after the first round of litigation, would do well to include a requirement in the insurance portion of their subcontracts that the sub must provide insurance for the type of project on which it’s working, either by providing a policy with no multi-family exclusion, or by paying for a rider to the base policy that covers all aspects of the project in question.

Low carbon fuel standard could negatively affect construction

Tuesday, December 10th, 2013

Washington State is considering the implementation of a low-carbon fuel standard (LCFS). While some of the effects of such a policy on the construction industry are unknown because it has yet to be tried anywhere, the things that are known about the policy are not good.

The push for a low-carbon fuel standard is coming from two directions: The Governor’s Climate Legislative Executive Workgroup (CLEW) will soon be making its recommendations for greenhouse gas-fighting policies the state could adopt, and the LCFS is one getting serious consideration. Plus, Governor Inslee signed a pact with other western states and British Columbia that promises to enact greenhouse gas policies regionally, including a LCFS. Neither of these actions actually creates new policies; they are more suggestions of what the state could do regarding greenhouse gases. In any event, these are strong indications of upcoming legislative battles.

The draft CLEW report talks about implementing a LCFS of a 10% reduction in the carbon intensity of the fuel mix over a 10 year time period in the State of Washington. It doesn’t prescribe what the fuel mix will be; just that it should have lower carbon intensity.

Keep in mind that for years refineries have been making fuel with 10% ethanol for many markets. But, even a 10% ethanol mix reduces the fuel’s carbon intensity by only 1%. Adding even more ethanol (and it would take a lot more!) has been shown to dissolve seals and gaskets in engines. Fuels with something else – such as agricultural waste products – has never been developed in the mixes needed to reach the 10% carbon intensity reduction.

So without a real-world test, it’s hard to say what the affect would be of a not-yet-developed fuel mixture on construction equipment and vehicles. But as AGC’s Oregon-Columbia Chapter pointed out in battling a similar proposal in Oregon, converting to higher biofuel content fuels would affect truck engine warranties. Currently, there are percentage limits on blended fuels, which when exceeded will void many manufacturers’ warranties. It is very likely that construction equipment and vehicles would have to at least be retrofitted to accommodate blended fuels, as was the case for recent clean air rules and their impact on older diesel-powered equipment.

Other concerns raised about LCFS proposals include:

  • Limited supply of biofuels in the US would likely trigger fuel shortages and spikes in fuel production costs, and industry analysts forecast that fuel costs could go up by as much as $1-$1.50 per gallon as a result.
  • Retro-fitting equipment to handle these biofuel blends is incredibly expensive. The majority of contractors would be faced with making changes they cannot afford, while only some contractors are able to make the necessary investments in biofuels/energy production technologies, onsite fueling depots, total fleet conversions and all of the costs associated with these capabilities.
  • California’s Low Carbon Fuel Standard Program was ruled unconstitutional in a United States District Court based on the Interstate Commerce Clause.  The court battle continues.
  • This kind of program is not feasible at the state level- these policies should be a matter of discussion at the Federal level. In fact, there are already federal mandates in place for advanced biofuels technology through the Federal Renewable Fuel Standards (RFS) program.

WSDOT Reform Takes Center Stage

Tuesday, August 20th, 2013

Two substantive efforts to consider reforms of WSDOT and transportation spending are underway.

The Legislature mandated a study of transportation cost-drivers.  Meanwhile, Senate Transportation Committee Co-Chair Curtis King has announced a series of meetings around the state to review reform proposals.

House Transportation Chair Judy Clibborn chairs the advisory committee overseeing the Transportation Project Efficiencies Study required by the Legislature.

“As we make policy we need to do it from an educated point of view, and not just have it be something we pulled out of the air that we heard two years ago and nobody has ever been able to validate,” said Rep. Clibborn, D-Mercer Island, at the committee’s first meeting. “The other side of it is that there are some things that are myths and there are some things that are reality, and we have to deal with them in a realistic way.”

The study will conclude with a report to the Legislature on the cost drivers by the end of the year.

On a separate track, Sen. King, R-Yakima, said he has contacted WSDOT Secretary Lynn Peterson, requesting her agency’s cooperation in coordinating a series of public meetings around the state. King said he and his colleagues in the Senate’s Majority Coalition Caucus would like to gather as much input as possible from Washington residents and WSDOT officials in various regions around the state in order to craft a viable transportation package that could be supported by lawmakers as well as taxpayers.

“In order to pass a transportation package of any substance there will likely be a need for additional revenue to pay for projects,” King said, “but before we go to the people asking for more money, the state needs to prove that it’s already stretching every dollar it has. We’ve compiled a list of ten reforms that could be implemented to save millions of dollars with minimal impact to other areas of the budget, and it’s our intention to discuss those ideas with DOT and the public at these meetings.”

King’s letter to Peterson requests that regional administrators present a prioritized list of projects based upon safety, congestion relief and economic development, and asks that their list contain a detailed scope and a cost estimate for each project that would be valid through the 2014 legislative session. In addition, the letter asks for reform suggestions from each regional office and seeks to encourage public comment on the Majority Coalition Caucus list of specific reform proposals. The proposals include exempting transportation construction projects from the state sales tax, streamlined permitting and an “open dialogue about prevailing wage and apprenticeship requirements.”

Click here for more info about these meetings.

Construction Employment Continues to Climb

Monday, July 15th, 2013

ABC’s Chief Economist Anirban Basu recently issued his economic outlook, centering on construction employment. Read his report below:

In June, the nation’s construction industry unemployment rate fell to 9.8 percent for the first time since September 2007 with the addition of 13,000 jobs, according the July 5 report by the Department of Labor. Since June 2012, the industry has added 190,000 jobs—a 3.4 percent increase.
Every major category of construction experienced gains in employment for the month. Nonresidential building construction employment increased by 700 jobs for the month and has added 16,400 jobs, or 2.5 percent, during the last twelve months. Residential building construction employment inched up by 100 jobs in June and is up by 13,100 jobs, or 2.3 percent, compared to the same time last year.
Nonresidential specialty trade contractors gained 2,100 jobs for the month and have added 47,100 jobs, or 2.3 percent, during the last twelve months. Residential specialty trade contractors have added 5,100 jobs since May and gained 77,100 jobs, or 5.2 percent, since June 2012. Heavy and civil engineering construction employment increased by 5,600 jobs last month, and the sector has added 36,300 jobs, or 4.2 percent, from one year ago.
Across all industries, the nation added 195,000 jobs as the private sector expanded by 202,000 jobs and the public sector shrunk by 7,000 jobs. However, the nation’s unemployment rate was unchanged from the previous month at 7.6 percent and remains lower than the 8.2 percent registered in June 2012.
Analysis
Today’s employment report is positive news for the nation’s construction industry.
While the economy continues to face a number of headwinds, including most recently in the form of higher interest rates, the wealth effect associated with rising equity markets and home prices dominates the recovery,” Basu said. “The result has been steady expansion in consumer spending, which is associated with expanding job creation in closely aligned sectors of the economy.
For construction contractors, the implication is that the volume of work associated with lodging and shopping center construction will continue to march higher,” said Basu. “Not coincidentally, more than one-third of the construction jobs added last month were added by specialty trade contractors.
There was also evidence of more people falling into part-time work, and the broadest measure of unemployment, which includes discouraged workers and people working part-time for economic reasons, rose to 14.3 percent in June.
Despite this increase, the construction industry’s diminishing unemployment rate shows that societal income tied to wages and salaries continues to expand slowly, which suggests the economy will only grow at a moderate pace. That should be enough to help drive nonresidential construction spending higher, but progress will remain gradual.

Prevailing Wage Coverage Expands — Again

Wednesday, July 3rd, 2013

I’ve served as a contractor/management representative on the state Prevailing Wage Advisory Board for more than 20 years. It’s not a fun or easy part of my job, but it is important. Let’s not argue if prevailing wage (PW) is good public policy or not. Let’s just talk about the expansion of PW over those last 20+ years. Since the original court case that allowed the application of PW off the actual job site (Everett Concrete, 1988), with few exceptions (or maybe none since I can’t think of any), every time there has been a question of whether work is covered by the PW Act or not, L&I determines it is. First is was off-site fabrication of non-standard materials (concrete tunnel liners, sheet metal parts, etc.), then it was delivery of materials (sand, gravel, etc.) Now a recent determination (02062013B) not only expands it to materials coming ON to the site, but now materials (dirt) going OFF the site: soil being removed to another disposal site and being spread on that site by an equipment operator and that operator is covered. Why? Because that work was directly “related to the completion of the contracted work…was necessary for its completion” and therefore was “contemplated by the contract.” So where is the line between what work is and is not covered? It gets further out and fuzzier all the time.
During the 2013 legislative session I sat through testimony on several PW reform bills; some were representatives from small public agencies (ports, park districts, schools) and they uniformly complained about things they couldn’t build because the cost with PW is too high. The pot of money Washington has to build or rebuild infrastructure — and not just roads and bridges, think water systems, parks, libraries, fire/police stations — would go a lot further if there were sensible PW reforms. Not paying construction workers low wages for sure — I honor their skill and hard work. But we need to take a long, serious look at the cost of PW given today’s realities. It’s time. It’s past time.

Construction Needs Immigration Reform to Allow More Temporary Workers

Thursday, June 13th, 2013

Immigration reform is a hot topic in Congress these days. There are no ideal solutions to this complex issue, regardless of which side of the argument you are on. Traditional allies can be see the solution differently. No easy answers.
The H-2B section deals with temporary non-agricultural workers. In Washington state, we tend to think of software employers needing H-2B workers for their high tech engineers and programmers, but now that the construction economy is finally rebounding, the construction industry is once again (didn’t take long!) facing a skilled worker shortage. However, the number of skilled construction guest workers per year is maxed at fewer than 20,000. With a projected shortage of hundreds of thousands, that is hardly enough. However, organized labor is opposed to more, so that number may be as good as it gets. Wonder whose going to build the buildings that all those high tech programmers are going to work in?
The U.S. Bureau of Labor Statistics predicts employment in construction will rise 33 percent by 2020, adding about 1.8 million jobs. As much as those of us in construction, both union and open shop, would like those to be “home grown” workers, we all know that isn’t going to happen. There are deep, long-standing societal and public policy/budget issues that stand in the way of achieving that dream. (But addressing those issues could take up a lot of blog space!)
We need more guest workers than we are going to get. But the whole reform bill, in any form, has to pass first. Stay tuned.

L&I Targeting High Risk Employers

Tuesday, June 11th, 2013

On May 23, the Department of Labor and Industries, with the support of business and labor representatives from the Construction Advisory Committee, sent letters to nearly 200 construction employers in this state.  The letter identified the recipients as the employers in their respective Risk Class Code as having the highest claim frequency or highest claim costs or both.

The intent is to try and get L&I resources where they are needed most and not invest as much time on employers who are already doing great things for safety.  These letters firmly set the expectation that recipients had 60 days to contact L&I’s Consultation division for assistance.  Failure to do so puts these employers on an elevated enforcement list for compliance activities.

The Construction Advisory Committee responsible for this effort has worked hard for many years to help L&I get their resources to the employers who need the attention and assistance most.