Category Archives: Construction

Massachusetts Awarding Authorities Must Allow Sub-bidders to Respond to Negative Reviews

By on January 9, 2018

The Massachusetts Attorney General’s Bid Protest Unit (“AG”) recently decided that when an awarding authority seeks references not listed by the sub-bidder, it must give the sub-bidder the opportunity to respond when such reviews are negative.

In the case, the Barre Housing Authority (“BHA”) sought public bids for a panel replacement project. BHA checked the references for the low sub-bidder, but also reached out to an unlisted public entity for which the sub-bidder had previously performed work. That public entity gave the sub-bidder a negative review, which caused BHA to reject the low sub-bidder’s bid.

The sub-bidder filed a bid protest. Pursuant to Massachusetts public bidding laws the AG’s office conducted an investigation and held a hearing. The AG decided that while BHA reaching out to references not listed by the sub-bidder was not improper, by doing so they implicitly created an obligation to offer the sub-bidder a chance to rebut the negative reference.

The AG ordered BHA to reconsider its decision to reject the low sub-bidder, in light of the ruling.  Should you have questions concerning your rights as a bidder, you’d be well-advised to consult with an experienced construction attorney versed in public bidding protests.

OSHA Injury Tracking Application Enforcement Delayed to December 15, 2017

By on December 8, 2017

The Occupational Safety and Health Administration (OSHA) recently extended, for the second time, the enforcement deadline for compliance with electronic reporting of injury and illness data through its Injury Tracking Application (ITA) until December 15, 2017.

The new rule took effect January 1, 2017, and required certain employers to submit injury and illness information electronically through the new tracking application.  The information required to be submitted to OSHA remains largely unchanged from the information already required to be kept under current regulations.  In other words, the primary difference is that it must be submitted through the ITA rather than through traditional methods.

In late November, the deadline was pushed back again to December 15, 2017.  Despite the second delay in enforcement it appears that the rule will eventually begin enforcement, even amid speculation that the rule might be scuttled entirely.  For the time being, construction employers should be prepared to submit their 300A and related forms electronically for years 2016 and forward electronically by December 15, 2017 to insure compliance with the new rule and avoid exposure to citations.

Know Your Rights – Limitations on Retainage for Private Construction Projects

By on November 20, 2017

The Massachusetts Retainage Act limits the amount of retainage allowed for private construction projects, and imposes mandatory processes for reaching the date of substantial completion, submitting punchlists and completing punchlist items, and submitting applications for payment and obtaining payment of retainage.

The Act applies to all construction contracts signed after November 4, 2014, for privately owned projects where the original contract price with the owner is at least three million dollars and the general contractor, subcontractors, or design professionals would have mechanic’s lien rights , but exempts residential housing projects of one to four units.

Limit on Retainage

Under the Act, no more than five percent retainage may be withheld from any progress payment. Among other things, this prohibits frontloading retainage amounts for a portion of the project, with less held at the end.

Substantial Completion

The Act defines substantial completion as the stage in the project when the work required under the general contractor’s contract with the owner is “is sufficiently complete … so that the project owner may occupy or utilize the work for its intended use.” Substantial completion may apply to the entire project or to a phase of the project, but only where the project owner has expressly allowed substantial completion for defined phases.

In order to reach substantial completion, the general contractor must submit a form for notice of substantial completion, as contained in the Act, to the owner within fourteen days of reaching the stage when the general contractor believes the project is substantially complete. Then the owner has fourteen days to accept or reject the general contractor’s notice. Should the owner fail to timely respond to the notice, the owner is deemed accept to general contractor’s work as substantially complete.  If the owner accepts the notice, the date of substantial completion is set and is binding upon all related aspects of the contract. If the owner rejects the notice, it must notify the general contractor in writing of the rejection and include the factual and contractual basis for the rejection and a certification that the rejection is made in good faith. The Act permits an expedited process for the general contractor to dispute the rejection under the contract’s dispute resolution procedures. Alternatively, the general contractor can resubmit a form for notice of substantial completion to the owner for new approval.

Submission of Punchlists and Completion of Punchlist Items

Within fourteen days after acceptance (whether express or deemed accepted) of the notice of substantial completion, or the final and binding resolution of a dispute, the owner must submit a written punchlist “describing all incomplete or defective work items and deliverables” to the general contractor. The owner’s punchlist must be certified as made in good faith.

The general contractor has an additional week after the owner’s deadline expires, or twenty-one total days after acceptance, to submit a punchlist to each subcontractor from whom the general contractor is holding retainage “describing all incomplete or defective work items and deliverables required,” which may include items in addition to the owner’s punchlist. The general contractor’s punchlist to its subcontractors and suppliers must be certified as made in good faith. General contractors, subcontractors and suppliers are permitted to dispute punchlist items directed to them.

Submitting Applications for Payment and Obtaining Payment of Retainage

The general contractor, subcontractors and suppliers from whom retainage is held may submit written applications for payment of retainage no sooner than 60 days following the date of substantial completion.  Each contractor shall use the form required by their contract to apply for payment of retainage. Alternatively, the project owner and general contractor may allow for earlier submission dates. An application for payment of retainage must include the punchlist, along with a written list identifying which items have been completed, repaired or delivered, and a certification that the application is submitted in good faith.

Applications for retainage must be paid within thirty days of receipt, minus any withholdings described below. For each tier of contract below the prime contact with the owner, the time period for paying retainage is extended by seven days.

Should the owner or contractor seek to withhold payment of retainage, they are limited to (1) the value of incomplete, incorrect or missing deliverables as either agreed upon by the parties or, if no agreement is reached, no more than two and a half percent of the total adjusted contract price; (2) one hundred and fifty percent of the reasonable cost to complete or correct incomplete or defective work items; and (3) the reasonable value of claims and any costs, expenses, or attorneys’ fees incurred as a result of the claims (but only when permitted by the terms of the contract).

Retainage, or any portion thereof, cannot be withheld unless the party seeking payment receives, before the date payment is due, a written explanation “of the incomplete or defective work items and incomplete, incorrect or missing deliverables, the factual and contractual basis for the claims and the value attributable to each incomplete or defective work item, deliverable and claim.” The explanation of withholding must also be certified as made in good faith.

Moreover, the Act prohibits the owner from holding any portion of retainage due to subcontractors or suppliers that are not the subject of the owner’s claim against the general contractor, unless the owner has declared the general contractor in default under its contract.

As the foregoing makes plain, the Act requires all parties to a project to adhere to strict guidelines in connection with withholding, and later releasing retainage.  In order to gain a full understanding of how the Act and other statutes govern Massachusetts construction projects, and how to preserve your rights under those statutes, contractors would be wise to consult with a Massachusetts construction attorney regarding their specific contract and situation.

Contractors Beware: OSHA Begins Enforcement of New Respirable Crystalline Silica Standard

By on October 30, 2017

On October 19, 2017, OSHA released interim enforcement guidance for its Respirable Crystalline Silica in Construction Standard. This standard began full enforcement on October 23, 2017.

The Interim Enforcement Guidance issued refers to the standard promulgated on September 23, 2017.  Initially, rather than issue citations for violations of the standard, OSHA’s compliance officers were instructed to assist employers making good faith efforts to comply with the new standard for the first 30 days of its enforcement.  With the new Guidance issued on October 19, full enforcement of the new standard was rolled out on October 23.  Accordingly, employers in the construction industry, and particularly those where substantial silica exposures may be encountered, should be cognizant that full enforcement of the standard will now be enforced by compliance officers.    

The Respirable Crystalline Silica in Construction Standard established a new exposure limit for respirable crystalline silica at 50 micrograms per cubic meter of air as a weighted average during a worker’s an eight hour shift.  This new permissible exposure limit is five times lower than the prior limit for respirable crystalline silica. 

Because prolonged and intense exposure to crystalline silica is known to cause cancer, and crystalline silica is byproduct of many construction activities and materials, such as concrete, rock, mortar and sand, OSHA’s Respirable Crystalline Silica in Construction Standard is intended to limit such exposures.  Many safety measures can be installed and protective equipment can and should be used to avoid intense or prolonged exposures to crystalline silica. Contractors frequently involved in operations where such exposure is likely should be careful to provide all necessary safety measures, safety equipment and personal protective equipment necessary to comply with the new standard.

If you have questions regarding OSHA’s new guidance, your compliance with other OSHA safety standards, or in connection with your rights after a citation has been issued, you are well-advised to consult with counsel familiar with OSHA matters.

Home Improvement Contractor Denied Damages for “Reasonable Value” of Completed Work

By on October 18, 2017

Damages for work performed under a construction contract may be awarded under a variety of legal theories. One such theory is the principle of quantum meruit, which, when established, allows for an award of the reasonable value of goods or services as compensation for the value of “enrichment” those goods or services provide. Generally, one must demonstrate both good faith and substantial performance in order to recover on the theory of quantum meruit.

Recently, the Massachusetts Appeals Court reversed an award of damages on a quantum meruit claim after homeowners terminated their contract prior to completion of work.

In Pinecone Construction, Inc. v. Sridhar, the trial court awarded quantum meruit damages to a contractor, reasoning that while the contractor’s work intentionally departed from the contract specifications, the work was “structurally sound” and was used in completing the project.  As a result, the court concluded that “equity demands” that the contractor recover the value of its labor and materials provided prior to termination. On appeal, the Appeals Court reversed, determining the trial court’s reasoning to be circular, and held that as a matter of law a contractor cannot recover quantum meruit damages without showing both good faith and substantial performance, without regard to any benefit or enrichment conveyed to the homeowners.  Because the trial court found the contractor’s intentional departure from contract specifications tantamount to bad faith, the damages award was overturned and the homeowners were separately awarded damages for the cost of completion and under the Massachusetts Home Improvement Contractor Act and Mass. Gen. Laws Chapter 93A.

While Pinecone Construction is an unpublished opinion, it should stand as a cautionary tale to contractors – failure to perform work in good faith can bar even equitable recovery for work performed.  If you have questions regarding your ability to recover damages for your work on a home improvement contract or other construction work, you should contact an experienced construction lawyer to determine your rights and assess your potential remedies.

Selecting the Right Home Improvement Contractor in Massachusetts

By on August 14, 2017

Selecting a contractor for a home improvement project is both exciting and fraught with peril. The right one can deliver your dream home, and the wrong one can make your living space a nightmare for an extended period of time.  Fortunately, Massachusetts maintains strong consumer protections against the latter in M.G.L. c. 142A, the Home Improvement Contractor statute.

Contractors are required by law to include specific provisions and notices in contracts with consumers. Homeowners should thoroughly investigate the contractor up front and be well-versed in their rights

Construction consumers should consider some practical tips is selecting their residential construction or home improvement contractor:  

(1)      Do thorough research and get multiple quotes. Many websites provide reviews and commentary on contractors from prior customers, such as yelp and angies’s list.

(2)      Make sure the contractor you choose is registered as a Massachusetts home improvement contractor;   

(3)      Verify that the construction supervisor the company plans to use to oversee the project day-to-day has a valid construction supervisor’s license; and  

(4)      Insist upon a complete written contract, signed by both parties, prior to making any deposits or starting any work.  At a minimum, your contract should include the following information:

          a physical address for the contractor, not just a post office box, along with the name of the salesperson and the construction supervisor for your project;

          a start date and a completion date for work, so that you don’t find yourself lower on the contractor’s priority list than other projects soon after making your deposit;

          a clear scope of work, including as much detail as possible.  If you’ve agreed upon certain brands for hardware or fixtures, be sure those brands appear in the contract; and

          specific benchmarks for making progress payments, including the amount for each such payment.

Do not make final payment to your contractor until all of the work is completed to your satisfaction.  Be sure to ask for a copy of the contractor’s insurance policy and call the insurance company to verify that it is current.

For substantial projects, have a qualified construction lawyer review your contract prior to signing it.  A small investment with a construction attorney can save thousands of dollars and immense frustration by avoiding traps for the unwary hidden in contract documents and by adding appropriate layers of protection into your contract that homeowners are not likely to add on their own.

Show Me the Money: When Payment is Due on Massachusetts Public Construction Projects

By on April 5, 2017

Traditionally, general contractors on Massachusetts state-level public construction projects employed one of two types of risk allocation provisions in payment clauses in their subcontracts with subcontractors:  a “pay-if-paid” or a “paid-when-paid” clause.  This changed, however, due to a 2004 Massachusetts court decision that largely did away with condition precedent payment clauses commonly referred to as “pay-if-paid” clauses.  While the differences between the two clauses may not jump off the page, the use of one rather than the other had a significant impact on a subcontractor’s right to collect payment from the general contractor.

“Pay-if-paid” clauses create a condition precedent to payment.  That is, a subcontractor has no right to be paid for completed work until or unless the general contractor received payment from the owner.  “Pay-when-paid” clauses create no such condition precedent to subcontractor payment.  Rather, a “pay-when-paid” clause is a timing provision; that is, the general contractor has a ‘reasonable time’ to obtain payment from the project owner, but in the event the owner does not pay the general contractor within a ‘reasonable time’ the subcontractor retains the right to collect payment from the general contractor for its work.  Ambiguous contract language often complicated the subtle, yet substantial, difference between the two types of clauses, leading to high stakes contract interpretation disputes.

In 2004, Massachusetts did away with the distinction between “pay-if-paid” and “pay-when-paid” clauses on state-level public construction projects.  In,  Framingham Heavy Equip. Co., Inc. v. John T. Callahan & Sons, Inc., 807 N.E.2d 851, 855 (Mass. App. 2004), the court reasoned, that absent express contract language, if “payment to the subcontractor is to be directly contingent upon the receipt by the general contractor of payment from the owner,” then the default interpretation of subcontract payment provisions, “should be viewed ‘only as postponing payment by the general contractor for a reasonable time after requisition … so as to afford the general contractor an opportunity to obtain funds from the owner.’”  This decision virtually eliminated “pay-if-paid” in favor of “paid-when-paid” clauses on Massachusetts state-level construction projects.         

While the holding in Framingham is generally good news for payment-seeking subcontractors, the issue remains, however, as to what a “reasonable time,” is to afford general contractors before general contractors must make payment to subcontractors should the owner not pay.  In Framingham, the court determined that where the payment issues originated in December 1998 and continued through March 1999, that by the end of April 1999, “the general contractor had exceeded any reasonable period of time,” and thus the subcontractor’s claim for payment for completed work could not be defeated even though the owner had yet to pay the general contractor for the subcontractor’s work.

There has been no subsequent case in Massachusetts that further defines the “reasonable time” standard to determine when general contractors must pay subcontractors when the general contractor objects to making payment as a result of a “pay-when-paid” clause.  Thus, subcontractors should be keenly aware of any developments in the law regarding what constitutes “reasonable time” for payment in connection with these provisions.  If you have questions regarding payment issues on state-level public construction projects you should contact a Massachusetts construction lawyer.   

Court Awards Damages Despite “No Damage for Delay” Clause

By on March 29, 2017

The Massachusetts Appeals Court recently upheld a trial court’s award of damages to a subcontractor in spite of a “no damages for delay clause” in the subcontract.

On a public construction project, the subcontractor entered into a subcontract that contained a clause making extensions of time the exclusive remedy for delays to the subcontractor. The project coordination did not go according to the original schedule, and the subcontractor was not able to start on various phases at the expected times. Despite this, the general contractor did not grant the subcontractor any time extensions. Instead, it insisted that the subcontractor increase the onsite labor, along with other accommodations.

The subcontractor filed suit, seeking payment for additional labor costs incurred due to the site not being ready for that trade’s work and related inefficiencies. The court awarded such damages, finding the failure to grant warranted time extensions to be a “deprivation of remedy.” In other words, the general contractor could not use the defense of the “no damage for delay” clause if it itself did not abide by the terms of the clause.

You can read the full decision here:  Central Ceilings, Inc. v. Suffolk Construction Company, Inc. *This decision may still be subject to further appeal.

Show Me the Money: Getting Paid on Private Massachusetts Construction Projects

By on March 15, 2017

As a general rule, parties to private contracts are afforded wide latitude to dictate and negotiate the terms as they see fit. While this notion of “freedom of contract” is an entrenched tradition within American law it is not without its limitations.  The Prompt Pay Act, enacted in 2010, is one such limitation that every Massachusetts sub-contractor and contractor should have an acute awareness of.

In effect the Prompt Pay Act requires that standard state provisions be incorporated into otherwise private construction contracts with an original valuation of over three million dollars. The Prompt Pay Act specifically affects the interpretation of payment clauses in such contracts.

As a reminder, “pay-if-paid” clauses create a condition precedent to subcontractor payment. That is, a subcontractor has no right to payment for completed work until the general contractor has received payment from the owner. “Pay-when-paid” clauses create no such condition precedent to subcontractor payment. Rather, the general contractor has a ‘reasonable time’ to obtain payment from the project owner, but in the event the owner does not pay the general contractor within the ‘reasonable time’ the subcontractor still has the right to seek payment from the general contractor. Ambiguous contract language often complicates the subtle, yet substantial, differences between the two types of clauses leading to high stakes contract interpretation disputes.

In 2004, Massachusetts did away with distinction between “pay-if-paid” and “pay-when-paid” clauses on state-level public construction projects.  Framingham Heavy Equip. Co., Inc. v. John T. Callahan & Sons, Inc., 807 N.E.2d 851, 855 (Mass. App. 2004). Thus with regard to Massachusetts state-level public construction projects “pay-if-paid” causes have been effectively eliminated in favor of “paid-when-paid” clauses.”

Federal-level public construction projects, on the other hand, have not completely eliminated the distinction between “pay-if-paid” and “pay-when-paid” contract clauses. On federal-level public construction projects “pay-if-paid” language included in a subcontract could complicate subcontractor recovery in relation to the principal contractor. The limited amount of Federal case law on the issue, however, leads to the inference that Federal Courts disfavor allowing “pay-if-paid” clauses to operate in the federal-level public construction context.

The Prompt Pay Act directs that, on private construction projects valued at over three million dollars, payment clauses be interpreted as “pay-when-paid,” thus effectively eliminating “pay-if-paid” in most instances. Specifically, and with very narrow exception, “[a] provision in a contract for construction which makes payment to a person performing the construction conditioned upon receipt of payment from a third person that is not a party to the contract shall be void and unenforceable.” MGL c. 149 sec. 29E (e).

This statutory language is a clear attempt, in the name of the broad public interest, to provide protections to subcontractors by endeavoring to ensure swift payment for work provided in order to keep construction projects moving and companies afloat by regulating cash flow.

Smith Ironworks, Inc. v. Torrey Co., Inc., Not Reported in N.E.3d (2014), is the only Massachusetts case to discuss the Prompt Pay Act at any length. Even so, it is an arbitration decision as discussed in Smith, and not the Court itself, that provides the limited interpretation of the Act. In Smith, the subcontractor applied for payment from the contractor for work provided on a private project. Disputes as to the actual amount owed existed, however, rather than actively reject the request for payment, the contractor did not respond at all. Pursuant to the terms of the Prompt Pay Act the request for payment was deemed approved after the statutorily prescribed time passed without formal rejection. The parties submitted to voluntary arbitration and an arbitrator found that the contractor was liable to the subcontractor for the amounts submitted, plus interest, as the contractor failed to properly respond to the request for payment as prescribed by the Prompt Pay Act. The contractor was deemed liable even though it had not been paid in full by the owner.

To reiterate, while Smith details an outcome favorable to a subcontractor by application of the Prompt Pay Act, that outcome is not of true precedential value. Questions remain as to the effectiveness of the Prompt Pay Act. Specifically, questions regarding the true parameters and enforceability of payment timelines and the exact remedy for non-compliance. Thus, subcontractors should keep an eye towards the development of the law in this area and strive to understand how the Prompt Pay Act may apply to various projects. If you have any questions about payment issues on public construction projects you should contact a Massachusetts construction lawyer.

Understanding the Limitations of Chapter 93A – Pursuing Litigation Is Not Unfair or Deceptive

By on February 26, 2017

Companies operating or conducting business in Massachusetts are aware of an all-too-familiar statute, Massachusetts General Laws Chapter 93A. This statute provides individual consumers and businesses a right to bring legal action if they are harmed by an unfair business practice. The statute eloquently, although perhaps ambiguously, states that a violation shall exist when a company commits an “unfair or deceptive act or practice, or unfair method of competition,” against another who is engaged in commerce within the Commonwealth.  Violations can cover a litany of topics, such as a company that unfairly demands more money to complete its contract obligations after having already executed the contract (Anthony’s Pier Four, Inc. v. HBC Associates, 411 Mass. 451), or where insurance providers fail to offer a fair and equitable settlement amount within the required time period (Rhodes v. AIG Domestic Claims, Inc., 461 Mass. 486), or against landlords who fail to provide habitable units to their residential tenants (Haddad v. Gonzalez, 410 Mass. 855).  Although Chapter 93A is far-reaching, it does have its limitations.

Recently, Strang Scott attorneys Cole Young and Jennifer Lynn argued to the Massachusetts Appeals Court that litigation tactics alone are not unfair or deceptive acts or practices, such that they violate Chapter 93A.  Agreeing, the Appeals Court held that demanding payment under a contract, filing suit, and continuing to litigate a claim over a disputed amount is a simple contract dispute and nothing more. Aggregate Industries ­– Northeast Region, Inc. v. Hugo Key & Sons, Inc., 90 Mass.App.Ct. 146 (2016).   Said another way, the Appeals Court held that plaintiffs should not be punished for deciding to litigate, rather than accepting a lower settlement amount.  The Appeals Court went on to hold that the unfair or deceptive practice must arise from an independent act of trade or commerce, “not tangentially from litigation concerning that conduct.” 

The precedent of this case will be far-reaching and provides security to companies and businesses who choose to file suit, as opposed to being forced into settlement for fear of committing an “unfair” act.  Because the breadth of Chapter 93A can be complicated and nuanced, potential litigants should speak with an experienced Massachusetts litigator.