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Jennifer R. Budd is an Associate in the Construction Group of Cohen Seglias. She has experience assisting clients with issues related to green building and sustainability. Jen is the Co-Editor of the Firm's newsletter, Construction in Brief.

As a follow-up to our July post on New Jersey state budget problems threatening public construction projects, the political fight over funding New Jersey’s Transportation Trust Fund (“TTF”) finally ended on September 30, 2016. Governor Chris Christie and the legislature agreed to a  compromise whereby the TTF will be reauthorized for eight years and funded with an additional 23 cent per gallon gas tax, for a total funding of $2 billion per year. As part of the compromise, the estate tax will be phased out by 2018, the sales tax will be reduced by 3/8th of a point, and other credits and deductions will be added to the NJ tax code.

Continue Reading A Deal on New Jersey’s Transportation Trust Fund: What Does it Mean for Affected Contractors?

Countdown FiveOver the past year, many states experienced budget crises that threaten public works spending and, in some cases, caused entire project shut downs. In Pennsylvania, a stalemate over the budget for Fiscal Year 2016-2017 lasted almost nine months, causing companies and non-profit grant recipients who had contracts with the Commonwealth to suspend their services or temporarily close. In New Jersey, Governor Christie and the legislature deadlocked over taxes, including an increase to the gas tax that would fund the Transportation Trust Fund (“TTF”). As a result, Governor Christie issued Executive Order No. 20, which shut down all construction projects funded by the TTF that were not “absolutely essential for the protection of the health, safety, and welfare” of New Jersey citizens. The Executive Order was issued on June 30, 2016, a list of projects subject to shut down was published on July 6, 2016 and the projects were shut down by July 8, 2016. Continue Reading State Budget Problems Threatening Public Construction Projects: 5 Key Points to Remember

In recent years, concepts such as “green construction” and “renewable energy” seem to have become almost commonplace. In what is perhaps an effort to lead the world by example in these areas, President Barack Obama recently issued a Presidential Memorandum that calls upon federal agencies to increase drastically their use of renewable energy sources.

The Memo and Its Goals Green Bulb.jpg

The Memo outlines ambitious goals that seek to more than double the federal government’s current use. The Memo targets the use of renewable energy sources for 20% of the government’s energy needs by 2020. To achieve this goal, federal agencies must ensure that their renewable energy usage exceeds 10% of all energy usage by 2015, 15% in 2016 and 2017, and 17.5% in 2018.

Since the federal government occupies nearly 500,000 buildings across the country, the Memorandum zeroes in on building performance and energy efficiency. It prioritizes the installation of renewable energy sources directly on federal property as an ideal way to realize the targets set forth in the Memo.

Implementation and Measures

To measure the performance of federal buildings, energy and water meters are to be installed in all federal buildings where installation is cost-effective and appropriate. To promote and ensure compliance, transparency, and benchmarking, data collected from the meters is to be reported to the Environmental Protection Agency and Green Button.

Notably, the Memo is to be implemented in a manner consistent with Executive Order 13514, which was issued in October 5, 2009. This Executive Order requires new construction and major renovation on federal buildings to be considered “high performance” or “sustainable.”

What Does It Mean for the Construction Industry?

With these new goals and priorities in place, the sustainability and construction industries should expect to see an increase in the installation of renewable energy infrastructures across the country. In fact, a Presidential Memorandum dated December 2, 2011 authorizes and encourages federal agencies to enter into energy savings performance contracts for up to 25 years.

However, agency funding for energy projects remains a concern. Although many trade organizations and other industry activists have applauded the goals set by the Memorandum, the procurement processes, which have allowed large private companies to install renewable energy infrastructures through long-term power purchase agreements, are still unavailable to the federal agencies. With regard to new construction, it will be interesting to see whether and to what extent the federal government incorporates renewable energy sources into those projects.

All told, President Obama’s Memorandum gives reason for optimism within the industry, but that optimism should be guarded while funding and other implementation issues remain up in the air.

Lane F. Kelman is a Partner with the Firm and a member of the Construction Group and chair of the Green Building and Sustainability practice group. He represents developers, general contractors, construction managers and the different trades in complex matters ranging from bid protests, contract negotiations and claim prevention & management.

Jennifer R. Budd is an Associate with the Firm and a member of the Construction Group.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

As the Greenbuild 2013 posters, web cafés and stages are removed from the Convention Center in Philadelphia, attendees and exhibitors from across the country have been reenergized in thinking about green building, sustainability and resiliency. From November 18-22, Philadelphia was painted green by thousands of professionals from all sectors of the sustainability movement. Here is a brief recap of the week’s activities and some comments from attendees and exhibitors.

  • greenbuild1-thumb-206x205-25410.jpgOver 700 exhibitors presented their sustainable design, products and construction during the two-day expo including regional industry leaders such as W.S. Cumby and Revolution Recovery.
  • Green Building tours highlighted Philadelphia’s best sustainable buildings and neighborhoods including the Tastykake Bakery, The Stable, US Airways Ground Support Equipment Maintenance Facility, Morphotek’s Pilot Plant, Longwood Gardens, the Morris Arboretum, the Navy Yard, Temple University and Penn Charter School, just to name a few.
  • Onion Flats, a Philadelphia based developer and design-builder, showed off their LEED and “Passive” certified row homes throughout the City that are changing the way Philadelphians think about urban living.
  • The U.S. Green Building Council outlined the themes, strategies, and key elements of the LEED v4 green building program; which it launched at Greenbuild.
  • Members of the public sector from the City of Philadelphia to federal government entities, such as the U.S. Department of Housing and Urban Development and the U.S. General Services Administration, explained how sustainability practices are being implemented into their design, procurement and building.
  • On Thursday evening, the Greenbuild keynote address was delivered by former Secretary of State Hilary Clinton who spoke about the importance of sustainability on a world stage. Secretary Clinton also detailed her efforts in creating a greener White House when she was the First Lady, and later ensured that all future U.S. embassies be built to a minimum of a LEED Silver standard.

Heather Blakeslee, the Deputy Executive Director of the Delaware Valley Green Building Council (“DVGBC”), had this to say about the week:

DVGBC always looked at Greenbuild as a way to showcase the region’s work. We had an absolutely impressive showing of local companies at the Expo, an unprecedented number of local presenters who are leaders nationally and internationally, and the most robust tours program to date for Greenbuild. We’re looking forward to building on that momentum by continuing to work on initiatives that make our communities stronger.

Although Greenbuild will be moving onto New Orleans, Louisiana in October 2014, the lessons learned from the week in Philadelphia will continue to be seen and implemented. For starters, CSPG&F partners John Greenhall and Lane Kelman served on the DVGBC’s Legacy Project Committee that created a youth-built “Adventure Playground” at Smith Memorial Playground in East Fairmount Park. The playground includes loose parts that allow children to continuously build and re-imagine the space.

If you are interested in presenting at Greenbuild 2014, check out the “Call for Proposals.”

Lane F. Kelman is a Partner with the Firm and a member of the Construction Group and chair of the Green Building and Sustainability practice group. He represents developers, general contractors, construction managers and the different trades in complex matters ranging from bid protests, contract negotiations and claim prevention & management.

Jennifer R. Budd is an Associate with the Firm and a member of the Construction Group

Two weeks ago, the Philadelphia Zoning Board approved the construction of Ridge Flats at 4300 Ridge Avenue in East Falls—a project proposed by developer and design-builder Onion Flats.

The Project

The five story building will provide 146 residential units and 9,300 square feet of retail space.  More importantly, Ridge Flats will be Philadelphia’s first – and the country’s largest – certified “passive house.”  A passive house produces a “net-zero” energy impact by producing as much energy as it uses for heating, cooling, lighting and hot water (which, at Ridge Flats, will be generated on-site).  The “net-zero” impact is accomplished by solar paneling on the roof and the construction of a highly insulated, air-tight building envelope so that the indoor spaces are easier to keep cool or warm.  The power generated by the building will be sold to a utility company, and the savings will be passed to the residents.

The Vision

Howard Steinberg, AIA, LEED AP, a principal of Onion Flats, explained the purpose and importance of Ridge Flats:

Ridge Flats strives to be the largest Passive House certified and net zero energy possible project in the country.  Our mission at Onion Flats is to continue to prove that well designed, high performance building development is a viable alternative that provides healthy and sustainable environments for our residents.  Equally important for us is to create projects that inspire the City’s politicians and development community with the hope that similar developments eventually become the rule rather than the exception, as envisioned in the Greenworks Philadelphia plan.

The building will also include many other energy saving elements such as a public art installation that incorporates and addresses the residents’ energy usage.  The building will also feature a garden landscape on the second floor to create “new ground.”  Proper storm water management will be achieved through a 100% pervious site, and much of the construction will be built through the use of sustainable and locally sourced materials.

In addition to the various “green” elements of the building, it also seeks to compliment and improve the East Falls community.  For example, the building design will encourage community among residents as it features viewing platforms and outdoor access to the residential units instead of interior hallways.  Ridge Flats will act as a buffer between the heavily traveled Kelly Drive and the pedestrian and bike friendly trails of Fairmount Park.

Recently, the Zoning Board approved several variances sought by Onion Flats, including less parking.  Under the current zoning laws, the project would have required 695 parking spaces due to the retail space planned.  Since the retail space will be geared towards pedestrians and the local community, all involved agreed that this much parking was not needed.  Additionally, all residents will have indoor bicycle storage and parking spaces for a car share program will be provided on premises.

Looking Ahead

Construction will begin in late 2013 or early 2014 and is anticipated to last about 12-14 months.  Ridge Flats is an ambitious and exciting project for Onion Flats and the City, and everyone is pulling for it.

Lane F. Kelman is a Partner with the Firm and a member of the Construction Group. He represents developers, general contractors, construction managers and the different trades in complex matters ranging from bid protests, contract negotiations and claim prevention & management.

Jennifer R. Budd is an Associate with the Firm and a member of the Construction Group.

Flood insurance.jpgIn January, Governor Chris Christie signed an Executive Order and proposed emergency regulations to guide the rebuilding process after Superstorm Sandy in flood prone areas of New Jersey.   Before the storm, the building code and flood-proofing regulations in the state were based on flood maps adopted by the New Jersey Department of Environmental Protection (“the Department”) in the 1970’s and 1980’s.  Unfortunately, these maps underestimated the 100-year flood elevations by anywhere from one to eight feet.  The Federal Emergency Management Agency (“FEMA”) is in the process of reevaluating its flood maps for New Jersey. One of the changes, which will have a widespread effect, is the adoption of FEMA’s 100-year flow rate maps, including advisory, proposed or effective mapping. Owners and their contractors rebuilding in New Jersey will need to consider FEMA’s most recent maps (the “New Maps”), regardless of whether the map at issue is considered to be final and approved.  All of these maps are available on FEMA’s website.

The Executive Order and the emergency regulations propose the following for construction in flood-prone areas:

  • A building is substantially damaged if the cost of restoring it to its original condition would equal or exceed 50% of the market value of the structure before the storm damage occurred.
  • An individual permit for reconstruction of a home that has suffered substantial damage due to the storm may not be issued by the Department unless the lowest floor of the home is constructed or modified such that it is set at least one foot above the elevation set by the New Maps.
  • The “lowest floor of a building” only includes a space which may be used for permanent or temporary occupation and does not include a crawl space, entryway and or garage if it is used for building access, parking or storage.
  • The Department may issue an individual permit for reconstruction of a commercial building that has suffered damage due to the storm that is not set at least one foot above the elevation set by the New Map map if an architect or engineer certifies that the building will be constructed in accordance with flood-proofing requirements.
  • The regulations also permit, for the first time, that commercial buildings be “wet flood-proofed.” Wet flood-proofing allows for flood waters to move freely in a building without damaging the structural integrity of the building.
  • When a property owner plans to rebuild, a permit need not be sought from the Department as long as the “footprint” of the building is not increased by more than 300 square feet, the lowest floor of the building is built at least one foot above the elevation set by the New Map, any basement or ground floor garage is not used for habitation, and the building is not moved closer to any large body of water or into a floodway. This will save the owner the cost of a permit fee.

According to the regulations, building owners who seek to comply will qualify for assistance from FEMA to help cover the cost of the work associated with complying with the regulations.  Since the new FEMA maps will likely place more properties in flood zones than before the storm, while other properties will be placed in more severe flood zones, flood insurance premiums will rise substantially for some New Jersey property owners.  But, FEMA anticipates that property owners who chose to comply when rebuilding could see their flood insurance premiums drop by more than 200%.

Have an opinion?

The regulations were adopted via an Executive Order, but will become permanent after an abbreviated comment period from the public.  A public hearing on these proposed regulations is scheduled for Thursday, March 7, 2013 at 5:30 pm at the City of Long Branch Municipal Building, Council Chambers, 344 Broadway 2nd Floor, Long Branch, New Jersey 07740.

Jonathan A. Cass is the Chair of the Insurance Coverage & Risk Management Group at Cohen Seglias Pallas Greenhall & Furman PC. He has extensive experience representing insureds and insurers in insurance coverage disputes.

Jennifer R. Budd is an Associate at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group.

home warranty.jpgBy John A. Greenhall and Jennifer R. Budd

For decades, Pennsylvania Courts have limited the scope of the implied warranty of habitability to the first user of the home. For the first time, in Conway v. Cutler Group, Inc., the Pennsylvania Superior Court permitted a homeowner, who was not the initial purchaser of the home, to maintain a claim against the home builder for breach of the implied warranty of habitability.

What is the Implied Warranty of Habitability?

The implied warranty of habitability (the “Warranty”) is a guarantee made by a homebuilder that (i) the home was built in a workmanlike manner and (ii) the home is suitable for living. If a homebuilder fails to satisfy these two basic requirements, then it can be held liable to the purchaser for breaching the Warranty. For instance, courts have held homebuilders liable to buyers for breach of the Warranty where the home does not have drinkable water.

It All Comes Down to Policy

In enacting this change, the Court examined the history of the Warranty and the policy behind its development, noting that the Courts developed the Warranty to shift the risk of latent defects in new homes from the buyer to the builder. The Court explained that shifting the risk to the builder is appropriate because (i) many defects go undetected even after a thorough inspection and (ii) the builder is in the best position to repair the defects and spread the cost of the repair.

With these policies in mind, the Court expressed several reasons why the Warranty should be expanded to future buyers. First, the Court noted that the Warranty was intended to even the playing field for a home purchaser lacking the expertise of a builder. The Court reasoned that in the case of a second purchaser, neither party possesses the expertise of a builder. Second, the Court explained that the Warranty targets defects that are impossible for an ordinary home purchaser and its inspector to detect. Therefore, the Court concluded that ownership of the home is irrelevant to the applicability of the Warranty because the consequences of a latent defect may not manifest for several years, at a time when title of the home has changed hands.

The Court provided two examples to show that the Warranty should apply to a subsequent purchaser. In one case, if a defect materialized five years after the builder or developer sold the home and the first buyer discovered the defect, that buyer could have successfully brought a claim for a breach of the Warranty. In the second scenario, if the first buyer sold the home after three years, and the second buyer discovered the defect, the builder would not have been liable for a breach of the Warranty. Using these illustrations, the Court concluded that the number of times a home changes hands should not limit the Warranty because it is immaterial to the discoverability of a latent defect. Therefore, the Court held that the sale of a home may not limit the applicability of the Warranty.

A Builder’s Liability under the Warranty Still Has Limits

Although the Conway decision could extend a builder’s liability under the Warranty, that liability is not limitless. First, the Court explicitly stated that all homeowners must file claims for breach of the Warranty within the twelve-year statute of repose. Second, the homeowner must still prove in litigation that (i) the builder’s design or construction caused the defect and (ii) that the defect affects the habitability of the home.

John A. Greenhall is a Partner with the Firm and a member of the Construction Group. He can be reaced at 215.564.1700 or jgreenhall@cohenseglias.com.

Jennifer R. Budd is an Assocaite in the Construction Group. She can be reached at 215.564.1700 or jbudd@cohenseglias.com.

By: Jennifer R. Budd and George E. Pallas

A bill allowing the New Jersey Turnpike Authority (“NJTA”) to enter into design-build contracts has been introduced in the New Jersey Assembly (A1561) and the Senate (S1211). The NJTA is the entity charged with maintaining and implementing capital improvements on the New Jersey Turnpike and the Garden State Parkway. The bill, if passed, would give the NJTA the discretion to administer any project through a design-build contract, rather than through the current design-bid-build method of procurement.

How It Will Work

According to the bill, if the NJTA decides to bid a project as a design-build, the NJTA must adhere to a two-phase procedure for awarding the contract. Under the first phase, the NJTA would qualify interested bidders, which may include joint ventures, by the issuance of a Request for Qualification. The Request for Qualification will list information such as the minimum qualifications needed by the design-build entity, a scope of work statement, the maximum time allowed for the project and the NJTA’s estimated costs of design and construction. Of the phase one bidders that respond to the Request for Qualification, the NJTA must select at least two but no more than five bidders to participate in a second phase Request for Proposal (“RFP”) solicitation.

For the second phase, the NJTA will issue an RFP to the remaining bidders. In response, those contractors will submit a technical proposal and a sealed price bid. The technical proposal will be reviewed by a technical review committee, given a score, and that score shall be submitted to the NJTA and made public. The NJTA will set a minimum technical proposal score, and any proposal that does not meet the minimum shall be rejected. Once the NJTA has determined which proposals have met the minimum score, the price bids will be opened publically, and the NJTA must award the project to the design-build entity with the lowest bid.

The Bill Has Some Traction

During the 2010-2011 term, legislators introduced a similar bill, and the Assembly Transportation, Public Work and Independent Authorities Committee unanimously passed it with amendments. The NJTA bill is very similar to the version passed by the Committee last year, which may be suggestive of the legislature’s belief that design-build bidding will be more efficient and cost effective for the NJTA.

Implications On Contractors

If passed, this bill could have widespread effects on highway and road contractors in New Jersey. Due to the high level of engineering, design and technical skill required to compete in price, and the cost of retaining such professional services, many small and mid-sized contractors could be squeezed out of the competition. On the other hand, larger contractors may enjoy the independence that often accompanies design-build construction since the contractors will have the benefit of design input from project inception.

Notwithstanding the additional independence, contractors should keep in mind that design-build projects are fraught with higher risk because design-builders are responsible for all phases of the project and any liability stemming from it. Additionally, unlike in design-bid-build construction where the contractor can look to the owner or the designer to share the costs from unanticipated circumstances, a design-build contractor is less likely to benefit from such cost-sharing.

Jennifer R. Budd is an Associate at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group.

George E. Pallas is the Treasurer of the Firm as well as a Shareholder and member of the Board of Directors. He is also a Partner with the Firm’s Construction Group.

Daniel E. Fierstein, an Associate with the Firm contributed to this post.