By: Scott T. Earle and Jennifer M. Horn

The recently passed and amended Delaware House Bill 109 (“HB 109”) has important implications for anyone concerned with construction law in Delaware. According to amended HB 109, any provision in a contract for construction occurring in the State of Delaware is void and unenforceable as a matter of law (1) if it requires that a dispute arising out of a Delaware construction project be subject to any law other than Delaware law, or (2) if it requires that a dispute related to a Delaware construction project be litigated outside of the State of Delaware.

The Law and Its Effect

HB 109 makes any contract provision requiring a dispute arising out of a Delaware construction project to be litigated outside of Delaware unenforceable as a matter of law. This is good news for Delaware based contractors who wish to keep their construction disputes in Delaware (regardless of what their contracts may or may not provide on the issue); bad news for companies who have contract clauses requiring that conflict resolution take place in another State. In addition, HB 109 voids construction contract provisions relating to choice of law in that any law other than Delaware’s is inapplicable, despite contractual agreements to the contrary.

Its History

After stalling out in the Delaware Senate Executive Committee during the last legislative session, the Delaware State Senate introduced Senate Amendment No. 1 (“SA 1”) to HB 109 to the floor this last legislative session. SA 1 maintained the original “Building Construction Procedures Act” (the “Act”) by striking Sections 1 and 2 of HB 109 in their entirety and amending Section 3507 of the Act. After being passed by both the Senate and House of Representatives in June, HB 109, as amended by SA 1, was signed into law by Governor Markell on June 25, 2012.

The Net Effect?

The net effect of HB 109 is to be determined. In this regard, contractors and subcontractors alike should re-visit and understand the choice of law and venue provisions of their construction contracts. The newly amended HB 109 will, among other things, preclude out-of-state construction firms from forcing Delaware based firms to incur the additional litigation costs associated with litigating outside of the State. Also, the choice-of-law aspects of HB 109 provide certainty to Delaware contractors, suppliers and subcontractors accustomed to the nuances of Delaware law.

Scott T. Earle is a Senior Associate with Cohen Seglias and a member of the Business Transactions Group.

Jennifer M. Horn is Senior Counsel at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

By: Scott T. Earle House Bill 109 (HB 109), which was passed by the House of Representatives, has stalled out in the Senate. This Bill was a proposed amendment to Title 6, Chapter 35 of the Delaware Code Delaware2.jpgBuilding and Construction Payments section (the Act).

What Would HB 109 Have Changed?

HB 109 would have changed the name of the Act to the “Building Construction Procedures Act” and expanded the scope of the Act to apply to all forms of construction, not just construction related to buildings or structures. The amendment would have also made it against public policy to apply any other law but Delaware law to construction contracts performed in the state. It also would have required an in-state contractor to participate in any legal proceedings inside the State of Delaware. Additionally, HB 109 would have consolidated and amended the contract clauses currently contained in Sections 3506 and 3507 into one section to harmonize the timing of events set forth in these Sections, which are presently inconsistent. Finally, the amendment would have also changed the time in which a contractor or subcontractor has to dispute an invoice from 7 days to 15 days.

Next Steps for HB 109

HB 109 was passed by the House on June 22, 2011 and received no opposition. The amendment was passed with forty out of a possible forty-one votes in its favor. After being passed by the House, the amendment was introduced to the Senate on June 23, 2011 where it stalled out in the Executive Committee and expired when the General Assembly recessed on June 30, 2011. HB 109 is anticipated to be reintroduced next January when the General Assembly reconvenes. We will monitor HB 109 and update you when the General Assemble reviews the legislation. Scott T. Earle is a Senior Associate with Cohen Seglias and a member of the Business Transactions Group.

Is construction picking up throughout the Mid-Atlantic region? Here are just a few summaries of headlines for Maryland, Delaware and Pennsylvania

Maryland:

As of March 2011, construction projects in several Maryland counties continue to increase, and Mid-Atlantic.jpgconstruction contracts “were up 55% when compared to the same month in 2010.” For the first quarter, future construction contracts reached $272M.

These statistics include Anne Arundel, Baltimore, Carroll, Harford, Howard and Queen Anne’s,counties in Maryland . The commercial projects included, but were not limited to, the construction of commercial, manufacturing, educational, religious, administrative, recreational, hotel, and dormitory buildings.

Delaware:

Delaware Governor Jack Markell spoke to Delaware business leaders on May 4, 2011 proposing how to spend the projected surplus above the $3.4 billion operating budget he proposed in January.

Ideally, Markell wants to spend $135 million of a projected $320 million budget surplus “on one-time construction projects to stimulate the economy” through a new initiative, the Building Delaware’s Future Now fund.

Some of the projects Markell suggests committing funds to include:

  • $40 million for a new jobs infrastructure fund to pay for road and sewer improvements for getting new companies to relocate to Delaware;
  • $40 million for the state’s Transportation Trust Fund;
  • $35 million for the preservation of historic buildings, the capital complex in Dover and state parks facilities;
  • $10 million for investing in affordable housing projects; and
  • $10 million for open space preservation.

Pennsylvania:

Pennsylvania has been awarded $40M, from the US Department of Transportation, for additional rail lines, leading from Philadelphia to Harrisburg. The funds come as part of the $2.4B that Florida Governor Rick Scott declined. Erin Waters, spokesperson for the Pennsylvania Department of Transportation (PennDOT) said the “upgrade would shave another 7 to 9 minutes from the travel time between Harrisburg and Philadelphia,” by improving the switch and signal network in Harrisburg.

No timeline has currently been released for this project.

Also in Pennsylvania, the Commonwealth Financing Authority approved $172M to fund 160 water infrastructure projects, in 51 counties, through the H2O PA program.

The H2O PA program provides “grants for flood control projects, construction of drinking water, sanitary sewer and storm sewer projects and high hazard or unsafe dam projects.”

For a complete list of projects and their descriptions please visit www.newpa.com.

For an increasing number of contractors, survival in the current economy has resulted in the need to find and secure work in other states. The migration of contractors to neighboring states is apparent throughout Jobs.pngthe country. Besides the work itself, benefits of an expanded geographic footprint include a broader client base, thereby creating mutually beneficial relationships.

For a complete breakdown on which states are seeing the biggest increases in cross border work, please visit, The Construction Blog, which is a dedicated to construction software technology.

Construction Technology Facilitates an Expanded Geographic Footprint

Recent advances in technology are accelerating the migration of contractors to neighboring states. Such technology includes, but is not limited to:

  • Online Plan Rooms – This software aids contractors looking for jobs across state lines. A contractor can browse by project type, trade or location to find upcoming construction projects.
  • Bid Management Software – This program acts like a “virtual broker” and assists contractors in the bidding process, by connecting buyers with sellers.
  • Web Based Project Management Software – This technology allows for real time monitoring of construction projects.
  • Onscreen Takeoff and Cost Estimating – This tool allows contractors to build cost estimates for projects happening in other states.
  • Building Information Modeling (BIM) – BIM brings a project to life, through 3D, 4D and 5D models.

Contractors seeking an expanded geographic footprint should be aware of the upgraded technology as a means of facilitating work across borders.

DE bridge.jpg The Delaware Department of Transportation (DelDot) recently filed a lawsuit for $19.6 million in damages against Florida based engineering contractor Figg Bridge Engineers (Figg) and its engineering subcontractor MACTEC Engineering (MACTEC). The suit alleges that the two contractors provided inaccurate and incomplete information regarding the geotechnical evaluation of the embankment surrounding the Indian River Inlet in Sussex County.

The Project

The existing bridge was originally built in 1965, and is in need of repair due to tidal erosion that is threatening the bridge’s support system.

Figg’s original plans called for traffic lanes that would approach the inlet and bridge along sharp-sided, heavily reinforced earthen slopes rising to a height of about 50 feet on either side of the river crossing.

MACTEC was hired in 2003 to study land on either side of Indian River Inlet and design a replacement for the current bridge, which has been deemed unsafe.

Problems with the Project

DelDot originally collaborated with Figg and MACTEC on the project to refurbish the bridge, but the project had to be cancelled because the, “underground soils supporting fill dirt on the bridge approach ramps were settling slower and deeper that expected, making the ramps unstable.”

DelDot hired an outside consultant to evaluate the project and find out what was going wrong. Their findings provided the groundwork for the lawsuit.

The suit, filed in Sussex County Superior Court, claims that the, “the studies done by MACTEC were inadequate, resulting in tilting, twisting, bulging and sagging of the embankments as they settled.” It goes on to claim that “MACTEC did not account for the complex sand and clay layers beneath the site and failed to inform DelDOT of signs the embankments were unstable.”

Carolann Wicks, DelDot secretary, claims that, “investigations have determined that there was nothing wrong with the construction of the “mechanically stabilized earth” walks supporting the embankments, and that the problem was improper analysis of the underlying soils.” One embankment that was expected to drop only 36 inches, actually dropped 74.

State officials said they were forced to sue after being unable to reach an out-of-court resolution that is fair to taxpayers.

Response to the Lawsuit

Figg maintains its innocence in the project, “noting that Delaware’s complaints are focused on MACTEC’s performance, and not any design or other engineering work performed by Figg.”

MACTEC denies the allegations in the lawsuit citing, among other things, DelDOT’s actions, project management, and decision-making as factors that led to increased costs for the bridge.

Another company has been hired to build the bridge just west of the original site, which is scheduled to open later this year.

The federal government recently denied the state of Delaware’s application for a $22 million grant for a wind turbine manufacturing facility in the Port of Wilmington (The Port). The Port, along with NRG Bluewater Wind (NRG), sought the grant from the second round of the U.S. Department of Transportation’s stimulus-funded transportation investment program.

wind turbines.jpg

The Port and NRG still hope to expand the port to include a facility where wind developers could import and assemble wind turbine parts and then haul them out to sea for installation. In the ocean, the wind is stronger and more stable, making it easier to harness power.The overall cost of the planned expansion is $66 million. If awarded the grant, NRG would have matched the federal government’s contribution of $22 million, and Delaware taxpayers would have been responsible for the remainder.

Both the state of Delaware and NRG expressed disappointment over not getting the grant, but remained optimistic about the project moving forward. Alan Levin, Director of the Delaware Economic Development Office said that, “Obviously, we’re disappointed, but I don’t think it changes our desire or our goal to be the major facility for the production and manufacture of [wind turbine] units. . . [i]t just means we’ve got to go look at other sources, other ways to make this happen.”

Similarly, NRG spokesman Dave Gaier explained that, “Obviously we’d like to have seen the Port of Wilmington get the. . . grant. However, that doesn’t change NRG Bluewater Wind’s project plan nor diminish our enthusiasm to move forward with the Mid-Atlantic Wind Park. We’ll sit down with Delaware state officials at an appropriate time to discuss options with respect to the port.”

Presently, Congress is considering funding a third round of grants under the stimulus-funded transportation investment program

We will keep you apprised of any developments regarding the state’s meeting with NRG or funding for the project.

Scott T. Earle and Daniella Gordon contributed to this post.

A recent Delaware Supreme Court decision limited the field of bond claimants on a private project. In the case, Berlin Steel proper claimants under bond.pdf the SuprCrane.jpgeme Court overruled the trial court’s interpretation of an earlier decision that stood for the proposition that all subcontractors, regardless of their relationship to the principal under the bond, were third party beneficiaries of the payment bond.

Background of the Case and Key Parties

Berlin Steel Construction Company (Berlin) was a contractor for a private project in Delaware. Under the terms of the contract, Berlin obtained a payment and performance bond for the benefit of the construction manager and the project owner. Berlin subsequently entered into a subcontract with Structural Steel (Structural) to perform certain steel work at the project. Structural then subcontracted with J&J Rigging (J&J) to lease and operate a crane. J&J leased a crane for the project from Salah and Pecci Leasing Co. (S&P). Although Berlin paid Structural, and Structural paid J&J, J&J did not pay S&P. In order to obtain payment, S&P, a third tier subcontractor in relation to Berlin, made a claim against the payment bond held by Berlin.

Continue Reading Delaware Supreme Court Confirms That Sureties May Limit Bond Claimants

The Delaware Department of Transportation (DelDOT) recently unveiled its plans to update the Cape Region over the next five years.

Funded Projects

On the agenda of funded projects are intersection and sidewalk improvements, such as realignment of the Plantation-Cedar Grove-Postal Lane intersection, as well as plans to develop the Destination Station Center near Rehoboth Beach. Another highlighted prDelaware.jpgoject is the $14 million plan to connect all the sidewalks and provide additional pedestrian crosswalks across Route 1 between Five Points and the entrance to Rehoboth Beach. Work on this project will occur in fiscal years 2012 and 2013.

Unfunded Projects

Included in the unfunded upgrades are a new Route 9-Route 1 interchange, and the relocation of Route 9. Both of these projects are estimated to cost over $50 million each and will receive engineering money, but no construction funding has been budgeted. Other unfunded projects include widening and improvement of Route 24 from the Love Creek Bridge to Route 1, and improvements to Plantation Road between Route 24 and Route 9. Engineering funding has been made available for the improvements to Route 24, but neither project will receive construction funding.

Funding DelDOT Projects

Money for Delaware’s road projects comes from the state’s transportation trust fund, which is funded by vehicle documentation fees, the gas tax and tolls from Route 1 and Interstate 95, all of which have suffered as a result of the poor economy. In addition to reduced capital, DelDOT must also contend with rising land costs. The Route 26 project in eastern Sussex County marks the first time in DelDOT history that the cost of the land is greater than the cost of engineering and construction.

In light of the economic downturn, and increased land costs, the state is seeking alternative sources of funding. According to Sandy Roumillat, DelDOT spokesperson, “[w]e are looking at the trust fund to see what changes we can make.”

There is conflict between the state and its counties when it comes to transportation funding, especially in Sussex County. Sussex County Councilwoman Joan Deaver has stated that the perception of county officials is that roads are DelDOT’s responsibility. According to Sussex County Council President Vance Phillips:

“There is a disconnect between land use and infrastructure funding. We were told the state would build roads where development would occur, and the state dropped the ball.”

However, in Deaver’s opinion, there is a disconnect between the county and DelDOT. Because of the projects and subdivisions the county approves in non-growth areas and other areas with existing traffic and road condition issues, it should share some of the responsibility. “We have to work with the state and we can’t continue to approve developments in Level 4 rural areas where no road work is planned or will ever be done. We can’t even get road work done in Levels 1 and 2.” Levels 1 and 2 are designations given to high growth areas where development is preferred in the state, whereas Level 4 areas are nongrowth farming areas. According to Deaver, “there needs to be intergovernmental cooperation.” Deaver has also said that developers of big projects need to contribute to road upgrades, which is a policy that DelDOT has adopted.

Christopher P. Soper, LEED AP, associate with Cohen Seglias, contributed to this post.

This summer, Delaware Governor Jack Markell signed into law four renewable energy bills designed to expand Delaware’s wind and solar power industries. The new legislation creates wind farm.jpgincentives aimed toward attracting companies in these industries to Delaware.

The bills also offer incentives that will benefit solar designers, manufacturers and installers. There can be little doubt that demand for solar electric systems will increase since both homes and businesses will be able to sell back 110% of their aggregate electrical consumption to the grid, and because of the newly created ability to place ground-mounted solar energy systems on property zoned for residential use.

In addition, the bills promote alternate sources of renewable energy, such as offshore wind infrastructure or a large wind park off the coast of Delaware. According to Collin O’Mara, who serves as both a member of Governor Markell’s Cabinet and as Secretary of the Delaware Department of Natural Resources and Environmental Control:

More than 95 percent of Delaware’s electricity comes from fossil fuels with 70 percent from coal-burning power plants. These green energy bills will help the state transition at a faster rate to renewable energy. We can dramatically reduce our reliance on fossil fuels in the next 15 years and move closer to the healthy environment and green economy we want in Delaware. The bills also provide an opportunity for all Delaware citizens to participate in buying clean power, using clean power and being a part of the clean technology transition.

Work opportunities for metal fabricating contractors, electrical contractors and marine trade contractors are anticipated. Job creation, less dependence on fossil fuels and rate stability are just some of the goals envisioned by the legislation which could serve as a template for clean energy bills for years to come.

The state has wasted no time in making good on its efforts to increase its reliance on renewable energy sources. On September 7, 2010, the Delaware Public Service Commission (PSC) approved 2 Delmarva Power contracts for renewable energy. The PSC approved the 20-year, $42.6 million purchase of power from a solar electricity farm planned in Dover, as well as moving back the dates for deliveries of electricity from the NRG Bluewater Wind offshore wind project to no later than the end of 2016, 2 years later than the original contract. Also in the works, the Dover SUN Park is expected to start operations next summer. The City of Dover will be buying all of the power from SUN Park, which is expected to generate enough electricity to serve 1,300 homes.

Initiatives similar to these bills recently passed in New Jersey and are currently before the Pennsylvania legislature.

For more information or to obtain a copy of the bills, please e-mail Christopher P. Soper, or call (215) 564-1700.