Three basic best practices for construction companies

While you work on your personal New Year’s resolutions for 2019, or dust off your 2018 … 2017 … 2016 resolutions, this year resolve to start with a review and solid implementation of legal compliance and financial goals for construction projects.

Verify compliance with new laws

Each year, laws or regulations or ordinances related to construction projects seem to commence on Jan. 1. Verify that you’re aware of anything new, and that your practices and contracts are in compliance. One place to look is at state license board websites, which often provide a brief summary of the key laws generally related to construction. Did an aspect of the mechanics’ lien laws change? Were any contractor licensing notification requirements modified? Were any mandatory notifications implemented? For example, take a look at Oregon’s Equal Pay Act, California’s notice requirements for residential solar contractors, and Washington’s Paid Family Leave Act. Speak with experienced counsel regarding the changes in the law due to court or administrative decisions during the prior year that may impact your obligations. For example, the Washington Supreme Court expanded contractor notice requirements, the California Labor Commission changed the enforcement of wage and hour laws, and the Oregon Court of Appeals modified the rules in construction defect insurance cases. Of course, any changes in law in any form should be promptly addressed. Contractors and design professionals, be aware that regulatory agencies may also impose administrative fines against you if illegal or improper clauses are discovered in your contracts.

Verify insurance coverage is sufficient and up-to-date

After you’ve reviewed the applicable new laws, regulations or ordinances that may apply to your business or profession, speak with an experienced insurance coverage lawyer and knowledgeable insurance broker to verify that you have the protection to cover your business, and that existing coverage has not changed, been reduced, or been limited by the policy or by how you are doing business. These counselors familiar with construction projects will assist you in navigating any changes in the nature of the work you are performing, or the scope of work changes for the types of projects you plan or work on, and can highlight actual or potential coverage gaps or limitations in your insurance coverage to avoid the “Murphy’s Law” situation of finding out after the fact that you have insufficient protection for your company and assets from future claims and litigation. And be sure to evaluate any primary or secondary implications related to the contract and insurance changes in your flow-down clauses to contractors, subcontractors and other vendors or providers that are retained. Among the key issues to review are indemnification obligations, insurance provisions and alternative dispute clauses.

Analyze activities in 2018 to address issues in 2019

Performance can always be improved. While we cannot achieve “perfection” on an entire project, we should learn from our past gaps, gaffes and errors so that we do not repeat them by default, or worse, intentionally not change past problems. Virtually every owner, design professional, contractor and subcontractor can easily name their top 10 repeat problems and expenses. Knowing this, take the next step and select the top three problems: claims, warranty callbacks and expenses, and consider modification of your contracts, work, practices or methods that could reduce or eliminate these issues. For instance, could there be payment disputes? Verify that contract terms are aligned with expectations, document and use processes that result in prompt payment or prompt rejection of payments in a timely fashion, and utilize contract terms that require prompt resolution of disputes. Will there be repeat warranty claims? Isolate the cause and mitigate or eliminate the factors that led to the claim.

Ultimately, improving our companies, like improving ourselves, is up to us and our own diligence and persistence in identifying and implementing improvements on an ongoing basis. Use this opportunity while the market remains strong to position your company to gain the benefits of such diligence and persistence before the next down cycle arrives.

Tamara Boeck is an attorney in the construction and design practice group of Stoel Rives LLP. Contact her at 916-319-4678 or 208-387-4256, or [email protected].