Jonathan Hausner | Construction Law Zone | August 4, 2016
A few weeks back my colleague, mentor and friend Greg Faulkner wrote a post here that looked back on his 25 years as a construction lawyer. It was a very thoughtful piece and frankly I think it was one of the best legal blog posts I have read. You an access it here.
As you might expect, more than a few things that Greg alluded to got me thinking about the construction business and how it’s intertwined with the practice of construction law. As a construction lawyer who sits “in the trenches”, and has for some time, I feel that I can also offer a valuable perspective.
One of the things that never ceases to amaze me is how often construction professionals and even other lawyers are unaware that “construction law” is a practice focus. Even though some feel that lawyers run the industry (http://www.enr.com/articles/8303-viewpoint-lawyer-as-constructor) (let me assure you we do not) you’d be surprised at how much of the industry misconstrues the nature of our practice and our role in delivering and helping to keep a project on the rails and out of the halls of justice.
Probably the biggest misconception I find is that a construction stakeholder needs to call their lawyer only when a project starts to move sideways (off the schedule or over the budget) or when an impasse is reached on a claim. In fact, I feel that the opposite is true. A construction lawyer wears two distinct but related hats. We are certainly dispute resolution lawyers – it is a large part of who we are and what we do. We help our clients identify and prosecute or defend claims. We mediate, we arbitrate and we try cases to a judge or jury. But, we are also very much transactional lawyers – we write, negotiate and facilitate the timely and appropriately timed execution of design professional, project/program manager and contractor/construction manager contracts. Our dual role as “litigators” and “transactional lawyers” allows us a somewhat unique perspective. Each of us has helped clients deal with a project that has gone all the way down the tubes and ended up in front of a judge or arbitrator. We have battled claims and, as Sonny Coreleone once said, we have “gone to the mattresses”. I feel that these experiences help us be more effective on the front end of a project. Meaning, because we have seen things go wrong, we can better identify project risks before they arise so that when things do go wrong our client is prepared. With that in mind, we can advise our clients, based on practical experience, how best to manage, allocate and mitigate risk.
In the ideal scenario we are one of the first stops on the project continuum. We hope that our clients, who include owners, developers, PMs, designers, construction managers, trade contractors or other construction professionals, come to us as soon as they become involved in a project. As any construction practitioner will tell you, a well written, clear, concise and fairly balanced contract is the first step in delivering a successful project.
Over the last few years I have witnessed a distinct shift in the industry where stakeholders have increased their focus on up-front risk identification and allocation. Greg alluded to this in a couple of sections in his piece (re: partnering and teaming and the industry’s evolving view of dispute resolution). That leads me to where I see things today and where I hope things go in the future . . .
I tend to work mostly with developers, owners and to a lesser, but still significant degree, with contractors/construction managers. Over the last five to eight years or so my experience has been that developers, owners and construction professionals have been increasingly and more sharply focused on teaming, collaboration, risk sharing and collective goal setting.
Today I often see our owner clients involving a construction professional before design commences in earnest to identify and discuss construction/project feasibility and budget with real-world reference points. Likewise, I see our construction professional asking for access to the design as soon as possible. I continually see owners discussing the process and facilitating the collaboration of their design and construction professionals so that they can eliminate confusion, lack of clarity or constructability issues arising from a design and turn “assumptions and qualifications” into tight drawings, specs and reliable budget line items. I also see a distinct focus on open lines of communication, asking for honest and dependable information and recognizing the collective goal that all parties are in the game to make a profit – hopefully something very close to the profit that they anticipate at the project’s outset. I also regularly see, while discussing contract terms in concept, our clients concerned with fair and balanced risk allocation in light of developing a continuing relationship with the party with whom they are negotiating. In short, it seems to me that more often than not stakeholders are looking to develop relationships of trust based on open and honest communications.
Now, with all of that said, I and the rest of our group spend a large part of our time helping our clients prosecute and defend claims, navigate disputes during the project and, as a last resort, resolving disputes before an arbitrator or judge. But, one of the things that has become quite apparent is that all stakeholders have recognized the very significant costs associated with engaging counsel for the long trip from assertion of a claim to judgment. Rightfully so, stakeholders tend to see every dollar they spend on dispute related legal fees as a diminution in the project profit they have worked so hard to protect. As such, and in keeping with the seemingly growing atmosphere of teaming, I have seen parties adapt their contract clauses to fit this philosophy. Specifically, contracts now often contain mandatory mediation, as a condition prior to arbitration or litigation. Stakeholders are also asking for a contractually mandated meeting between principals to attempt to reach a good faith resolution of a dispute even before moving to mediation. Of course, not all disputes result in settlement prior to litigation or arbitration, but taking into account the cost of legal fees and the potential for delays, many see the time and effort prior to counsel’s involvement as well spent.