Math 202 Attorney/client Privileged Communication

Addressing the Principal Risks:

Risk Changed

to Agree with P&A Advice

Risk

Remains

• There is pay when paid language throughout the Agreement.  See, for example, Agreement paragraphs 4.B and 9.C.

Mid-American Elevator (“MAE”) is used to working under these conditions. On current job where TCCo is operating as a subcontractor to Bechtel, we never experienced break in payments.

• The risk of existing conditions is shifted to the Subcontractor by a broad representation.  See, for example, Agreement paragraph 5.

All work adjacent to elevator work is new (no existing conditions). We do, however drill 27 jack-holes but there is nothing that prevents us from filing an unforeseen conditions claim where we to encounter an underground obstruction that we couldn’t drill through.

• There is exposure to liability for consequential damages and no mutual wavier of consequential damages.  See, for example, Agreement paragraphs 6.B, 6.C, 22.C and 23.C, and Exhibit C.  Paragraph 6.C and Exhibit C also contain overbroad indemnifications, which are broad enough to include the work itself and which are not limited to negligence.

The largest consequential damage exposure is for delay.  Observing the elevator work on the current Silver Line project shows that the elevator work is significantly off the critical path (the requirement for transporting passengers comes more than 9-months after the elevators are scheduled to be completed).

• Time is of the essence (see Agreement paragraph 8, and Exhibit B, paragraph 37), and there is no excusable delay clause.

Our elevator work is considerably off the critical path.  The critical path runs through the track, ATC, testing and start up.

• Entitlement to additional compensation or damages for delay is only to the extent the Contract Document entitles the Prime Contractor to damages or to a contract adjustment increasing its price.  See Agreement paragraph 8.

Risk remains.

• There are broad lien obligations, which are not limited to the extent of payment and which require discharging or posting a bond within 3 days of notice.  This is very tight.  See, for example, Agreement paragraph 13, and Exhibit J, paragraph 2.3.8.

Risk limited to claims from one of our suppliers not being paid and posting lien all of which is under our control. Owner will not allow us to change as this flows down from prime contract.

• The risk of labor disputes or disharmony is shifted to the Subcontractor and there is a broad indemnification in favor of the prime contractor it incurs, which could include consequential damages.  See Agreement paragraph 24.

MAE uses union labor with which we have a long harmonious history. If a strike were to occur, MAE is able to sign an interim agreement and continue operations.

• There are design-assist responsibilities, including standard of care and waiver of claims based on design development.  See Exhibit B, paragraph 3.

Yes, we are an active participant in the design process. Engineer of Record’s PLI will be sent to Risk Management for review.

• The Subcontract Price will not be adjusted except for narrowly defined “Scope Changes.” This means, among other things, no adjustment due to delays.  See Exhibit B, paragraph 3.G.

No adjustments due to delays UNLESS the GC receives an adjustment. Otherwise, risk remains.

• There is a mandatory 10% DBE participation requirement.  See Exhibit B, paragraph 4.

We are prepared to fulfill this obligation.

• There are broad audit provisions which are out of place on a lump sum subcontract.  We recommend limiting the scope of the audit rights.  See, for example, Exhibit J, Article 12.5.  As a minimum, we recommend that any agreed fixed rates (e.g. insurance or burden rates) be non-auditable.

We will attempt to gain advanced agreement with CRC on certain rates.

• There is no mention of builder’s risk insurance.  Turner and its subs should be additional insureds and subrogation waived by the Owner and CRC.

The GC has BR – we will verify access to coverage and that coverage is adequate (will request declaration page)

Addressing the Balance of the Contract Documents reviewed:

AGREEMENT (MA SC Rev/2009)

Paragraphs 1 and 30

We recommend inserting Turner’s qualifications and assumptions as a Contract Document which will limit the Work and have priority over all other contract documents.

Paragraph 3

Please note that performance and payment bonds are required.

Paragraph 4.F

We recommend clarifying that final acceptance is a final acceptance of the Contractor’s work, not of the entire project.

Paragraph 4.G

We recommend that the right of offset be limited to this Agreement only, not other agreements between Turner and CRC.

Paragraph 4.H

We recommend rejecting the right to withhold final payment until the entire Project is complete.

Paragraph 6.A

The language “from any cause” in the third line is very broad.  We recommend limiting the causes to those caused by the Subcontractor.

Paragraph 7.A

We recommend limiting the additional insureds to be named on Turner’s policy.  Also, note at subparagraph c the requirement to submit certified copies of insurances policies.  Turner prefers not to submit copies of its corporate level policies, certified or otherwise and project specific policies may be required.

Paragraph 8

This deals with time.  It permits the Prime Contractor to amend schedules without clear entitlement to Turner for adjustments.  Entitlement is limited to the extent the Prime Contractor is entitled to adjustments.

Paragraph 9.D

We recommend adding entitlement to adjustment of time in addition to price.  Further, note the very tight 3 day notice requirement.

Paragraph 9.E

Seven (7) days may be too tight to submit a price quote for proposed changes.  Further, the Prime Contractor has the unfair right to use its best estimate which will be the maximum adjustment due to Turner.  

Paragraph 10.A

Note the short 3 day cure period and exposure to liability for consequential damages.

Paragraph 11

This paragraph deals with disputes and restricts the Subcontractor’s adjustment to whatever the Prime Contractor is entitled to under its agreement with the Owner.  Further, if the Prime Contractor prosecutes a dispute on behalf of the subcontractor, the subcontractor will be liable for the Prime Contractor’s attorney’s fees which could be substantial.

Paragraph 12

The warranty provides that the subcontractor assumes the warranty obligations and responsibilities of the Prime Contractor with respect to the subcontractor’s work.  These warranty obligations are unknown.  We note that there are separate warranty obligations elsewhere in the exhibits to this Agreement.  For example, a 2 year warranty at Exhibit B, paragraph 21.

Paragraph 17.A

This is a very broad warranty by the subcontractor that all requisite approvals from the Owner as to eligibility to serve as a subcontractor are obtainable.  We recommend rejecting.  Turner does not know whether the Owner will grant all approvals.

Paragraph 20

We recommend limiting Turner’s responsibility to license fees and royalties specifically identified in the Contract Documents as required for the subcontractor’s work.

Paragraph 21

We recommend rejecting the hold harmless language.  Limit Turner’s liability to payment of civil fines and penalties.

Paragraph 22 and Exhibit J, paragraph 10.1.3

We recommend that laws, regulations and ordinances be limited to those pertaining to construction means and methods, and employment and socio-economic requirements, as opposed to design.

Paragraph 26

In the third line, we recommend inserting “reasonable” before “information.”

Paragraph 27

Please note this restriction on performing any other work directly with the Owner or any of its tenants, or dealing directly with the Owner’s Representatives in connection with the Project.

Paragraph 32

Please note CRC’s fitness for duty policy with which Turner must comply.  Further, note the affirmative certification that all employees who work on the project passed a pre-hire drug test.

EXHIBIT D (CONTRAX/113263)

GENERAL REQUIREMENTS

Paragraph 72

Providing “complete operational systems whether or not all items are explicitly shown or included in the Contract Documents” is very broad.  We recommend excluding any design responsibility and qualifying your scope of work to avoid the “fill in the gaps” responsibility.

Paragraph 73

This paragraph gives the Architect carte blanch to force Turner to execute an onerous agreement favorable to the Architect, which can include an overreaching indemnification as a condition to receiving CAD information.

Paragraph 76

Note the 14% DBE goal as compared to the mandatory 10% elsewhere.

Paragraph 80

This paragraph requires punch list work to be completed in a very tight 10 days.

EXHIBIT R (09/01/2009)

We recommend removing any indemnification language in the various forms of releases.

DULLES CORRIDOR METRORAIL PROJECT – FEDERAL REVIEW

Davis-Bacon Act, Contract Work Hours and Safety Standards Act, and Copeland Anti-Kickback Act

• The Davis Bacon Act, the Contract Work Hours and Safety Standards Act, and the Copeland Anti-Kickback Act are applicable.
• Since the project spans both Fairfax and Loudoun counties and is subject to both Heavy and Building wage decisions, there are four applicable wage determinations.  The subcontractor has to submit separate certified payroll reports for each county and each wage determination.  (Exhibit D, Article 7)  
• The subcontract incorporates both the standard FAR clauses (FAR 52.222-4, FAR 52.222-6, FAR 52.222-7, FAR 52.222-8, FAR 52.222-9, FAR 52.222-10, FAR 52.222-11, FAR 52.222-12, FAR 52.222-13, FAR 52.222-14, and FAR 52.222-15) and the federally funded clauses (29 CFR § 5.5).  (Exhibit G-4; Exhibit G-8; Exhibit 2.3.14, Section 12-14)
• The subcontractor agrees to comply with the contractor’s Subcontractor Code of Conduct for Davis-Bacon Compliance.  This Code generally sets forth the standard Davis-Bacon Act obligations.  It also requires the subcontractor to provide Clark with the hourly rates and fringe benefits and corresponding classifications used by the subcontractor to bid the project within 30 days of signing the subcontract or 60 days prior to starting work.  (Exhibit G-8)  

Labor and Right to Work

• The subcontractor cannot require any individual, as a condition of becoming an employee of the subcontractor, to: (1) be or become a member of a labor union or labor organization; or (2) not to become a member of a labor union or labor organization.  The subcontractor cannot discrimination against any person or entity that is seeking to work under a subcontract based upon the affiliation of the person or entity with one or more labor unions or labor organizations or its lack thereof.  The subcontractor cannot require a person or entity to become a party to, or otherwise adhere to, any agreement with one or more labor unions or labor organizations in order to secure or maintain a subcontract.  (Exhibit J, Section 29.20)
• The subcontract is subject to Virginia’s Right to Work Law.  (Exhibit J, Section 29.20)
• The subcontractor has to establish and implement a drug and alcohol testing program that complies with 49 CFR Parts 32 and 655.  DOT, Virginia, and the owner have the right to inspect the subcontractor’s facilities and records relating to the program.  (Exhibit 2.3.14, Section 25)

Nondiscrimination

• The subcontractor cannot discriminate against any person or persons on account of age, sex, race, creed, color, national origin, religion, or presence of any disability in connection with the project.  This section applies to the selection, use, hiring, firing, promotion, or termination of employees and subcontractors.  The subcontractor must comply with FTA’s regulations on Equal Employment, including the regulations implementing Executive Order 11246.  (Exhibit J, Section 23.1.1; Exhibit 2.3.14, Section 19)

DBE Participation

• The DOT DBE program is applicable.  (Exhibit J, Section 23.2; Exhibit 2.3.14, Section 23)
• The subcontractor warrants that the subcontract includes a minimum of 10% participation (calculated on the total sum payable to the subcontractor) by DBEs certified by MWAA or the Virginia Department of Minority Business Enterprise.  The DBE obligation is not reduced in the event that lower-tier subcontractors are unable to perform, the total sum payable to the subcontractor is revised by change orders, and/or a DBE’s certification is terminated.  Along with the monthly payment request, the subcontractor has to provide CRC with written notice of the amounts of agreements with any lower-tier subcontractors, copies of DBE certifications from lower-tier subcontractors, and reports of payments to any lower-tier subcontractors.  (Exhibit B, Article 4)
• The owner’s prior written approval is needed for substitution of DBEs.  The owner will approve the substitution if the owner determines that the subcontractor has acted in good faith in attempting to meet the DBE participation achievement and substitution is necessary based on good cause.  (Exhibit 23.2, Section 04)
• The owner will conduct DBE compliance reviews to determine whether: (1) the named DBE subcontractors are performing the work as assigned; (2) the named DBE subcontractors are performing a commercially useful function; and (3) the DBE subcontractors are being paid at least at the agreed price on the most recent Contract Participation Form.  The subcontractor has to submit a completed Invoice Attachment Form (MWA DBE Exhibit J) with each monthly invoice.  The subcontractor has to maintain a detailed record of every non-compliance issue and corrective action taken.  (Exhibit 23.2, Section 06)

Buy America

• The subcontractor has to comply with FTA’s Buy America requirements.  All steel, iron, and manufactured products must be produced in the United States unless a waiver has been granted by the FTA or the product is subject to a general waiver.  For iron and steel, all manufacturing processes must take place in the United States except metallurgical processes involving refinement of steel additives.  For manufactured products, all manufacturing processes must take place in the United States and all components must be manufactured in the United States.  The subcontractor has to complete the appropriate Buy America certification.  (Exhibit 2.3.14, Section 3)

Fly America/Cargo Preference

• The subcontractor must comply with the Fly America Act.  The Act requires the use of U.S. flag air carriers for government financed international air travel and transportation of personal effects unless travel by a foreign air carrier is a matter of necessity.  (Exhibit 2.3.14, Section 1)
• The subcontractor has to use privately owned U.S.-flag vessels to ship at least 50% of the gross tonnage to the extent such vessels are available at fair and reasonable rates.  The subcontractor has to furnish a copy of the bill of lading to the contractor and the Maritime Administration.  (Exhibit 2.3.14, Section 2)

Program Fraud Civil Remedies Act

• The Program Fraud Civil Remedies Act and DOT’s implementing regulations apply.  By executing the subcontract, the subcontractor certifies the truthfulness and accuracy of any statement it has made, makes, may make, or causes to be made that pertains to the subcontract and the project.  The subcontractor also acknowledges that, if it makes or causes to be made, a false, fictitious, or fraudulent claim, statement, submission, or certification to the Federal Government, the Government has the right to impose the False Statements Act criminal penalties against the subcontractor.  The subcontractor certifies that it is not debarred or suspended and it must verify that any lower-tier subcontractors are not debarred or suspended.  (Exhibit 2.3.14, Sections 16-17)

Audit of Books and Records

• The owner, DOT, FTA, and the Comptroller General of the United States have rights to audit the subcontractor’s books and records that are directly pertinent to the subcontract.   The subcontractor has to maintain records for a period of at least three years after the date of final payment or termination or expiration of the subcontract or until conclusion of any litigation, appeals, or claims.  (Exhibit J, Section 12.5; Exhibit 2.3.14, Section 8)  

Lobbying

• The subcontractor has to complete the Certification Regarding Influencing or Attempting to Influence (Lobbying) Federal Contracting and Financial Transactions.  The subcontractor certifies that no federal appropriated funds have or will be used to lobby an officer or employee of an agency, a Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress in connection with the award of any federal contract, the making of any federal grant, the making of any federal loan, the entering into of any cooperative agreement, or the extension, continuation, renewal, amendment, or modification of any federal contract, grant, loan, or cooperative agreement.  If the subcontractor has lobbied using non-appropriated funds, the subcontractor has to complete Standard Form LLL, Disclosure Form to Report Lobbying.  Exhibit G-3; Exhibit 2.3.14, Section 7)

Environmental Statutes and Regulations

• The subcontractor has to comply with Clean Water Act.  It must report any violations to the owner who will report the violation to FTA and EPA.  (Exhibit 2.3.14, Section 6)
• The subcontractor has to comply with the Clean Air Act.  It must report any violations to the owner who will report the violation to FTA and EPA.  (Exhibit 2.3.14, Section 10)
• The subcontractor has to comply with § 6002 of the Resource Conservation and Recovery Act.  Generally speaking, § 6002 creates an affirmative procurement program for the procurement of products made with recycled materials as identified by EPA.  (Exhibit 2.3.14, Section 11)

Data and Patent Rights

• The subcontract provides for ownership and rights in data first produced in the performance of the subcontract.  It restricts the subcontractor’s right to publish or reproduce the data without the Government’s written consent and gives the Government a royalty-free, non-exclusive, and irrevocable license to reproduce, publish or use the data.  It also provides for government rights in an invention, improvement, or discovery that is conceived or first actually reduced to practice under the subcontract.  There also are provisions on indemnifying the Government for violations of proprietary rights, copyrights, or privacy rights arising out of the publication or use of data furnished under the subcontract.  (Exhibit 2.3.14, Section 20)

FTA Master Agreement and Circular 4220.1F

• The subcontractor has to comply with the FTA Master Agreement and FTA Circular 4220.1F.  (Exhibit 2.3.14, Section 9)
• The FTA Master Agreement contains the standard terms and conditions governing the administration of an FTA funded project.  The Master Agreement is available at http://www.fta.dot.gov/documents/19-Master.pdf.
• FTA Circular 4220.1F provides contracting guidance for recipients of FTA assistance when using that federal assistance to finance its procurements (third party contracts).  The Circular is available at http://www.fta.dot.gov/documents/FTA_Circular_4220.1F.pdf.