As another year comes to a close, we should take this opportunity to reflect on lessons learned and apply them to build better projects in 2022. This was an interesting year for construction as bids and projects picked up in some market sectors and regions while bids and projects slowed or halted in others. Based on reports from various construction sectors, all of this activity resulted in a variety of claims and disputes in 2021. The top causes of claims and disputes on construction projects involved:

1. changes in scope;
2. owner/contractor/subcontractor failing to understand and/or comply with its contractual obligations;
3. incomplete design;
4. poor coordination and management of lower-level tiers, including subcontractors and suppliers; and
5. force majeure events.

In addition to those issues, the building industry continued to grapple with the pandemic and increasing market uncertainty, especially in terms of the supply chain. The pandemic has disrupted the industry by restricting access to sites and labor, constricting cash flow, and exposing the limitations of contract provisions on force majeure and changes in the law.

Now that we have a better idea of where the claims and disputes in 2021 originated, we must ask: How can the construction industry, and specifically contractors, avoid similar claims and disputes in the new year?

Given the increased pandemic-related uncertainty and that the claims and disputes mentioned above revolve around management and communication on a project, parties to a construction contract should invest more time in up-front planning, design and coordination. When reviewing the contract, special attention should be given to contract provisions most likely to generate a dispute, including the scope of the work, payment terms, changes, project schedules, completion milestones, delay damages and consequential damages. Doing so may help parties avoid conflict down the road by ensuring that parties are clear on their roles, responsibilities and risks at the outset. This forces the parties to come together to review the construction contract, drawings and schedule to address issues before the shovel hits the dirt.

This review is especially important for subcontractors that need to understand and agree with all of the timelines, scope of work, personnel involved, and processes for handling issues or claims as specified by the contract with the general contractor and any other contract that has flow-down provisions and requirements that might apply to the subcontractor’s work.

Additionally, to deal with potential supply chain problems, contractors should be more strategic about taking on new work. When applicable, contractors should factor in potential future cost increases, the rate of potential price acceleration, force majeure clauses, and supply chain delay clauses that allocate risk between the parties. Failure to structure a contract appropriately could lead to potential lawsuits, delays, budget busts and reputational damage.

Although 2021 has been a busy and challenging year for the construction industry, and 2022 looks to be on pace with it, contractors should take time to reflect and reassess how bids, contracts and projects are approached. Communication, better project management and better construction contracts are the key to making next year a success.

Antonija Krizanac is an associate and member of the construction and design group in the Portland office of Stoel Rives LLP. Contact her at 503-294-9459 or antonija.krizanac@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91ĘÓƵ guarantees the accuracy or completeness of any information published herein.

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About this time last year, I wrote about effective COVID-19 safety policies and how contractors can ensure job site safety to comply with the developing Occupational Safety and Health Administration (OSHA) and Centers for Disease Control and Prevention (CDC) COVID-19 safety standards and guidelines. Since that time, much has changed in OSHA and CDC guidance and how businesses operate during a pandemic. But some things remain the same, including the need for contractors to ensure job site safety and prevent their employees and clients from contracting COVID-19 on the job site or at the office. Because safety remains paramount during this ongoing pandemic, contractors should be thinking about what they are liable for at the job site or office, especially the potential exposure as they consider vaccine policies, on-site operations, and more end-of-pandemic logistics.

The question of liability will largely depend on the state where a contractor operates its business. For example, Kentucky is the most recent state that has enacted a law that shields certain businesses from COVID-19 injury and death lawsuits. This new Kentucky law states that certain businesses cannot be held liable for COVID-19-related injuries during the state health emergency sparked by the coronavirus pandemic so long as they adhere to public health and safety guidelines. West Virginia, Florida, Indiana and Alabama are other states that have passed similar coronavirus legislation in recent months.

With more states adopting liability laws to shield businesses from potential lawsuits related to COVID-19 injuries or death, contractors will need to make sure that they understand their potential liability under the law and how to avoid that liability. It is especially important to ensure that evolving safety and health standard guidelines, such as those issued by the CDC and OSHA, are well-considered and appropriately practiced at every job site and office.

With the recent change in leadership at OSHA, this is a crucial point for every contractor to consider. Many workplace safety experts have predicted that workplace safety enforcement will become more aggressive and robust under an OSHA governed by the Biden administration. In line with that prediction, OSHA recently stated that it plans to double the number of inspectors in the field. These changes at OSHA mean that every contractor needs to:

• track (and document) evolving OSHA/CDC safety guidelines,
• consistently enforce the OSHA/CDC safety guidelines,
• confirm that its own COVID-19 safety policies and rules comply with the recommended safety guidelines, and
• adjust (and document) business plans and safety policies when official guidelines or recommendations change.

Keeping track of health and safety guidelines and then complying is paramount to a contractor protecting itself and its workers, especially in light of the changes at OSHA and the development of new liability laws. Although such laws may vary by state and provide a certain level of protection for a business operating during the COVID-19 pandemic, none of the currently enacted laws shield businesses that are reckless, wanton, or in willful disregard of public safety guidelines and standards.

Antonija Krizanac is an associate and member of the construction and design group in the Portland office of Stoel Rives LLP. Contact her at 503-294-9459 or antonija.krizanac@stoel.com.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the author and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither the author nor the 91ĘÓƵ guarantees the accuracy or completeness of any information published herein.

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When was the last time you took pen to paper to sign a document such as a contract, invoice or change order? On the other hand, when was the last time you clicked on an “I agree” checkbox or inserted your digital signature, or e-signature, into a document? It’s likely that you no longer physically sign many documents. However, are you aware of the laws behind e-signatures and the common pitfalls that come along with using them?

An e-signature is just data in electronic format used by a person to indicate assent on an electronic document. E-signatures can be as simple as typing your name or as complex as involving sophisticated cryptographic security protocols. The federal Electronic Signatures in Global and National Commerce (ESIGN) Act establishes the validity of e-signatures on most types of documents. The law recognizes that your “electronic signature” might not actually be your “signature” but instead might be a “sound, symbol or process” that otherwise indicates your agreement or assent. Similarly, an “electronic record” is defined as “a record created, generated, sent, communicated, received or stored by electronic means.” So, just as with an e-signature, the federal law recognizes that an electronic or digital version of a document is the legal equivalent of a paper record.

Most states follow the ESIGN Act and recognize that a record or signature may not be denied legal effect or enforceability solely because it is in electronic form. For example, Oregon law states that (a) a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation; (b) if a law requires a record to be in writing, an electronic record satisfies the law; and (c) if a law requires a signature, an e-signature satisfies the law.

Today, many construction companies are regularly using e-signatures in their day-to-day business dealings, but others are hesitant to make the digital move. DocuSign reports that in a recent poll 42 percent of construction companies stated that they already use an e-signature, 38 percent stated that they are considering using e-signatures and 20 percent were not interested in using one. Although those numbers show that e-signatures have not taken the construction industry by storm, it is important for those who use them and those who are contemplating use to recognize certain pitfalls:

1. All parties to a transaction need to agree that they will use electronic means to conduct the transaction. This agreement can be done by including a specific provision in the agreement itself or by using a designated e-signature platform.
2. The parties to the transaction need to make sure they have the appropriate policies in place for data security and electronic records retention. These include, for example, systems to maintain security of employee passwords, to prevent other people from accessing employee accounts, or to determine whether the signature is genuine (the e-signature must be shown to be the “act of the person” who signed the document).
3. The electronic document with the e-signature must be in a format that can be retained and accurately reproduced for later reference by the parties to the agreement. The most common format used to exchange documents is PDF.
4. Although e-signatures are valid in most states and under federal law, it is important to note that not all construction documents can be signed with an e-signature alone. For example, in Texas, Wyoming and Mississippi, lien waivers must be notarized (either because it is a statutory requirement or because the required lien forms have a place for notarization). Lien waivers in these three states can still be signed electronically but that requires an additional step. This means that, in order to create a valid lien waiver in one of these states, the e-signature must also be notarized. This can be accomplished through electronic notarization or notarization through webcam (if allowed by state law).

Using e-signatures and digital documents is a great way to cut down on costs and improve efficiency with little risk if the correct processes and strategies are used to safeguard information. E-signatures and electronic documents are the future, and with the right help and the right systems, any company already using e-signatures or thinking about making the switch can be on track to meet that digital future successfully.

Antonija Krizanac is an attorney in the construction and design practice group of Stoel Rives LLP. Contact her at 503-294-9459 or antonija.krizanac@stoel.com.

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