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The Construction Advantage

Emily L. Kahn

This month marks the 20th edition of The Construction Advantage! In our August issue, Emily Kahn provides a pro and con summary of alternatives to the design bid build project delivery model, Mike Bosse discusses the Rhode Island Supreme Court’s upholding of an arbitration award even in the face of an erroneous legal ruling, and we have provided links to OSHA highlights from the last month, including some cases and events relevant to us in Region One. We hope that everyone enjoys the waning days of summer, and Happy Labor Day!

Beyond Design-Bid-Build: Issues to Consider in Alternative Project Delivery Systems

In this article, Emily Kahn explains alternative delivery methods to the design-bid-build model for construction projects. Emily discusses the positives and negatives, and risk that exist with some alternative methods, including design-build, construction manager at risk, and integrated project delivery (IPD). Click here to the link to Emily’s article, just published in the last issue of Construction Executive: Risk Management.

Arbitration Award Upheld Despite Legal Error

In a ruling from the Rhode Island Supreme Court in mid-March of 2015, the Court affirmed the proposition that an appellate court is quite limited in its ability to review and overturn a private arbitration award. In Atwood Health Properties v. Calson Construction Company, Calson constructed a three-story medical office in Johnson, Rhode Island for the hospital. The compressors in the HVAC system constructed by one of Calson’s subcontractors, GEM, repeatedly failed, and all three eventually found themselves in a private arbitration hearing. After the hearing with the arbitrator, the arbitrator concluded that the subcontractor had breached its contract with Calson by designing and building an HVAC system with experienced and repeated compressor failures, although the arbitrator did not conclude the subcontractor was “negligent.” The arbitrator decided that the general contractor was required to pay the hospital $358,223.42 for the HVAC replacement, and that the subcontractor was responsible for paying that same amount to Calson. The Rhode Island Supreme Court noted that the grounds for vacating or modifying an arbitration award are very narrow, and include issues of fraud, partiality, or an arbitrator exceeding his or her authority to arbitrate a matter. The subcontractor here asserted that the arbitrator had wrongfully decided the case by irrationally invoking the indemnification obligations that it owed to the general contractor that were based upon the subcontractor acting in a negligent fashion. The Rhode Island Supreme Court concluded that an arbitrator’s award will not be overturned  for “mere errors of law.” Instead, awards premised on clearly erroneous interpretations of a contract can be affirmed where the result is “rationally based” on the contract. The Court concluded that the arbitrator had determined that the subcontractor was obligated to indemnify the general contractor for the faulty HVAC system pursuant to the indemnity clause and even though the Court agreed that the arbitrator’s reliance on the provision was legally erroneous due to the lack of a finding of negligence by the subcontractor, the error was not enough to overturn the award. This case is an important reminder that, although arbitration can be a suitable alternative to litigation, part of what parties get in an arbitration is a very limited window of appeal, even if the arbitrator’s ruling on the law was flat wrong.

OSHA Update

In this issue, we link to four major legal happenings from OSHA in the last 30 days, including three coming from Region One, which includes New England. A good reminder that worker safety has to be front and center every day on construction projects.

August 27: First Circuit Court of Appeals holds Maine contractor in contempt for failure to correct hazards.

August 24: Alabama steel and roofing contractor sentenced to supervised probation for 3 years for lying during OSHA investigation.

August 19: Hannaford Supermarkets entered into a settlement with OSHA to protect warehouse employees from muscular skeletal injuries. Read about the settlement here.

August 4: Maine has recently been approved by the Occupational Safety and Health Administration as the newest State Plan responsible for protecting the safety and health of state and local government employees. The Maine State and Local Government Only State Plan will cover more than 81,000 employees of the state and its political subdivisions under an OSHA-approved plan. The plan became effective August 5, 2015.

We hope that you have found this article in the twentieth issue of The Construction Advantage helpful to you in your daily business. Each of the attorneys in our Construction Law Practice Group is available to answer the day to day questions of your business as you work on projects. As always, we would like to hear from you on the topics in this issue, or any of our other issues, and what you would like us to write about in the future.