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Specifying Practices--Laws and Regulations in Construction Documents

By Kevin O'Beirne, PE, FCSI, CCS, CCCA, CDT posted 05-26-2022 03:39 PM

  

A project owner’s attorney once said to me, with some bemusement, “The law applies to everyone.”. While he was referring to our mutual client for a capital project, the same, exceedingly basic precept engenders the question for architects, engineers, and specifiers, “Is it necessary to expressly cite specific laws or regulations in construction documents?”

For decades, this writer has encountered a strong belief among many design professionals and project owners that applicable laws, statutes, ordinances, codes, rules, regulations, and lawful orders, decrees, and resolutions of governmental authorities having jurisdiction (collectively referred to in this article as, “laws and regulations”) should be expressly cited in construction specifications,, perhaps under the assumption that contractors, subcontractors, and suppliers may be unaware of the laws and regulations that pertain to their business. However, appropriate procedure on this matter is more complex and, often, less well understood by practitioners.

The Overarching Obligation to Comply

Because laws and regulations apply to everyone, is it necessary to address them at all in construction documents?

The answer is yes, because it is in the owner’s interest, and is an appropriate risk management provision, to place on the contractor the contractual responsibility to comply with laws and regulations. Such provisions clarify that the owner, design professional, and others retained by the owner, such as a construction manager as advisor (CMa) or program manager, are not responsible for the contractor’s compliance with laws and regulations. Without such a provision, it is possible a contractor might adopt a position that the owner, design professional, or others were co-responsible for, or should have advised the contractor of, the contractor’s non-compliance with laws and regulations.


Furthermore, while it is obviously in the owner’s and design professional’s interest to have the work performed in accordance with laws and regulations, making such compliance a contractual obligation allows the owner, design professional, or CMa to enforce such compliance. When not a contractual requirement, only authorities having jurisdiction, such as a local building code official, municipal zoning code enforcement official, state or local health department, state environmental regulatory agency, or other such entity, can enforce compliance with laws and regulations.

The American Institute of Architects’ document AIA A201—2017, Standard General conditions of the Contract for Construction, requires:

“§ 3.7.2 The Contractor shall comply with and give notices required by applicable laws, statutes, ordinances, codes, rules and regulations, and lawful orders of public authorities applicable to performance of the Work.

“§ 3.7.3 If the Contractor performs Work knowing it to be contrary to applicable laws, statutes, ordinances, codes, rules and regulations, or lawful orders of public authorities, the Contractor shall assume appropriate responsibility for such Work and shall bear the costs attributable to correction.

AIA A201—2017 Section 3.7.1 addresses the contractor’s responsibility to obtain and comply with permits.

AIA A201—2017 and AIA A503—2017/2019, Guide to Supplementary Conditions, do not expressly address contractual obligations or entitlement in the event laws or regulations change after the parties have signed the construction contract. This appears to be a significant omission, because laws and regulations do change over time, regardless of when the contract was signed, compliance with laws and regulations is obligatory as soon as the law or regulation goes into effect. Such changes may have a substantial effect on the contractor’s cost and ability to comply with the contract times. Obviously, changes to laws or regulations is a risk over which the contractor has no control. An example is the wave of executive orders issued at the state and federal level to combat the COVID-19 pandemic of 2020-2022. Without a provision addressing responsibility and entitlement for changes in laws and regulations, it is possible owners and contractors may have disagreements when such changes add to the contractor’s cost or ability to comply with the contract times. 

The Engineers Joint Contract Documents Committee’s document C-700—2018, Standard General Conditions of the Construction Contract, includes the following defined term:

“{1.01.A.]25. Laws and Regulations; Laws or Regulations—Any and all applicable laws, statutes, rules, regulations, ordinances, codes, and binding decrees, resolutions, and orders of any and all governmental bodies, agencies, authorities, and courts having jurisdiction.”

EJCDC C-700—2018 also includes (bracketed text, below is not in the original and is added here for clarity. Also, “…”, below, represents where selected text, present in the original, was omitted from this blog post for brevity):

“7.11     Laws and Regulations

“A.  Contractor shall give all notices required by and shall comply with all Laws and Regulations applicable to the performance of the Work. Neither Owner nor Engineer shall be responsible for monitoring Contractor’s compliance with any Laws or Regulations.

“B.  If Contractor performs any Work or takes any other action knowing or having reason to know that it is contrary to Laws or Regulations, Contractor shall bear all resulting costs and losses, and shall indemnify and hold harmless Owner and Engineer… It is not Contractor’s responsibility to make certain that the Work described in the Contract Documents is in accordance with Laws and Regulations, but this does not relieve Contractor of its obligations under Paragraph 3.03 [regarding obtaining Engineer’s interpretations and clarifications].

“C.  Owner or Contractor may give written notice to the other party of any changes after the submission of Contractor’s Bid (or after the date when Contractor became bound under a negotiated contract) in Laws or Regulations having an effect on the cost or time of performance of the Work, including but not limited to changes in Laws or Regulations having an effect on procuring permits and on sales, use, value-added, consumption, and other similar taxes. If Owner and Contractor are unable to agree on entitlement to or on the amount or extent, if any, of any adjustment in Contract Price or Contract Times resulting from such changes, then within 30 days of such written notice Contractor may submit a Change Proposal, or Owner may initiate a Claim.”

Notable in comparison with AIA A201—2017 is EJCDC C-700’s Paragraph 7.11.C, copied above, which implies a potential change in the contract price, contract times, or both, as a result of changes in “Laws or Regulations”.

EJCDC C-700—2018 addresses, at Paragraph 7.09, the parties’ obligations regarding required permits.

Both AIA A201—2017 Sections 3.7.2 and 3.7.3, and EJCDC C-700—2018 Paragraph 7.11 require compliance with all applicable laws and regulations. Because literally thousands of laws and regulations apply to virtually any construction project, these are very powerful, important clauses. As further discussed below, they generally render it unnecessary to expressly cite specific laws and regulations in the contract documents, except under certain circumstances.  

Laws and Regulations that Must be Included in Construction Contracts

In certain situations, especially in contracts for public work, it may be a requirement of selected laws or regulations to either expressly cite the law or regulation or include all or part of the law or regulation’s language, in construction contracts. Common examples include local laws or executive orders regarding diversity business enterprise utilization, equal employment opportunity, “right-to-work” statutes (such as those prohibiting employment of undocumented workers), minimum prevailing wage rates (where applicable), and others.

Such requirements can be incorporated into the project’s supplementary conditions, but such clauses may be lengthy. In such cases, it may be appropriate to bind the requirements into the construction documents following the supplementary conditions. CSI MasterFormat—2020 includes, among other assigned numbers and titles, the following:

  • 00 73 19 - Health and Safety Requirements
  • 00 73 33 - Non-Segregated Facilities Requirements
  • 00 73 36 - Equal Employment Opportunity Requirements
  • 00 73 39 - Minority Business Enterprise Requirements
  • 00 73 43 - Wage Rate Requirements
  • 00 73 46 - Wage Determination Schedule
  • 00 73 73 - Statutory Requirements

When any of the foregoing are included in the construction contract documents, for enhanced potential to be enforceable, as contractual requirements, in the event of a claim or dispute. they should be expressly indicated in the list of what comprises the “contract documents” in the owner-contractor agreement.

Many public owners’ construction contracts include language similar to the following:.

ALL LEGAL PROVISIONS DEEMED INCLUDED: Where a Law or Regulation requires all or part of such Law or Regulation be included or indicated in the Contract, this Contract is deemed to include each and every such Law and Regulation. Every such provision is deemed to be so inserted herein. If, through mistake or otherwise, any such provision is not included or indicated in the Contract, or is not indicated or included in correct form, then this Contract shall forthwith, upon the application of either party, be amended by such inclusion or indication, to comply with the subject Law or Regulation without prejudice to the rights of each party to this Contract.”

Short of a determination by a court or arbitrator, the extent to which the above provision is enforceable is unclear. This writer advises against relying on such a clause. However, such provisions are nonetheless reasonably common.  

Citing Laws and Regulations in Specifications

Except for the circumstances discussed above and other, rare, instances discussed below, it is unnecessary and, perhaps, unwise to expressly cite selected laws and regulations in construction documents. The broad language of the general conditions, such as AIA A201—2017 Section 3.7.2 and EJCDC C-700—2018 Paragraph 7.11, already require compliance with all applicable laws and regulations.

There is a compelling reason to not cherry-pick a few of the thousands of laws and regulations applicable to the work: It is desirable to not emphasize certain laws and regulations, which has potential to imply they are somehow more important or more relevant than others.

Worse still, by expressly citing only a limited number of applicable laws and regulations, a contractor may potentially argue that compliance with the cited statutes was intended, but compliance with others, not cited, was not contractually required. In other words, the contractor may argue that omissions were intentional.  Based on numerous published decisions, courts and arbitrators have often found such arguments to be compelling. Thus, expressly citing in the specifications selected laws and regulations has some potential to weaken the broad applicability and strength of clauses such as EJCDC C-700 Paragraph 7.11 and AIA A201 Sections 3.7.2 and 3.7.3.

However, in limited situations, it may be appropriate to expressly cite certain laws or regulations in the construction documents. The most obvious example is indicating in the Division 01 specifications the applicable building code and related codes. The proper, local titles of the applicable codes should be indicated. While many construction specifications in the United States refer to model codes, such as, “International Building Code” and NFPA 70, National Electrical Code, no state or municipality has codes with such titles. Rather, every state and territory, and many municipalities, have their own amendments to the model codes. Thus, the applicable code indicated should be the proper, local title, such as “Uniform Fire Prevention and Building Code of New York State” or, “City of Erie, Pennsylvania, Construction Codes”. Most states and many municipalities have separate codes for new buildings, renovation or modification of existing buildings, electrical, plumbing, mechanical, energy, and other topics. When applicable to the contractor’s work, each construction code should be expressly indicated once in the construction contract documents. Appropriate section numbers and titles are assigned in MasterFormat under “01 41 00 – Regulatory Requirements”

In selected circumstances, a law or regulation applicable to the work of a certain specifications section may be unique to the jurisdiction where the project site is located and, therefore, some bidders or contractors may reasonably be expected to be unfamiliar with it. In such cases, which are likely rare, it may be appropriate to expressly cite the law or regulation in the specifications section.

CSI SectionFormat—2007 allocates provisions for regulatory requirements as follows;

  • In “Part 1 – General”, as the first subdivision in the “Quality Assurance” article; however, this pertains only to sustainability requirements.
  • In “Part 2 – Products”, in the “Systems”/”Assemblies”/”Equipment”/”Materials” article, under the “Description” provision, in the suggested, “Regulatory Requirements” subparagraph, for regulatory requirements applicable to manufactured or fabricated items.
  • SectionFormat does not allocate a location for laws or regulatory requirements in “Part 3 – Execution”.

Thus, when it is necessary to cite a law or regulation that applies to all the work of a given section, including both products and execution, it would appear the “Quality Assurance” article in “Part 1 – General” may be the most appropriate location, likely in a provision titled, “Regulatory Requirements”.

When including such a provision, care should be taken to avoid intermixing requirements for compliance with specific laws and regulations with third-party reference standards, such as those published by ASTM, ANSI, ASME, UL, and many others. Laws and regulations are enacted by governmental authorities having jurisdiction and are compulsory. In contrast, reference standards, no matter how common or advisable, are not laws, statutes, ordinances, codes, rules, or regulations. Thus, reference standards and laws and regulations when included, should not be intermixed.

It is typically unnecessary and inadvisable to indicate a specific year or edition of applicable laws or regulations. By omitting indication of the year or edition, the contractor will be contractually obligated to comply with the current edition of the subject law or regulation. When the specifications indicate a specific year-of-issue or edition of a law or regulation, if the law or regulation is subsequently superseded before the associated work is performed, the owner would be entitled only to compliance with the year or edition expressly indicated. EJCDC C-700—2018 Paragraph 3.02 (“Reference Standards”) directly addresses, among other things, the edition of laws and regulations, as well as reference standards, applicable to the work.

Conclusions

It is appropriate to include in construction contracts a clear obligation for the contractor’s work to comply with all applicable laws and regulations, via language similar to that drafted by EJCDC or AIA. Such provisions are extremely important and powerful, and should generally not be weakened by expressly citing in the specifications selected laws or regulations. Before including such citations in the specifications, design professionals should exercise careful judgement, recognizing that such provisions may have unintended, adverse consequences.

Acknowledgements: The author gratefully acknowledges the assistance of Jerry Cavaluzzi, Esq, vice president and general counsel of Kennedy/Jenks Consultants, for reviewing and commenting on drafts of this article.


Copyright 2022 by Kevin O’Beirne
The content of this blog post is by the author alone and should not be attributed to any other individual or entity
The author of this blog post is not an attorney and nothing in this blog post constitutes legal advice. Readers in need of legal advice should consult with a qualified, experienced attorney.

Kevin O’Beirne, PE, FCSI, CCS, CCCA is a professional engineer licensed in NY and PA with over 30 years of experience designing and constructing water and wastewater infrastructure for public and private clients.  He is the engineering specifications manager for a global engineering and architecture design firm.  He is a member of various CSI national committees and is the certification chair of CSI’s Buffalo-Western New York Chapter.  He is an ACEC voting delegate in the Engineers Joint Contract Documents Committee (EJCDC) and lives and works in the Buffalo NY area.  Kevin O’Beirne’s LinkedIn page

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Kevin:
In this area it is not uncommon when the project is in the Mississippi River that in the Conditions of Contract that the work is not covered by the same rules that apply to ships and seamen. I cannot remember the title of the act.

Kevin:

In my experience, the most frequent instance of including code requirements in specification sections is by elevator consultants. Their sections are often 50 - 60 pages long, bulked-up primarily because their specification requirements are extracts from ASME A17.1 Safety Code for Elevators and Escalators. For some reason they have an aversion to simply referencing this document (and it’s not a situation where they are selecting from various choices); it’s a repetition of the code text.