Legal Issues for Project Managers

Roy Nieuwenburgran@cwilson.com

CW 8699231

October 6, 2015

The Project Management Conference 2015 Program

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11:05 to 12:05pm

50 - 55 minutes - content

5 -10 minutes - Q & A

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• Quick overview for this session

• Feel free to ask questions (if you are thinking about it, probably others are too)

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Themes for today’s session:

Managing the project to completion

Liability of Project Managers – some examples

Some aspects of Managing Liability – (i) for Project Manager (ii) for Owner Odds and Sods

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Perspective:

– importance of “the legal issues” in comparison to …

what project managers do to move along the project to completion:• people and relationships• meetings, minutes, diligence, follow up,

expediting, ushering along (nudging and nagging), common sense and practicalities

• “strive for” adherence to the schedule

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“project managers” in the broad sense

• whether they be external project managers, like MHPM, or internal (such as UBC, Airport Authority, Cressey, or Polygon, etc.)

• by whatever name – “project managers”, “construction manager”, “VP Engineering”, “head of procurement”, etc.

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“the right people:”

A Practical Guide to Project Management - Don Mackie:

“My career spans more than forty years. During that time …”

• so, what does he have to say?

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the right people:

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how do you retain your ability to select “the right people”

• since “people” are key, how do you retain your ability to select “the right people” - within competitive bidding mandates ?

• most important!

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how do you retain your ability to select “the right people” - continued

course of dealings:• used a lot, from what I see• for private sector (not really available for

public mandates)

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how do you retain your ability to select “the right people” - continued

prequalification (or a bidders list, etc.) • issues and how to address: • issue: “fax from Kinkos” (or Tercon 2010):

- clause: is sufficiently associated (including joint ventures)

• issue: Ed Brunet & Associates case:- clause: can still differentiate, based on relative rankings and grading based on non-price criteria

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how do you retain your ability to select “the right people” - continued

retaining flexibility in RFP’s and tendering

• a large topic onto itself – too large for today (but I’ll give a few examples)

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illustration of the problem: the Sound Contracting scenario

• Sound Contracting cases• You can retain flexibility – even in the context

of the AIT, NWPTA (TILMA) and Core Policy Manual and CAMF - but you have to have vigorous, clear and strident provisions

• usual privilege clause won’t do it – most packages I see fall short

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Sampling of the kind of things you need:

Common sense prevails Continental Steel Ltd. v. Mierau Contractors

• “reasonable exercise of business judgment” is a vital tool in making good procurement decisions

• recognized and validated by the courts in British Columbia in Continental Steel Ltd. v. Mierau Contractors, 2007 BCCA 292

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Understanding Authority Levels – applied to RFPs and Tenders

"Before any contract or obligation relative to the subject matter herein becomes binding on {the Owner}, approval thereof by its authorized senior personnel, or such officer or officers of {the Owner} as {the Owner} may from time to time designate, must first be obtained."

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For example:

The Owner may elect ...

The Owner reserves the right to ...

The Owner may ...

The Owner may...

The Owner may waive, regardless of severity, any non-conformity, non-compliance, irregularity or error. The Owner may accept a non-compliant Tender.

etc.

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September / October 2012 issue of Construction Business

“At the time of Ron Engineering clauses of this nature were rarely found in tender conditions, the thought being that it would reduce the market available to project sponsors. If the project sponsors could act contrary to the express and implied terms of the invitation to tender, particularly to those relating to non-compliant bids, without fear of consequence, then a large portion of the market would be disinclined to bid to the project. But that fear has not prevailed, and no action or limitation clauses are commonly found in tender documents.”

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• “a stitch in time” – always attach proforma Contract

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• what are the tools and measures you can draw upon to manage schedule and timely performance?

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Note: change made with CCDC 2-2008: cannot use change order to accelerate completion date.

Issue: e.g.: classes start on September 8 …

clause: can accelerate, as long as not earlier than original date …

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float and sample float clause

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sample Builders Lien Act clause for Section 5(7)

Builders Lien Act - if you don’t establish holdback saving account, then that can put the Contractor “off the hook” for performance.

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Of course Project Managers have liability

• Consultant found liable for recommending a non-compliant tender Tectonic Infrastructure Inc. v. Middlesex Centre (Township)

• Consultant Found Liable for “Bid Shopping”Stanco Projects Ltd. v. British Columbia (Ministry of Water, Land and Air Protection)

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• To third parties too, if foreseeable third party relies on it:

ND Lea case

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Some aspects of Managing Liability – (i) for Project Manager (ii) for Owner

• Wrap-up insurance• is the Project Manager covered?

(or subject to the standard exclusion)?• Under a Wrap policy – will E&O be covered?

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Wrap-up insurance – is Project Manager covered?(or subject to the standard E & O exclusion)?

Excerpt from advice from leading brokerage from Vice President, Construction Insurance Services [September, 2015]

 

“All standard Wrap Up Liability policies include Professional Liability exclusion, this is because Wrap ups are to cover the potential 3rd Party Bodily Injury & Property damage caused by a project not the design Errors or failure to provide professional services.

 

Owners of projects can protect themselves by purchasing a ‘Project Specific E&O’ Policy, this would be based on the fee base of the Professionals involved in the project and require each Professional to complete a short application. You can pick and choose which professionals you cover. The minimum premium for project specific is around $80,000 to $100,000.

 

The policy would act similar to a Wrap Up Liability Policy in that it would be Primary (before their own Professional Liability) …”

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• third party beneficiary issues (aka privity of contract)

• sample “Benefits Extend” clause and “Agency and Trustee” clause

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Privity of contract (aka third party beneficiary issues) and “benefits extend” clause

Relevant to:• whether project manager benefits from

insurance; and • contracts that the project manager is

arranging for the Client / Owner (e.g. with construction manager, consultants, trade contractors, contractor, etc.)

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Where Owner is a Trustee etc.

• Constitution Insurance Co. of Canada et al. v. Kosmopoulos et al.

• Marks v. Commonwealth Insurance

You must specifically name the beneficiaries or silent partners who have an interest or else insurance, bonds etc. may be disallowed.

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Odds and Sods

• Don’t forget to designate someone as “prime contractor” for WCB (easy to overlook for construction management projects).

• Are you, the project manager, the “prime contractor” for WCB? [no]

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"open site" project

"GC 16 LABOUR

16.1 The Project is an "open site" project. From time to time, there may be present on the site both unionized and non-unionized workers, including the employees of the Owner. The Contractor acknowledges and agrees, and will ensure that each Subcontractor and Supplier acknowledges and agrees, that: …”

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Odds and Sods - continued

• Apprentices On Public Projects In British Columbia Policy & Procedure Guidelines

• Construction Infrastructure Projects that are procured after July 1, 2015 and that have a provincial investment of $15 million or more

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Odds and Sods - continued

Careful about agreeing to confidentiality.

Pharand Ski Corporation v. Province of Alberta

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Odds and Sods - continued

• McCarty Inc. v. The Queen [CRA] – tax case - nifty tax planning (but you might be “pushing it”)

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Odds and Sods - continued

• Have you thought about AIA forms?

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any burning questions?

THANK YOU

Questions or Comments:

Roy Nieuwenburg | Clark Wilson LLPran@cwilson.com | 604.643.3112

www.cwilson.com