A Recipe for Green Building Litigation
The American Recovery and Reinvestment Act (ARRA) projects have resulted in extremely low bids. These low bids could be the result of improved efficiency in the construction industry; or the low bids could be the result of cut throat competition. Simultaneously, the ARRA includes $250 million to investigate (PDF) and audit ARRA projects. These investigations and audits will most likely occur when contractors make claims for modifications and change orders.
This is a recipe for litigation. And with $25 billion in ARRA funds going towards green building projects, the stage is set for green building litigation.
Colleague Steve McBrady recently explained how the federal government will use ARRA funds to investigate contractors:
Colleague Steve McBrady recently explained how the federal government will use ARRA funds to investigate contractors:
“These days, there are more companies competing for comparatively fewer contracts, and that means contractors are facing downward pressure on their bids,” McBrady said. “The key for contractors is that it is OK to be competitive, but that bids should accurately reflect the cost to execute the work. Government officials are going to be on the lookout for contractors who make false claims, such as inflating costs for work conducted under change orders.”
Another colleague, George Ruttinger, recently highlighted the various agencies that will receive the $250 million (PDF) set aside for audits and investigations of ARRA projects. The cast of characters that will be involved in ARRA investigations is long:
- GAO
- Agency IGs
- RAT Board
- National Procurement Fraud Task Force
- Congress
- DOJ Antitrust Division
- State and local auditors
- Whistleblowers
- The Public
If you are concerned about the implications of ARRA investigations, I suggest you review the presentation Rewards, Rules and Risks of Doing Stimulus Business -- An Introduction to the American Recovery and Reinvestment Act of 2009: Implications for Construction Contractors. You can learn more about the funding and players involved with ARRA investigations and, most importantly, what you need to do to remain in compliance.
Related Links
Stimulus Bids Running 10 Percent Lower Than Estimates (Wash. Bus. Journal)
Transparency and Accountability Under the 2009 Stimulus Act (Executive Counsel - PDF)
Photo: zenosparadox
From a rather selfish point of view, maybe we'll start getting some case law that resolves the many issues inherent in green building disputes.
Great thought Leigh! Low bids, new risks plus audits = litigation! Sounds like lots of work for us lawyers.
The next two years is going to continue to show a lot of wreckage in the industry. A lot of folks are bidding just to do what they think is surviving, but it is driving down pricing and going under cost, let along covering margins. I am suprised folks are getting bonded on some of these bids, but maybe someone else has a better numbers mind than I. Looks ugly to me.
Hit post too quick -- Chris, great links on this post, very interesting information - thanks for sharing!