Who is Mike M. Johnson and Why is He Important?

Mike M. Johnson was a contractor in Washington State whose name is attached to a lawsuit that continues to have repercussions in the construction industry.

Contractor Documentation of Change Order Requests:  In Washington State, in 2003, the State Supreme Court issued a decision in the Mike M. Johnson v. County of Spokane case, in which the court held that the contractor, Mike M. Johnson, was bound to the strict notice and documentation requirements of the contract for change order requests, and that by failing to follow those procedures, they essentially forfeited their right to relief for change order work.  

Prejudice Standard:  The court ruling has been very controversial with contractors and there have been unsuccessful attempts to have state legislation passed that would institute a prejudice standard for filing of notice and documentation.  In other words, if the owner was not prejudiced or damaged by the failure of the contractor to meet the strict time constraints of the contract, the claims could nevertheless be considered.

John Ahlers and Lindsay Taft

Resources:  Seattle construction attorneys John P. Ahlers and Lindsay K. Taft have written extensively on the subject, most recently in two issues of the Washington State Bar News.

• Part 1: Construction Contract Draconian Notice Provisions - Is Prejudice Still the Issue? (May 2012)

• Part 2: Construction Contract Draconian Notice Provisions - Is Prejudice Still the Issue? (July 2012)

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

Claims & Changes Workshop

Claims & Changes Workshop:  Fundamentals of Claim/Change Order Preparation

When:  Thursday, April 29, 2010 (7:00 a.m. to 11:30 a.m.)

Where:  Renton, Washington (Maplewood Greens, 4050 Maple Valley Hwy)

Cost:  $148

Sponsored by and for more information:  Construction Seminars NW LLC

Topics include:

• The First Signs of a Problem
• Monitoring the Work - Time and Money
• Key Areas of Cost Recovery - Damages
• Communication - Proper and Timely Notifications
• Resolution Options and Strategy (Protection versus Cooperation)
• Understanding Delay and Disruption (Problems and Solutions)
• The Preparation Process - Equitable Adjustment Request or Claim
• Presentation of an Equitable Adjustment Request (EAR) or Claim
• Warning from the Past - Learn from Others Experience (both the Good and Bad)
• Examples of Successful Claim Recoveries - Why and How
• Proper Record Keeping and Documentation

Speakers include:

• Todd Henry (Oles Morrison Rinker & Baker LLP)
• Roger Brown (R Brown Consulting)
• Joe Schneid (AKT - CPAs and Business Consultants)
• Phil Martinson (Phil Martinson Engineering, Inc.)

Mike M. Johnson, Inc. v. Spokane County

You may have heard a lot in recent years about the Mike Johnson case. Johnson was a contractor whose dispute with Spokane County led to a ruling by the Washington State Supreme Court in 2003 on the importance of contractors filing notice and claim documentation with owners in a timely manner, consistent with the terms of the contract. The case has cause a lot of concern among contractors.

If you're interested, you can read the full case at the following website address: Mike M. Johnson, Inc. v. Spokane County.

Look for legislation to be introduced in the 2009 Legislative session by the AGC. Owners and the AGC are having numerous discussions on trying to craft compromise legislation that will meet everyone's interests.

Re-cap of 2008 Legislative Session

When it came to legislation affecting public contracting in Washington State, the 2008 Legislative Session was noteworthy for the extremely limited number of bills that passed and became law. In fact, the only one I was tracking that actually made it into law related to concerns arising from the State Auditor’s findings on the Port of Seattle’s construction management and contracting program. SB 3274 passed and makes certain changes related to port districts.

Legislation that did not pass includes the following, some of which will undoubtedly re-surface in the 2009 session, which will be a full session unlike the short one this winter.

Alternative Public Works Contracting: HB 2780, crafted and endorsed by the well-respected Capital Projects Advisory Review Board (CPARB), was a clean-up bill from the 2007 session and fixed some of the problems in the re-authorization of alternative public works contracting. Most of the focus of HB 2780 was on design-build and would have permitted use of some design-build-operate-maintain projects. The bill passed the House, but not the Senate. This bill will likely show up again next year, but with further refinements of the various alternative public works contracting methods (design-build, general contractor/construction manager (GC/CM), and job order contracting).

Expansion of Qualifications Based Selection: ESSB 6235 would have expanded qualifications based selection (not using price as a criterion for selection) to include project and construction management, in addition to the current disciplines covered in RCW 39.80 (architects, engineers, landscape architects, land surveyors). This bill also included a number of issues that were part of port district reform, and did not pass. The bill was supported by the architectural and engineering community, but in my mind would not be in the public’s best interests – public agencies should be able to use price for selecting these consultants. I have a more detailed analysis of the issues surrounding this subject if you’re interested.

Prevailing Wages for Off-Site Prefabrication: HB 2864 passed the House but not the Senate. It would have required public agencies to collect data about off-site prefabricators prior to acceptance of a public works project. The issue stems from the fact that in Washington State prevailing wages must be paid for off-site prefabrication of materials for a public works project if the materials are not standard, off-the-shelf items, but are specifically fabricated for the public works project. The applicable wages are those in the county where the product is prefabricated. A number of fabricators have moved their operations to Idaho and Oregon, just across the Washington state line in order to avoid having the pay prevailing wages and thus be more competitive. This practice has labor unions particularly concerned as it is putting firms out of business who are not able to compete with low wages paid across state lines. In addition, the state is losing tax revenues.

Trench Excavation: HB 2009 was a hold-over bill from the 2007 legislative session and was crafted by CPARB. It would have eliminated the requirement for listing the dollar amount for trench excavation safety shoring on the bid form. Failing to get any traction this session, this bill got buried, and didn’t pass either house. Look for it again next year when hopefully support for it can be shored up.

Fees for Intents and Affidavits: HB 2942 would have increased the filing fee for a Statement of Intent to Pay Prevailing Wages and an Affidavit of Wages Paid from $25 to $40. No one was willing to put any money on this bill and it didn’t pass either house.

Veteran’s Preferences: HB 2210 passed the House but not the Senate. It was a poorly written and confusing to implement piece of legislation that would have required certain percentages of public contracts to be awarded to veteran owned businesses and would have created a certification process for such businesses. The bill is becoming a veteran in Olympia, having been introduced in 2007 originally and it may make another appearance in 2009.

Mike M. Johnson: While there was a lot of discussion between public owners and the Associated General Contractors (AGC) on this issue stemming from a Washington State Supreme Court decision, the AGC chose not to introduce any legislation this session, instead engaging in dialogue with owners to develop a consensus and compromise bill that both parties could live with. Hopefully, the dialogue will continue and the parties can reach a consensus before the next session. AGC has all but given notice that they will introduce some bill in the 2009 legislative session.

There were a host of other bills that did not pass including those related to bid limits for cities and counties (HB 3030), living wages on public contracts (HB 2853), and OMWBE (HB 2925).

If you know of important bills affecting public contracting (public works, consultant, architectural or engineering, or procurement of goods and supplies) that passed during the 2008 Legislative session, please let me know.

American Safety Casualty v. City of Olympia

On December 27, 2007, the Washington State Supreme Court issued its decision in a closely watched case dealing with notice requirements on public works construction projects, and whether the owner (City of Olympia) had waived its rights to insist on the bonding company (American Safety Casualty) meet the contractual deadlines for filing a claim for additional compensation. American Casualty was the bonding company for Katspan, Inc., the contractor hired by the City of Olympia for a pipeline project.

In its analysis, the Supreme Court discusses the impact of the Mike M. Johnson case and how it relates to the facts of this case.

The unanimous decision by the Supreme Court states in part:

"This case arises from a contract dispute between American Safety Casualty Insurance Company (American Safety) and the city of Olympia (City) and the trial court's award of summary judgment in favor of the City. There is no dispute that American Safety did not follow the contract's provisions when it sought additional compensation for work it had performed and that it filed suit after the 180-day time limit established in the contract. However, American Safety argues that the City implicitly waived its right to demand compliance with the contract's provisions when it agreed to negotiate and try to reach a settlement. American Safety argues that the trial court erred in granting summary judgment to the City, and that the Court of Appeals was correct to reverse because an issue of material fact existed as to whether the City waived its contractual defenses. The City maintains that it expressly reserved its rights; that any waiver of rights must be unequivocal; and that, at most, its acts were equivocal and thus did not constitute a waiver. We agree with the City and reverse the Court of Appeals."

Conclusion: "Implied waiver of contractual rights requires unequivocal acts, and here the City's acts were, at most, equivocal. Agreeing to enter into negotiations, without more, does not constitute an implied waiver of contractual rights. Therefore, since American Safety admittedly did not comply with the contractual provisions and thus waived its claim to additional compensation, the trial court was correct in granting summary judgment to the City. The decision of the Court of Appeals is reversed."

If you would like a copy of the full decision, please contact me and I'll e-mail it to you.