Despite reports of softening in some regions and sectors, it appears that 2007 will be another strong year for construction activities on the West Coast.

In California, while the residential housing market has slowed, Governor Arnold Schwarzenegger has embarked upon a $222 Billion, 10-year Strategic Growth Plan, which will provide new capital for infrastructure, education and housing related construction. Further, California voters recently approved five major bond issues earmarked for transportation projects, school construction, housing for battered women and seniors, and levees and other flood protection. Accordingly, in 2007, double-digit growth in non-residential construction is expected.

In the Pacific Northwest, the housing market has not slowed as rapidly as other parts of the country, although most analysts agree that the housing boom of recent years is trending downward. New condominium projects continue to spring up in downtown Seattle and Portland, and increasing office occupancy rates bode well for commercial office construction. This year, heavy construction, nearly half of the overall construction market in the Northwest, will also continue to be strong. Numerous highway and mass transit projects are in the late planning or early construction stages across Washington State, while in Oregon, heavy construction is playing catch-up, as work on schools, sewers, roads, etc. struggles to keep pace with population growth and recent new housing.

2007 is also expected to be another good year for construction in Alaska, supported by a generally strong economy and increased highway and military spending by the federal government. Hundreds of millions of dollars in new highway projects, funded under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) are in the works or under way.

One area of concern for the construction industry on the West Coast, especially in the Northwest, is the aging construction workforce. The growth of the skilled labor force slowed dramatically in recent years, and the industry faces increasing competition for highly trained employees in 2007 and beyond. Attracting and keeping qualified workers will be an ongoing challenge, and some forecasters expect labor costs to significantly increase as a result.

West Coast Case Notes

I. Read and Follow all Directions (Part One)

In a recent Washington State Court of Appeals case, Frank Coluccio Construction Company, Inc., v. King County, the owner/defendant failed to purchase Builder's Risk insurance covering the contractor/plaintiff, even though the contract required that the owner do so. Although the owner had purchased a general liability policy, it failed to obtain builder's risk coverage. In affirming the trial court's damage award, the Washington Court of Appeals held that where a party "fails to provide insurance in accordance with the terms of a contract, the breaching party assumes all risks of loss...Damages recoverable for such a breach are the full amount that would have been covered by insurance, had the breaching party performed as specified." Thus, unless your company is looking to get into the insurance business, make sure you read, understand and adhere to the insurance requirements in the contract.

II. Alaska Broadens "Goofing Off" Exception to Worker's Comp Bar

In an October 2006 decision, Estate of Milos v. Quality Asphalt Paving, the Alaska Supreme Court ruled in favor of the estate of a worker who was electrocuted while driving a company All Terrain Vehicle at the gravel pit where he worked. At the end of his shift one evening, while waiting for a friend to finish checking some work, the deceased employee hopped on his employer's ATV and raced to the top of one of the gravel stockpiles, which rose to a level only six feet below the overhead high voltage line. His head touched the power line and he was electrocuted. The Alaska Supreme Court held that the worker's compensation bar may not apply to claims involving an employee's "post-shift diversions," as opposed to "horseplay during a lull." On this basis, the case was remanded to the lower court for trial.

III. Read and Follow all Directions (Part Two)

In Johnson, Inc. v. County of Spokane, a contractor sued the owner for additional costs incurred in building sewer lines. The Washington State Supreme Court upheld the trial court's summary judgment in favor of the owner, based on the contractor's failure to comply with the letter of the contractual claim notice requirements. Even though is was clear that the owner had actual notice of the claims, the Washington State Supreme Court held that such notice did not excuse compliance with contract's notice requirements. The Washington State Supreme Court explained that "to hold that a contractor's notice of protest to the owner served to excuse the contractor from complying with mandatory claim procedures would render contractual claim requirements meaningless."

Further, the Washington State Supreme Court rejected the contractor's claim that the owner had waived strict compliance with the notice provisions by engaging in repeated discussions and negotiations regarding the claims. The Washington State Supreme Court stated that "adopting [plaintiff's] view would unrealistically halt all discussions for fear of evidencing [an] intent to waive mandatory claim provisions under the contract."

Thus, although the contractor presented evidence that the notice it provided met industry standards, and though the rule in Washington State had previously been that failure to follow notice provisions to the letter would not defeat the contractor's right to compensation unless such failure caused actual prejudice to the owner, few, if any, circumstances will excuse a party's strict compliance with contractual notice provisions.