This audio is automatically generated. Please let us know if you have any comments.
This feature is part of ‘The Dotted Line’ series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.
Manufacturing continues to drive construction spending, thanks in part to a federal boost to ground chipping plants. This means great opportunities for contractors looking to build these expensive facilities, as well as great potential for risk.
The $52 billion CHIPS Act supports companies that build semiconductor factories in the US, among other incentives, in an effort to reduce reliance on Chinese-made chips. Dozens of these highly technical megaprojects have progressed since the law was signed in August 2022. Many of them are in the billions of dollars.
For example, the Biden administration awarded Intel $8.5 billion in CHIPS Act funding on March 20 for its semiconductor projects in Arizona, New Mexico, Ohio and Oregon, the largest given yet under the law.
Since there is a limited number of specialized contractors with experience in the semiconductor space, some builders are doing so for the first time amid a general shortage of skilled workers and a host of regulations. Construction lawyers say that given this confluence of events, there are particular areas that contractors must consider when building these projects.
For example, these projects often require progressive approaches to design, build and engineering, procurement and construction, according to Jeffrey Gilmore, chair of the construction practice at the Miami-based law firm Akerman. They also require higher security and workers may need security clearances.
The pace and complexity of the jobs present additional challenges, he told Construction Dive.
“Ultimately, the success of the project will require an agile team prepared to perform highly specialized design and construction services suited to the clean building environment required for a precision industrial chip facility,” said Gilmore .
Builders must navigate federal regulations
Beyond the technical and logistical aspects, builders working on projects that receive federal funding must also navigate certain federal regulations, like Davis-Bacon, according to a webinar with Angela Styles and Josh Teitelbaum, partner and principal counsel, respectively, with the global law firm Akin Gump Strauss Hauer & Feld. this rule applies to all workers and mechanics employed by applicants, subrecipients, contractors, and subcontractors who perform construction, alteration, or repair work funded in whole or in part with CHIPS money.
Although the CHIPS Act does not require applicants to bind project labor agreements, according to the webinar, they must still provide a project workforce continuity plan in their construction workforce plan which details its efforts to promote workforce development, minimize labor disputes, improve safety and ensure adequate compensation.
All of this means that it is vital that contractors thoroughly understand the risks associated with these projects and take proactive measures in their contracts to mitigate them.
How to protect yourself
There are key elements contractors can add to their documentation to ensure they are bidding effectively and are compliant. Builders should pay close attention to construction project definition, project costs and payment terms, as well as the scope of work, said Laura Colca, a partner at Baltimore-based Goldberg Segalla.
Laura Colca
Authorization granted by Goldberg Segalla
“Having a well-defined scope of work can avoid construction delays, reduce the need for change orders and reduce the likelihood of disputes,” Colca said.
It is also important that the contract includes deadlines for all stages of the project. He said ill-defined parameters on completion dates open the door to potential conflicts.
“A well-written work schedule is essential,” said Colca. “Constructors should strive to achieve a work schedule that is clear, concise and simple, as this facilitates compliance and holds all parties accountable for project progress.”
To further protect against delays, contractors should consider including a “moment of the essence” clause that provides that any delay by either party constitutes a material breach and include a term in the contract that requires specific notice of a possible delay. Without that, either party may have a hard time recovering damages caused by the other party, Colca said.
There are other ways to protect against unforeseen circumstances, such as a comprehensive force majeure provision that excuses performance if there is a catastrophic event beyond the parties’ reasonable control.
“One final area that should not be overlooked is risk management and liability protection,” said Colca. “Constructors should proactively manage risk and use best practices to protect themselves from liability, including monitoring issues of construction defects, property damage and worker safety.”
____________________________________________________________
AIA Contract Documents® brings you the Dotted Line Series, a recognized leader in design and construction contracts. To learn more about their 200+ contracts and to access free resources, visit their website here. AIA Contract Documents has no influence over Construction Dive’s coverage within the articles, and the content does not reflect the views or opinions of The American Institute of Architects, AIA Contract Documents, or its employees.
