As the countdown to the Year 2000 continues, you can expect more and more cries of impending doom with respect to the consequences of the Year 2000 Bug. Although construction industry members share many of the Millennium Bug concerns faced by other industries, it may be helpful to consider some of the ways in which the Y2K crisis may affect construction industry firms. Consider the following Millennium Bug Checklist for the construction industry:
- Inventory And Assess Your Computer Systems. Your Millennium Bug assessment should begin with verification of the Year 2000 compliance of your computer systems hardware and software, as well as the Year 2000 compliance of products or service being provided to others. "Patches" or software upgrades are being made available for most construction industry software. Software license and maintenance agreements may entitle you to a software fix at the software vendor's expense. Inventory your software packages. Check your license and maintenance agreements. Contact your hardware and software vendors now.
- Assess Your Reliance On Y2K Compliance By Others. In assessing Y2K compliance of systems, products and services, do not stop at the assessment of your own systems. Consider also the Y2K compliant nature of any products, services or systems being supplied by subcontractors or vendors that may be critical to your timely contract performance. In this regard, Y2K compliance inquiries and potentially helpful contract terms are discussed in the paragraph that follow.
- Year 2000 Compliance Inquiries. Contractors performing construction contracts for the federal government have been sent letters seeking information regarding the Year 2000 compliant nature of the products being furnished to the government, especially HVAC systems and controls, security systems, and fire and life safety systems. (See Common Sense Contracting, Summer 1998, p. 338). Contractors should anticipate a continuation of this practice in 1999, as well as the use of similar Year 2000 compliance inquiries from local and state governments, and from private construction industry participants. New Federal legislation, as described below, should be considered in responding to such requests.
- Year 2000 Information And Readiness Disclosure Act. As of October 19, 1998, Congress put into place an Act intended to encourage voluntary, good faith sharing by businesses of information concerning the Year 2000 readiness status of their products and services. This Act also provides some protections to those who make inaccurate statements regarding Year 2000 compliant products or services. In general, the Act provides that any lawsuit based on a statement regarding a party's Year 2000 readiness must be supported by (1) clear and convincing evidence that the statement was material; and (2) proof that the maker of the statement either knew that it was false, made the statement with an intent to deceive, or made the statement with reckless disregard for its accuracy.
In addition, the Act provides protection for those required to give "Year 2000 Readiness Disclosures" between October 19, 1998 and July 14, 2001. A "Year 2000 Readiness Disclosure" is defined to include a statement issued or published with respect to a company's own Year 2000 processing, transmitting or receiving of date data, or with respect to its own products or services, but only with respect to any such statement which is clearly identified on its face as a Year 2000 Readiness Disclosure. With respect to such Disclosures, the Act excludes from evidence in any resulting civil litigation against the maker any statement set forth in the Disclosure, subject to certain limited exceptions.
Although the Act will not protect you from misleading or inaccurate Statements or Disclosures if you are deemed a "fiduciary" in a particular contract arrangement, most construction contract arrangements do not involve "fiduciary" relationships. In any event, when responding to requests for information regarding the Year 2000 compliance readiness of your firm, its systems or products, you would be well advised to label your reply as a "Year 2000 Readiness Disclosure" on the face of the reply, so as to take advantage of the protections afforded by this new federal legislation. If you receive representations or statements designated as "Year 2000 Readiness Disclosures" from contractors or vendors whose products or services may be particularly critical to your contract performance, you may want to negotiate a special warranty term, or contract so as to create a "fiduciary" relationship with that contractor or supplier, so as to limit or avoid the protections furnished by this Act with respect to inaccurate Year 2000 compliance statements.
- Contract Warranties. Public and private owners can be expected to expand and particularize contract warranty requirements to include specific affirmation of the Year 2000 compliant nature of all contracted for products. Look for these in your new contracts and purchase orders.
- Expanded Bid Checklists. Contractors and subcontractors supplying date-sensitive products should plug into their bidding checklist the need to verify the Year 2000 compliant nature of products reflected in bids from their suppliers and subcontractors. During the bid qualification process, the right to insist on proof of the supplier's or subcontractor's due diligence in verifying the Year 2000 compliant nature of products and services may be advisable, especially in view of some of the protections afforded by new federal legislation with respect to the furnishing of false affirmations.
- Contract Indemnity Clauses. Owners, contractors and subcontractors should consider the adequacy of their contracts and purchase orders with lower-tier firms supplying services, equipment or other products in connection with a construction contract. For example, contractors may want to add Y2K indemnity clauses which require that subcontractors both demonstrate Year 2000 compliance for all services, products and systems relied upon by that subcontractor in connection with the performance of any aspect of the subcontract, as well as indemnify the contractor from any adverse consequence (e.g., delay or added costs) resulting from Millennium Bug problems.
- Review Product Warranties. If you have provided computer-based systems or equipment (e.g., elevators, HVAC systems, alarm systems or fire protection) in recent years as part of your construction contract performance, contact the manufacturer for Y2K compliance information. Review product warranties to identify potential warranty risks.
- Information Sources. Fortunately, there are many places to turn for helpful advice regarding the potential impact of the Millennium Bug. For example, the DPIC Companies, a group of professional liability insurers based in Monterey, California are offering architects and engineers a free handbook entitled Y2K-Are You Ready For The Year 2000? (requests for the handbook may be faxed to (408) 649-01346 or downloaded at the DPIC website at www.dpic.com). Hewlett-Packard provides a helpful "white paper" on Y2K issues at its website (www.hp.com/year2000) and most software companies offer website advice or software "patches" designed to assist software users in avoiding millennium bug issues.
Industry trade associations also may provide helpful information sources. For example, the Associated General Contractors of America offers the following list of useful websites:
- www.assnconsult.com
- www.itaa.org/year2000.htm
- www.itpolicy.gsa.gov
- www.mastech.com/SERV/Services_See.html
- www.microsoft.com/y2k/
- www.novell.com/y2k/
- www.nstl.com/html/y2klogo.html
- www.sba.gov/y2k
- www.y2k.com
- www.y2k.gov
- www.yahoo.com/Computers_and_Internet/Year_2000_Problem/
- www.year2000.com
(See THE CONSTRUCTOR, November 1998, p. 15)
The Building Owners and Managers Association provides helpful information on preparing buildings for the Year 2000 at its website (www.boma.org/year2000); and the Department of Transportation is serving as a clearing house for Year 2000 information shared within both the foreign and domestic transportation industries (www.y2ktransport.dot.gov).
- Examination Of Force Majeure and Liability Limitation Clauses. Owners, contractors, subcontractors, suppliers and sureties should pay careful attention to contract provisions, and especially time extension and liability limitation clauses, for the manner in which these clauses will be supplied to Millennium Bug consequences. For example, will a Millennium Bug problem which delays a supplier's compliant contract performance be viewed as "beyond the supplier's control" so as to justify a contract time extension? Modification of contract force majeure clauses may be appropriate to expressly address the risk.
- Possible Insurance Coverage. Effectively managing the risks associated with the Millennium Bug also may involve an examination of the extent to which such problems may be covered by insurance or surety bonds. When reviewing the adequacy of your insurance coverage, remember also that the potential impacts of Y2K problems may continue to surface years after the Year 2000.
- Document Due Diligence. Document your efforts to assess and correct potential Year 2000 problems. The exercise of "due diligence" may be important, especially for corporate officers and directors, in defending against claims arising from Millennium Bug problems.
The approach of the Year 2000 is not a cause for panic. Nevertheless, the potential Millennium Bug impact on your construction contracts and firm operations should not be ignored. Help is available. If you have not already done so, now is the time to conduct a Millennium Bug assessment of your contracts, of your firm hardware and software, and of the equipment and products furnished in fulfillment of your contract obligations.