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Virginia Department of General Services Issues Final report on Statute of Limitations Exemption for State Construction Contracts
Virginia Department of General Services Issues Final report on Statute of Limitations Exemption for State Construction Contracts

The Virginia Department of General Services has issued its General Assembly-mandated report on current Virginia law regarding state construction contracts and the freedom that the Commonwealth currently enjoys from any statutory time limitation on the state’s ability to bring claims against its contractors. 

While private owners must bring claims for allegedly defective construction work within a five-year limitation period, there are no such constraints applied to the Commonwealth of Virginia’s ability to bring claims. The Commonwealth could bring a claim against a contractor (or a design professional) ten, fifteen, or twenty years or more after substantial completion. We’ve written about this topic previously here, here and here.

A 2019 General Assembly bill, supported by testimony from the Hirschler Construction Team before the House Courts of Justice Committee, would have created a five-year statute of limitations on public projects. That bill hit a roadblock, however, when the House Appropriations Committee requested that the Department of General Services (DGS) conduct a study of the bill and issue a report of its findings, including a recommendation regarding whether the State should adopt a statutory limitations period applicable to public projects. An online survey and a series of DGS-sponsored town hall meetings took place last summer and fall, with DGS collecting data and opinions from Virginia construction industry members and stakeholders. The Hirschler Construction Team participated in both the survey and the town halls. We were encouraged by DGS’s apparent receptiveness to the construction industry’s arguments in favor of a statute of limitations of five years. Based on statements DGS made at the town halls, we believed that DGS was in favor of some limitations period, the only remaining issue being whether the time period would be five, seven, ten, or some other number of years.

DGS, however, issued its report last month recommending that a change to Virginia law was not needed. DGS arrived at this conclusion despite finding that: (1) over half of all other states have some time limitation on state claims; (2) most design professionals believe that a statutory period applicable to the state would not result in the need for extended warranties on construction work; (3) most contractors, design professionals, and public bodies believe that overall costs on state construction projects would decrease if Virginia adopted a statute of limitations applicable to the Commonwealth; and (4) the impact of a single claim on an individual contractor or design professional could be “significant” (such claims could be devastating in the view of the Hirschler Team – see our prior discussion of the Hensel Phelps case.

Instead, DGS asserted that creating a statute of limitations would incentivize state agencies to file claims rather than pursue informal resolutions. DGS also seemed to rely on contractor registration data suggesting that the absence of an SOL is not impacting the number of contractors willing to bid state work. This overlooks the fact that, while contractors are still bidding state work, the prices that state taxpayers are paying for their public projects may be higher as a result of current state law.

We are encouraged, however, by two companion bills that have been introduced in this year’s Session, on the House and Senate side respectively, that would create a public project statute of limitations in the Commonwealth. Our optimism is tempered somewhat, however, by the knowledge that legislators will be considering these bills through the lens of the DGS report. We are tracking the progress of these two bills and will keep you updated in the weeks to come. In the meantime, we welcome your thoughts, comments, and questions about this important issue.

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