Thursday, April 30, 2015

What's a "building"? Appeals court hears challenge to DOB's approval of Forest City's modular plan

Today at a session that begins at 2 pm, a state appeals court will hear an effort to overturn a judge’s December 2013 decision upholding the New York City Department of Buildings’ (DOB) conclusion that modular construction could proceed in a factory using cross-trained workers without the presence of licensed plumbers and fire suppression contractors.

While the case was brought in response to Forest City Ratner’s B2 modular tower, should the courts rule in favor of the appellants, two industry groups representing plumbers and mechanical contractors, it could have significant ripple effects regarding the growing modular industry in New York.

At issue is whether the modules built in the Navy Yards for the tower qualify as "buildings" under the law. They clearly are not standalone structures--and at least two modules are needed for an apartment--but as nearly-finished apartments they also differ from the pre-fabricated materials or equipment which otherwise can be built offsite.

One great irony surrounds the case. While Forest City pursued modular to save money, and city officials gave it their blessing at least in part to foster money-saving innovation, B2—the first modular tower—is delayed and faces huge cost overruns. But the legal papers, which rely on an outdated record, must assume that it is money-saving.

Even a successful argument by the petitioners—the Plumbing Foundation and the Mechanical Contractors Association—is not likely to affect the in-progress B2 tower.

But it could hamper Forest City’s professed desire to build more modular towers. And it could set up enormous—and seemingly contradictory complications, given that other companies are building modular components outside New York and thus the jurisdiction of the Department of Buildings.

The petitioners’ case

The petitioners argue:
The Code requires that all plumbing and fire suppression work done in connection with the construction of any structure in New York City, must be performed under the direct and continuing supervision of licensed master plumbers and fire suppression contractors. These licensing requirements are fundamental to the Construction Code, and essential to ensuring the safety and stability of the City's residential, commercial, and industrial construction projects.
According to the appellants, the Code makes no distinction between on-site and off-site work, so factory work shouldn’t be exempt.

Nor are the custom-built modules roughly equivalent to standardized items like Jacuzzis that are exempt from the Code's licensing requirements, because they are built to uniform national standard, say the appellants, though the judge in the lower court said it was OK to manufacture such “systems.”

The appellants warn that upholding this result could lead to unsupervised prefabrication of fuel gas piping in residential buildings and waste disposal piping for industrial uses.

A bulletin at issue

At issue in the case is an April 2011 Buildings Bulletin from the DOB's Office of Technical Certification and Research (OTCR), which established "temporary guidelines” for modular fabricators but did not require licensed plumbers and and fire suppression contractors.

After the industry groups contacted DOB, then Commissioner Robert LiMandri called it a drafting oversight ; a revised draft of the Bulletin was circulated January 2012, requiring such licensed contractors. But it was never issued, and the DOB in December 2012 issued a permit for B2.

In response, DOB says it never finalized the draft because it later analyzed the issue in more depth, and concluded that the codes’ licensing provisions do not apply to off-site modular assembly work.

After the City Council held an oversight hearing in January 2013, DOB General Counsel Mona Sehgal said DOB concluded that the modules constructed in Brooklyn should be treated as “materials" and thus the plumbing and fire suppression work was not subject to the Construction Code.

(At the hearing, industry representatives charged intervention by Atlantic Yards developer Forest City Ratner.)

Is it a building?

The relevant inquiry, according to the appellants, is whether work done on the modules means work done "in any building in the City,” with building defined "a structure used or intended for supporting or sheltering any use or occupancy" (emphasis added in brief).

The DOB, however, said a building or structure be immediately "viable for use and occupancy"or that it must "stand and function properly on its own”—language that the petitioners say is not found in the Code.

The petitioners point out that Forest City has frequently called the work on the modules "plumbing."
Plumbing is defined as work done "in connection with sanitary draining or storm drainage facilities, venting systems; and public or private water supply systems."

Does "in connection with" mean physically "connected to,” as the city says, or does it simply mean “related to”? The petitioners point out that, in traditional construction, the “plumbing system must be designed, built, and installed before the entire system is connected to the City's water, gas, waste and drainage systems,” but the work must be supervised.

And while the DOB can approve alternative "materials, design, methods of construction, or equipment,” according to the Administrative Code, that doesn’t mean they can suspend licensing requirements. The petitioners note that the City Council in 2008 could have but did not provide exemptions when revising the Code.

DOB response

In response, DOB notes that offsite materials must either be preapproved or separately found to meet technical requirements. It has approved approved numerous other site specific applications for modular construction, and a number of others are under review, the DOB said.

Given the standardization involved in modular factory work, the “rote nature” does not require the expertise of licensed plumbers or fire suppression contractors, DOB said, noting the steps it took to monitor the process. Forest City—in the form of its affiliate, B2 Owner—had to hire an independent licensed engineer to oversee the work.

Structures, to DOB, are defined as completed structures.

DOB also distanced itself from some positions taken by Forest City, such as that plumbing is defined as “currently” connected or that modular construction projects are not governed by the Code until ready for occupancy, the appellants pointed out.

Forest City response

Forest City’s attorney accuses the petitioners of being “[g]uided only by narrow economic protectionism.”

“As a result of the ability to use modular construction, which should cost considerably less to build than traditional construction buildings, B2 will offer half of its apartments as affordable housing,” Forest City says, in a claim no longer backed by facts.

Similarly, Forest City says that the modules “are being assembled at a factory located at the Brooklyn Navy Yard, which is owned and operated by FC+Skanska.” While that may be in the record, that’s no longer true, as the partnership has been split.

“The factory-based assembly of pipes into modules is not the installation of plumbing ‘in any building.’” Forest City says, saying modules are not buildings but rather components, as no module could stand alone.

Also, says Forest City, “pipes put into a module are not installed ‘within or adjacent to any structure’ for the same reasons that they are not installed ‘in any building.’” Beyond that, Forest City says, case law treats modular construction as a good, not a service.

Forest City points to a potential absurdity: “If licensed master plumbers must assemble all fabricated items except those carved out by the non-existent definition of ‘listed items,’ then a module built in Kentucky that gets trucked into New York City would have to be assembled by New York City licensed master plumbers in Kentucky,” the lawyers say. But DOB cannot force such a result.

The response

The appellants take aim at DOB’s effort to see a distinction between on-site and off-site plumbing and fire suppression work, saying it includes work in a “building,” which encompasses “any structure intended to support occupancy.”

They note that “DOB argues for the first time… that the phrase ‘in any building’ is a ‘term of art’” and DOB’s interpretation of that term is thus entitled to deference.” Does “in any building” mean “on-site work”?

The law states:
BUILDING. Any structure used or intended for supporting or sheltering any use or occupancy. The term shall be construed as if followed by the phrase "structure, premises, lot or part thereof" unless otherwise indicated by the text.
“It cannot be disputed that the modular units are ‘intended . . . for occupancy,’” the appellants say, and also “part” of a building, since the latter term is to be construed “as if followed by the phrase ‘structure, premises, lot or part thereof.’"

“Finally, DOB argues that compliance with the Code can be waived by approving an alternative supervisory scheme,” the appellants state. “But nothing in the Code permits DOB to ignore the Code’s black-letter requirement that all plumbing and fire suppression work be done by and under the supervision of licensed plumbing and fire suppression firms.”

They do not, however, address the potential impact of that result on out-of-state modular construction.

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