ALEXANDRIA, Va. — ASA hailed legislation introduced by Rep. Carolyn Maloney, D-N.Y., on May 9, 2013, as a significant step to improve the management of the federal government’s construction projects.

By requiring contractors to use the subcontractors identified in the contractors’ bids, the Construction Quality Assurance Act of 2013 (H.R. 1942) would promote open competition among subcontractors and ethical bidding practices and ensure that the highest quality subcontractors bid and work on projects paid for with federal taxpayer dollars.

“As the federal government continues to tighten its belt, taxpayers deserve to get absolutely the best construction projects for their tax dollars,” said ASA Chief Advocacy Officer E. Colette Nelson. “Under the current acquisition system, federal contracting officers must accept prime contractor bids without any assurance of which subcontractors will actually perform the work. This lack of oversight diminishes the quality of and threatens the security of federal construction. Taxpayers deserve better, and mandatory bid listing is the responsible solution.”

Rep. Maloney’s bid listing legislation would require prime contractors that bid on federal construction projects over $1 million to list each subcontractor they plan to use for $100,000 or more work. After the contract award, if a prime contractor replaced a listed subcontractor without the permission of the contracting officer, the prime contractor would be subject to penalties in an amount equal to the greater of: 10 percent of the amount of the subcontractor’s bid; the difference between the amount of the list subcontractor’s bid and the replacement subcontractor’s bid; or the difference between the amount of the bid by a substituted subcontractor and the dollar value specified by the contractor to self-perform the work. A subcontractor that knowingly participates in the prime contractor’s failure to comply with the bid listing requirements also would be subject to penalties.

“The bid-listing requirement would eliminate post-award price negotiations between contractors and subcontractors that can lead to corner cutting and wasteful spending, and can drive quality contractors and subcontractors out of federal construction markets,” Nelson said. “And, by requiring contractors bidding on federal agencies’ construction projects to inform agencies of the major subcontractors they would use on projects and the types of work that those subcontractors would perform, the bill would add a welcome measure of protection to the nation’s infrastructure.”

Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. ASA’s vision is to be the united voice dedicated to improving the business environment in the construction industry. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.

###

ALEXANDRIA, Va. — Construction subcontractors are celebrating three new Maryland laws that will improve their ability to do business in that state.

On May 16, 2013, Maryland Gov. Martin O’Malley (D) signed a bill into law that addresses payment issues involving individual surety. On April 9, Gov. O’Malley also signed legislation into law that gives subcontractors clarity in the state law governing retainage and another that provides payment assurances for subcontractors working on projects funded through public-private partnerships (P3s).

“Our members tell us that individual surety, retainage, and payment assurances on P3 projects are three of the most problematic business issues for them,” American Subcontractors Association Chief Advocacy Officer E. Colette Nelson said. “Maryland has made significant inroads on these critical subcontractor issues.”

The individual surety legislation (SB 599) requires the state to provide additional information to contractors on the types of securities accepted at the prime contract level, which include corporate surety bonds, bonds furnished by the state minority business agency, and individual surety bonds, as already permitted under state law. As originally introduced, SB 599 would have allowed individual entities to provide bonds at the subcontract level, but such language was removed, thus protecting subcontractor/supplier payment at the lower tiers.

Individual sureties are not required to be licensed in any state or to be approved by the U.S. Treasury, and while some individual sureties may be able to provide the liquid assets necessary to provide assurance, others cannot or do not.

“A payment bond from an individual surety may provide only illusory protection and can easily result in a catastrophic loss to a small subcontractor or supplier,” Nelson said. “Payment bonds provided by individual sureties are essentially worthless, unless the pledged assets are real, adequate in amount, and readily available to meet the legitimate payment claims of the subcontractors and suppliers. Subcontractors and suppliers should not be put in the position of finding out, in their hour of greatest need, that the assets pledged by an individual surety are illiquid, otherwise unavailable or simply insufficient to respond to their payment bond claims.”

The retainage legislation (SB 140) (Chapter 23) prohibits a state entity from retaining more than 5 percent on projects for which the prime contractor provides performance and payment bonds. “The new law also will improve cash flow for subcontractors on state work since Maryland law already limits the amount that a prime contractor can retain from its subcontractors to no more than that retained by the government,” Nelson explained.

The P3 legislation (HB 560) (Chapter 5) requires the private partner and the prime contractor on a public-private partnership project to provide performance and payment bonds in accordance with the state’s Little Miller Act. Depending on how a construction project funded by both public and private sources is structured, the project may be exempt from both mechanic’s liens and payment bond requirements, leaving subcontractors and suppliers without adequate payment assurances.

“This is another of what promises to be a long list of state legislatures taking steps to protect the payment of subcontractors and suppliers on construction projects financed by public-private partnerships,” Nelson added.

The three new Maryland laws will take effect on July 1, 2013.

Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. ASA’s vision is to be the united voice dedicated to improving the business environment in the construction industry. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.

###

ALEXANDRIA, Va. — A video-on-demand from the Foundation of the American Subcontractors Association is helping construction subcontractors get paid on time and in full.

In the video-on-demand, “The Science and Art of Getting Paid,” presenter Michael Pappas, Esq., Miles & Stockbridge, Baltimore, Md., explains how construction subcontractors can develop and implement a corporate strategy using the law, the subcontract, and the subcontractor’s own personnel to prevent payment delays and effectively apply pressure for proper payments, when necessary. He also reviews key elements of such strategies and how they enable subcontractors to better manage projects and reduce uncollectible receivables.

“The Science and Art of Getting Paid” (Item #8054) can be downloaded from the FASA Contractors’ Knowledge Depot at www.contractorsknowledgedepot.com. This 94-minute video-on-demand can be viewed whenever, and as many times as, you’d like and costs $65 for ASA members and $95 for nonmembers.

FASA was established in 1987 as a 501(c)(3) tax-exempt entity to support research, education and public awareness. Through its Contractors’ Knowledge Network, FASA is committed to forging and exploring the critical issues shaping subcontractors and specialty trade contractors in the construction industry. FASA provides subcontractors and specialty trade contractors with the tools, techniques, practices, attitude and confidence they need to thrive and excel in the construction industry.

###

ALEXANDRIA, Va. — The American Subcontractors Association, Inc. (ASA) expanded its line of contract resources for construction subcontractors with the introduction of its new “Subcontractor’s Negotiating Tip Sheets,” which will be released on a serialized weekly basis beginning on May 9, 2013.

Each one-page tip sheet is designed to provide a construction subcontractor with the information it needs to negotiate a particular subcontract clause, including ASA-recommended language, samples of what a subcontractor may see in a client’s proprietary subcontract, an explanation of the impact of poor language on a subcontractor, negotiating tips, and sources for more information.

The first “Subcontractor’s Negotiating Tip Sheet” addresses “pay-if-paid,” a clause that, in a recent survey, ASA members said is one of their most problematic. “A pay-if-paid clause shifts the risk of owner insolvency from the prime contractor, who has the responsibility to check the credit of the owner and the financing of the project, to the subcontractor, who may not even have access to that information,” said Brian W. Cubbage, the chair of ASA’s Task Force on Contract Documents and contract administration counsel of the Heico Construction Group, LLC, Alexandria, Va. “If a subcontractor agrees to a subcontract that makes payment completely contingent upon payment by the owner to the general contractor, the subcontractor may never get paid.”

In the tip sheet, ASA recommends that a subcontractor, faced with a subcontract with a pay-if-paid clause, substitute such language with:

“Subcontractor does not accept the risk of Customer’s receipt of payments from any source, and in no event will payments to Subcontractor be based upon or subject to, Customer’s receipt of payment for Subcontractor’s work.”

ASA also provides the following negotiating tips:

When the GC Says: “The subcontractor should share in the risk of owner insolvency.”

The Sub Should Say: “My credit risk is with you. There’s no justification for me to also extend credit to the owner. I don’t have a contractual relationship with the owner. You did the credit check on the owner and your decision to go forward is strictly your responsibility.”

When the GC Says: “A subcontractor’s lien rights and the job’s payment bond will offer payment protection.”

The Sub Should Say: “Bonding companies routinely deny claims on pay-if-paid terms, reasoning that no money is owed when an owner fails to pay. Liens also are often challenged using the same logic.”

When the GC Says: “You should always be willing to wait for your money until I’m paid.”

The Sub Should Say: “I can’t wait until you pay me to issue checks to my jobsite workers, office staff, utility companies and suppliers. If I’m supposed to finance you, I’ve become a banker, not a builder.

When the GC Says: “Pay-if-paid is a valid concept.”

The Sub Should Say: “Contingent payment terms are void in some states as being against the public interest and fair contracting practice. Even widely-endorsed model documents, such as ConsensusDocs and AIA, do not include a pay-if-paid clause. I would have to be a pretty lousy business person to agree to such a questionable concept as pay-if-paid.”

ASA members can access the “Subcontractor’s Negotiating Tip Sheets” in the member resources section of the ASA Web site at www.asaonline.com.

ASA will release additional “Subcontractor’s Negotiating Tip Sheets” as follows:

• May 16, 2013: Inability to Stop Work for Nonpayment
• May 23, 2013: No Interest for Late Payment
• May 30, 2013: Progress Payment Timing
• June 6, 2013: No Payment for Stored Materials
• June 13, 2013: Retainage for Sub is More than for GC
• June 20, 2013: One-Way Conduit Clause
• June 27, 2013: Temporary Site Facilities

On the last day of each month beginning on June 30, ASA will announce the clauses to be serialized during the following month.

Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. ASA’s vision is to be the united voice dedicated to improving the business environment in the construction industry. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.

###

ALEXANDRIA, Va. — A video-on-demand from the Foundation of the American Subcontractors Association provides tips for construction subcontractors to negotiate the purchase order terms they want.

In the video-on-demand, “Purchase Orders: How to Wage and Win the Battle of the Forms,” presenter David R. Hendrick, Esq., Hendrick, Phillips, Salzman & Flatt, Atlanta, Ga., explains how purchase order terms are established and modified, including key terms such as delivery, warranty and waivers.

“Purchase Orders: How to Wage and Win the Battle of the Forms” (Item #8053) can be downloaded from the FASA Contractors’ Knowledge Depot at www.contractorsknowledgedepot.com. This 94-minute video-on-demand can be viewed whenever, and as many times as, you’d like and costs $65 for ASA members and $95 for nonmembers.

FASA was established in 1987 as a 501(c)(3) tax-exempt entity to support research, education and public awareness. Through its Contractors’ Knowledge Network, FASA is committed to forging and exploring the critical issues shaping subcontractors and specialty trade contractors in the construction industry. FASA provides subcontractors and specialty trade contractors with the tools, techniques, practices, attitude and confidence they need to thrive and excel in the construction industry.

###