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Kansas Still Lacking P3 Legislation, But Effort Picking Up Steam
April 22, 2016
Kansas lawmakers are considering SB 475, which would require a payment bond in an amount “equal to the full contract amount solely for the protection of claimants who supply labor or materials to the contractor or subcontractor in the prosecution of the work.” Kansas is one of just more than a dozen states nationwide without such statutes already in place.
Absent of passage and gubernatorial signature, Connie Baker, of NACM’s Secured Transaction Services, recommends requesting payment bond copies for review and investigating the financial reliability of the surety in question. E. Collette Nelson, of the American Subcontractors Association, added that it is also important to determine if another, above-tier contractor has provided a payment bond and to consider if the bond amount outlined is actually sufficient for your company should a problem arise.
“Taking these steps will only add to your peace of mind that your company is secured,” Baker noted.
- According to state documents, SB 475 will become live as soon as it is published in the state’s statute book and calls for the following:
- Prior to entering into a contract with an owner for an amount of $25,000 or more that involves a P3, the contractor must furnish to the owner (or its agent) two bonds, which become binding upon the award of the contract:
1. A performance bond equal to the full contract amount conditioned upon the “faithful performance of the contract in accordance with plans, specifications and included conditions, made solely for the protection of the owner awarding the contract.”
2. A payment bond, also equal to full contract amount, for the protection of claimants supply products or labor to the GC or subcontractors working on the project.
- Bonds will include a prevision allowing the prevailing party to recoup legal fees and expenses that the court finds reasonable.
P3 agreements have become increasingly popular in the United States by, in theory, combining resources available from private industry with expertise at the government level on transportation projects, according to an early 2016 report by the National Conference of State Legislatures (NCSL). In the last three full calendar years, state lawmakers throughout the country have filed 47, 68 and 81 bills, respectively, for consideration.
Kentucky Enacts Suppliers, Subs Protections in P3 Work
April 22, 2016
Kentucky Gov. Matt Blevin (R) signing of Kentucky statutes requiring a general contractor (GC) to post payment bonds on public private partnership (P3) projects made him the latest to join a growing list of governors who have enacted such legislation over the last few years.
“Before this legislation was signed into law, it was at the general contractors’ discretion to post a payment bond,” said Chris Ring, of NACM’s Secured Transaction Services. “Material suppliers are often asked to grant credit on job accounts that exceeds the creditworthiness of their subcontractor customers. Without this legislation, suppliers’ recourse against non-payment rested squarely on the shoulders of their subcontractor customer.”
The American Subcontractors Association (ASA) was among industry groups that applauded the Kentucky legislature’s efforts in crafting HB 309. Notably, the law will require compliance with the state’s existing “Little Miller Act,” according to ASA Chief Advocacy Officer E. Colette Nelson.
P3 agreements have become increasingly popular in the United States by, in theory, combining resources available from private industry with expertise at the government level on transportation projects, according to an early 2016 report by the National Conference of State Legislatures (NCSL). Only about a dozen states—including New Jersey, Michigan, Iowa and New York—do not have P3 legislation already on their books, the report indicated. In the last three full calendar years, state lawmakers throughout the country have filed 47, 68 and 81 bills, respectively, for consideration.
“Governments are turning to P3s because infrastructure needs far exceed the funding available in budges raised through taxes or that could be accessed with revenue bonds and borrowing,” said Nelson. “For construction subcontractors and suppliers, one major concern with P3s is that established payment assurances under existed law may not apply. … This new law will help protect payment of subcontractors and suppliers on P3 projects in Kentucky.
Protocols for Lien Filing Deadlines Tougher in Some States
April 7, 2016
Determining the best time to file a mechanic’s lien sometimes requires a forensic review of an improvement project, from determining if there are any issues with the product or service to spotting any problems with invoices. After wading through those issues, the next step often involves deciphering statutory filing deadlines for mechanic’s liens. In some states, it’s fairly easy to determine the deadline; in others, notably California, it’s more difficult.
Therefore, creating internal protocols that prompt payments is a sustainable and suggested practice to achieve timely filings, said Chris Ring, of NACM’s Secured Transaction Services (STS). In California, claimants, including the original contractor, subcontractor or supplier, must file a mechanic’s lien within 90 days of completion of the project if the owner has not recorded a notice of completion or cessation.
For public jobs, a preliminary notice must be filed with the original contractor, surety or public agency within 20 days from first furnishing labor or material.
But important questions remain such as what constitutes a notice of completion or where one is found. According to California’s Civil Code, Title 2, Private Works of Improvement, Section 8180-8190, completion of a work of improvement occurs when one of the following happens:
• Actual completion of the improvement work
• Occupation or use by the owner accompanied by cessation of labor
• Cessation of labor for 60 consecutive days
• Recordation of a cessation notice after cessation of labor for 30 days
If a work of improvement is subject to acceptance by a public entity, completion occurs on acceptance.
According to California’s Civil Code, Title 2, Public Works of Improvement, Section 9200-9208, completion of a work of improvement occurs when whichever of the following occurs first:
• The public entity’s acceptance of the work of improvement
• Cessation of labor on the work of improvement for 60 consecutive days
Searching the job site is one way to find a notice of completion, but that’s not always practical, Ring said. Also, the information is not always available at the county recording site for the project. Likewise, a request for a copy of the notice from the property owner or general contractor could go unanswered because the California statute does not outline damages if they don’t furnish a copy, he added.
Try to set a protocol that looks at the possibility of filing a lien within 60 days of last furnishing, Ring recommended. That will allow time for collection calls, demand letters and, if needed, filing a lien.