President Supports Law Protecting Suppliers, Subs

 January 1, 2016

President Supports Law Protecting Suppliers, Subs

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Lien Waivers Come in a Variety of Types

December 1, 2015

Mechanic’s lien waivers relinquish creditors’ rights to impose liens on property owners, so it’s critical to know what type to use and when. “Simply stated, a lien waiver is like a receipt for payment you are receiving,” said Lynn Wilkes, a regional credit manager for St. Louis-based HD Supply Waterworks, and NACM Credit Congress speaker.

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Surety Update 2: Senators Try Two-Edged Approach to Move Individual Surety Language through Senate

June 16, 2015

Legislation that sets clearer standards for assets pledged by an individual surety on federal construction projects could face an uphill battle in the U.S. Senate after passing through the House last month.

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Surety Update 1: U.S. House Passes Proposed Law to Assure Assets Pledged Are Marketable, Valuable

June 16, 2015

The U.S. House of Representatives passed legislation May 15 to establish clear standards for assets pledged by an individual surety on a federal construction project.

"Individual sureties are 'natural persons' and are not subject to the same auditing procedures reserved for corporate sureties under the Federal Miller Act," said Chris Ring of NACM's Secured Transaction Services.

Individual sureties must post collateral in the care of the government, which will only accept cash, readily marketable assets or irrevocable letters of credit from a federally insured financial institution to satisfy underlying bond obligations, Ring noted. "By moving the ball forward on this legislation, it assures that individual sureties have adequate assets to pay potential claims."

The proposed provision is part of H.R. 1735, the National Defense Authorization Act for Fiscal Year 2016. Sec. 839 of the bill would require an individual surety to pledge solely those assets that the law currently allows to be pledged directly to the government and to place such assets in the care and custody of the federal government (i.e., the Secretary of Treasury, a federal reserve bank or a depository designated by the Secretary).

This section would also increase the amount of surety bond guarantees from the Small Business Administration from 70% to 90% and would require the U.S. comptroller general to study the surety bond program and to examine the impact of this amendment.

The provision would eliminate fraud and abuse by curbing the ability of an individual surety to pledge insufficient or illusory assets, Ring said. In addition, the federal government could pay claims to subcontractors and suppliers more easily and expeditiously if an individual surety bond is accepted.

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Public Private Partnerships Growing in Popularity

June 16, 2015

Efforts to enact P3 (Public Private Partnership) mandates in U.S. states that lack solid lien rights continue to spread throughout the country. The District of Columbia is among the most recent to begin operating with P3-focused laws, which relate to a construction project being completed on publicly owned property and funded by private investment. For subcontractors and material suppliers in states without such legislation, there is no way to file a mechanic's lien on a public property. Financial protection is also lacking because general contractors typically aren’t required to post a payment bond in such states.  

The state governments of Arkansas, Georgia and New Mexico are among those currently working on potential legislation, according to the National Association of Surety Bond Producers. It noted that New Mexico has no P3 statues in place, while the others lack protective language related either to bonding or surety requirements. The association notes Maryland and Pennsylvania are also working to correct or clarify existing language which leaves too much room for "discretionary" decisions on the part of GC’s).

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Mississippi Expands Ability to Reprimand “Poor Performing” Contractors

June 16, 2015

Mississippi has passed two pieces of legislation of note this session. Mississippi SB2508 sees the state again taking steps to regulate and validate construction contractors in an attempt to ensure they are licensed. The state now has more ability to issue citations and reprimands on contractors deemed as poor performers, including the potential removal of contracts from the licensing board.

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Case Shows 'Trust but Verify' an Important Guiding Principle for Suppliers, Subs

April 3, 2015

A famous quote from the Cold War era, “Trust but verify,” is back in fashion on Capitol Hill and in many business instances, as many circumstances continually dictate its prudence. A recent fraud case out of Minnesota related to a public works project covered by the Minnesota Little Miller Act is a great example of the pertinence of this quote.

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Additional PA Change to Affect Suppliers and Subs Plans Now

December 31, 2014

Construction material suppliers and subcontractors in Pennsylvania must be mindful of a second set of significant changes to mechanic’s lien requirements passed in 2014, ones that make the state a “Notice to Order” one, even though they don’t go into effect for two years. Granted, plenty of debate exists regarding whether Pennsylvania’s newest changes will be a net-positive or negative.

The switch to a Notice to Owner state will create a central, Internet-based directory for Notices of Commencement, Notices of Furnishing, Notices of Completion and Notices of Nonpayment, according to an analysis released in late December by frequent NACM contributor Jim Fullerton, Esq., principal at Fullerton & Knowles, PC. The change goes into effect in full on December 31, 2016, and could prove to be a bit of a double-edged sword in his estimation:

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STS, ASA, Industry Awaits Response of Protest Against Texas Municipality's Bond Waiver Plan

October 24, 2014

Officials from the City of Kilgore, TX have gone quiet since opposition came in from the construction industry to their plan to waive bond requirements on a baseball complex. Chris Ring, of NACM’s Secured Transaction Services, said the plan to reduce costs by skirting obligations of a surety bond on such projects is about accountability and providing some kind of path toward payment when a problem arises.

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Stop Payment Notice Rights Weakened by Cal Court of Appeals?

October 24, 2014

Also in California, criticism is mounting regarding a state Court of Appeals decision that could decrease contractors Stop Payment Notice rights on public projects. The American Subcontractors Association (ASA) noted in a September letter to the California Supreme Court that the decision in Golden State Boring & Pipe Jacking, Inc. v. Safeco Insurance Company, et al infers that a contractor would be required to serve a Stop Payment Notice when completing its portion of the work and again by completion or acceptance of the project by a public entity. ASA noted "a Stop Payment Notice is only effective if the public entity is still holding funds dedicated to the project."

 

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