No Damages for Delay: Maybe, Maybe Not

Delays on construction projects are as common as shells on the shore. They can arise from contractor fault, owner fault or events beyond either party's control—or any combination of these. Contracting parties contemplate the possibility of delays, and often include contract language to address them—sometimes with clauses precluding a contractor fro...
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CA Court of Appeal Affirms Bar on Recovery of Licensed General Contractor for Work Performed by Its Unlicensed Subcontractor

Most are familiar with California's harsh penalty for unlicensed contractor work. California Business and Professions Code Section 7031 (Section 7031) bars any recovery for compensation for work performed by an unlicensed contractor under any theory of recovery "regardless of the merits of the cause of action." Cal. Bus. and Prof. Code § 7031(a). I...
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Iowa Supreme Court Issues Opinion Re: Subcontractor Preliminary Notices

On June 17, 2022, the Iowa Supreme Court rendered a decision in the Borst Brothers Const. vs. Finance of America case involving a mechanic's lien, which addressed one aspect of the pre-lien notice requirement for Iowa subcontractors on residential projects. As detailed below, the Iowa Supreme Court held that the 10-day deadline for posting of a Com...
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Construction Company Settles False Claims Act Allegations for $2.8 Million

On May 12, the U.S. Department of Justice announced a $2,804,110 settlement with Hensel Phelps Construction Company to resolve allegations that it violated the False Claims Act (FCA) by circumventing federal regulations designed to encourage contract awards to service-disabled veteran owned small businesses (SDVOSBs).According to the settlement, He...
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Massachusetts Appeals Court Strictly Construes Prompt Payment Act

On June 7, 2022, the Massachusetts Appeals Court issued an opinion of first impression regarding the Massachusetts Prompt Payment Act, G.L. c. 149 § 29E (Act). In Tocci Building Corp. v. IRIV Partners, LLC, Appeals Ct. Nos. 21-P-393, 21-P-733, the Appeals Court affirmed the decision of the Superior Court, which held that when an owner objects to a ...
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Construction Input Prices Are Up 21% from a Year Ago, Says ABC

The Fed's policy of monetary tightening and raising interest rates to fight inflation will "quite likely drive the economy into recession either later this year or at some point in 2023," according to the Associated Builders and Contractors (ABC) association.The Federal Reserve raised interest rates by 75 basis points yesterday, the biggest rate hi...
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More Details about VA Changes to Newly Enacted Ban on Contingent Payment Provisions

In April, we wrote about Virginia Senate Bill (SB) 550, which sought to amend VA ST §§ 2.2-4354 and 11-4.6 to prohibit the use of contingent payment provisions in public and private construction projects. Since then, SB 550 was formally enacted and signed into law on April 27, 2022. We observed that it was still unclear as to whether this law appli...
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May CMI Shows Signs of Economic Downturn

The May NACM Credit Managers' Index has begun to show signs of economic distress as the combined score fell 1.6 points to 57.5—slightly higher than its lowest reading for the year registered in January (57.1). Overall, the combined score fell 1.6 points when compared with April (59.1). The drop is a result of high inflation and pervasive supply cha...
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Hurricane Season Could Mean Large Economic Losses

 The start of hurricane season is one week away, and the National Oceanic and Atmospheric Administration (NOAA) expects another above-average year with up to 21 named storms (winds of at least 39 mph), of which six to 10 could become hurricanes with winds of 74 mph or higher—including three to six major hurricanes with winds of 111 mph or high...
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Settlement Strategy Is More Important Than Litigation Strategy

In the world of federal government contract disputes, a great deal of time is frequently spent drafting a request for equitable adjustment (REA) or a claim under the Contract Disputes Act. Both of these actions are often a prelude to litigation and, when the parties cannot agree to an amicable resolution, lead, inevitably, to a trial. Once this pro...
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Specially Fabricated Materials Can Affect the Construction Supply Chain

Construction projects sometimes require materials that are not stocked by suppliers and that require special fabrication to make them suitable for certain fixtures. Specialized materials can be both expensive and difficult to obtain, said Sam Smith, regional finance manager at Crescent Electric Supply Company (East Dubuque, IL). In addition, these ...
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Senate’s Bankruptcy Threshold Adjustment and Technical Corrections Act Retains $7.5 Million Eligibility for Subchapter V Small Business Debtors

The Small Business Reorganization Act (SBRA) went into effect on Feb. 19, 2020, creating Subchapter V of the Bankruptcy Code. Acknowledging that a bankruptcy proceeding is not "one size fits all" and that a Chapter 11 proceeding can be prohibitively expensive and lengthy for a business, the goal of the SBRA was to reduce costs and increase efficien...
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Grand Jury Indicts Former COO of Major St. Louis Construction Firm in Alleged Fraud Scheme

The federal grand jury recently indicted Brian Kowert, Sr., former chief operating officer of HBD Construction Company, for five counts of wire fraud related to falsifying the company's participation with a minority business enterprise (MBE) on several construction and redevelopment projects from 2014 through 2022, according to the U.S. Department ...
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The Risks of Selling to Unlicensed Contractors

What happens if you find yourself working with an unlicensed contractor? Or your customer's customer—perhaps, the general contractor—is unlicensed? Understanding the risks beforehand and the steps for mitigating them will help you avoid unnecessary headaches.Even if your company has contracted with a licensed party in the supply chain, are you sure...
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Pay-if-Pay Clauses May Be Eliminated in Virginia

Pay-if-pay clauses may be eliminated soon in public and private construction contracts in Virginia. The Virginia General Assembly has approved a new law known as Senate Bill 550 that would make a general contractor individually liable for the entire amount owed to any subcontractor.Payment by the owner shall not be a condition precedent to payment ...
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March CMI Indicates Economic Resiliency to Russia-Ukraine Conflict

The March NACM Credit Managers' Index shows resiliency despite the widespread economic uncertainty that followed Russia's invasion of Ukraine in late February. This month's combined score rose 1.1 points to 58.9.However, rising commodity prices and supply-chain disruptions relating to the ongoing conflict may soon start to weigh heavily on business...
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Tribal Construction Projects: How They Differ and How You Can Stay Protected

More opportunities to participate in tribal construction projects could be on the horizon. The Infrastructure Investment and Jobs Act legislation passed in November includes more than $13 billion for tribal communities across the country, and makes them eligible for billions more, according to a White House statement."The trends in tribal construct...
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Construction Outlook Predicts Continued Inflation and Steep Material Prices

Supply-chain disruptions and labor shortages have led to significant increases in inflation and prices in the construction industry. And more disruptions may be on the horizon due to the conflict between Russia and the Ukraine, said Amy Crews Cutts, Ph.D., CBE, NACM economist, during the NACM webinar, U.S. Construction Outlook: Workforce Worries, P...
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More Inflation and Delays Expected to Drive Up Construction Prices

Inflation continues to takes its toll on the construction industry—fueled by spikes in commodity prices, supply chain disruptions and material delays. Sanctions on Russia, due to its invasion of Ukraine, have led to a further rise in pricing and supply disruptions. And the sum of these issues is expected to affect all parties along the contractual ...
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Personal Guarantees Provide Payment Leverage

Nearly 69% of credit professionals who responded to a recent eNews poll request a personal guarantee on a case-by-case basis, while 17% never require them. A personal guarantee is a legal promise by an individual to repay credit issued to a business, should the business not repay the debt. Personal guarantees provide an extra level of protection to...
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