February 2018
ASA Introduces New White Paper on Contingent Payment
Observers of the construction industry have seen companies go bankrupt, or go through torturous downsizings, layoffs and disputes, because of slow payment and nonpayment by customers. One cause of such difficulties is the contingent payment clause. In addition to the economic damage pay-if-paid clauses cause, they also raise serious legal and ethical questions in business. Simply put, “contingent payment” describes a contractual provision that makes one party’s right to be paid for services provided to a second party contingent on the payment of the second party by a third party. In the construction industry, this clause often translates into a subcontractor’s right to be paid being contingent on the owner’s payment of the prime contractor for the subcontractor’s work. You can master contingent payment by studying ASA’s new white paper now available free for ASA members on ASA’s Web site. Mastering Contingent Payment helps readers understand the important differences between pay-if-paid and pay-when-paid clauses, discusses industry practices, reviews existing law and trends, and provides tips on how a subcontractor can protect its business. The white paper is available to ASA members as a free, downloadable PDF document under “Contracts and Project Management” in the Member Resources section of the ASA Web site.
House Committee Approves ASA-Endorsed Risk Allocation Bill
On Jan. 30, the House Judiciary Committee approved, by a vote of 16 to 14, H.R. 3808, a bill that specifies that lawsuits against property owners and contractors for injuries associated with slips, falls, and gravity-related risks at federally-funded projects must be judged under a comparative negligence standard. The bill is “an important measure towards common sense tort reform,” a coalition of 20 associations representing construction, real estate and insurance companies told the committee. As a part of the coalition, ASA said, “H.R. 3808 would enable a course correction for the proliferation of lawsuits relying on New York State’s “Scaffold Law,” which was enacted in the 19th century, long before the advent of federal and state OSHA and workers’ compensation laws. The courts have interpreted the “Scaffold Law” to subject property owners and contractors to “absolute liability.” This means that costs of injuries are completely borne by property owners and contractors, even if they are not the direct employers of the injured workers. According to the business coalition, “The U.S. government bears higher costs for general liability insurance at the dozens of federally-owned and -managed properties in New York State. As Federal property managers hire contractors to perform commonplace cleaning, painting, renovation, and construction activities within the Scaffold Law’s scope, taxpayers are ultimately on the hook for more expensive insurance to cover accidents at U.S. facilities.”
ASA-Endorsed Change Order Bill Introduced in House
On Jan. 11, Rep. Don Bacon (R-Neb.), along with bi-partisan co-sponsors, introduced a bill to address change orders on federal construction projects. H.R. 4754, the “Change Order Transparency for Federal Contractors Act,” would require a federal contracting agency to provide with its invitations for bid and requests for proposals details on its change procedures and historical performance data about change orders. “Small business contractors deserve to know all relevant information before entering into a contract with a federal agency,” Bacon said. “Small businesses waste time and money while waiting for the approval of their change order requests.” ASA, in collaboration with the Construction Industry Procurement Coalition, has been working with Congress and federal contracting agencies to improve the federal government’s change order procedures. “When enacted, H.R. 4754 will help federal construction contractors and subcontractors learn and understand the risk of nonpayment for change orders before bidding and signing a contract,” said ASA Chief Advocacy Officer E. Colette Nelson. Rep. Steve Knight (R-Calif.), Rep. Stephanie Murphy (D-Fla.) and Rep. Al Lawson (D-Fla.) co-sponsored the bill, which is pending before the House Small Business Committee. Ask your Representative to co-sponsor H.R. 4754 by using the ASA Legislative Action Center.
ASA and Surety Industry Associations Update P3 Guide
Construction of projects for public use through public-private partnerships continues to increase at all levels of government, particularly at the state and local levels. Many of the P3 programs authorized by the states, however, provide no payment protections for subcontractors and suppliers on P3 projects, on which mechanic’s liens and a requirement for payment bonds most likely do not apply. ASA, in collaboration with the National Association of Surety Bond Producers and The Surety & Fidelity Association of America, has reviewed the state laws authorizing construction projects to be financed by P3s and determined which programs provide payment assurances for construction subcontractors and suppliers through payment bonds. The updated guide, Public-Private Partnership Laws in the States, Including Surety Bond Requirements (2018 Edition), will help subcontractors determine whether they have payment protections before they bid on a P3 project. “Many people think that P3s are used only for expensive horizontal construction projects, such as major bridge and highway construction, but P3s are increasingly being used for vertical construction projects, too,” said ASA Chief Advocacy Officer E. Colette Nelson. “They are being used to construct public housing, to renovate or construct educational facilities, and to build or renovate public buildings and public parking facilities.” During 2017, Alabama, Arkansas, Kentucky, Louisiana, Nevada, Oklahoma, Oregon and Utah enacted new laws governing public-private partnerships. Nelson reminded ASA members to obtain a copy of and review the prime contractor’s surety bond before signing a subcontract and certainly before starting work. Once a subcontractor obtains a copy of the bond, it can expeditiously check the validity of bonds by confirming that the surety is licensed in the jurisdiction of the project and that the bond has been authorized by the surety. NASBP provides step-by-step guidance in its publication Always Verify Your Bond!
Post OSHA Form 300A from Feb. 1 Through April 30
The Occupational Safety and Health Administration requires most employers with 10 or more employees to prepare and maintain records of serious occupational injuries and illnesses using the OSHA 300 Log. Employers who are required to keep the Form 300, Log of Work-Related Injuries and Illnesses, must post Form 300A, Summary of Work-Related Injuries and Illnesses, in a workplace every year from Feb. 1 to April 30. Visit OSHA’s Recordkeeping Rule Web page for more information on recordkeeping requirements.
DOL Announces Proposal for Small Business Health Plans
On Jan. 5, the U.S. Department of Labor issued a proposed rule to expand the opportunity to offer employment-based health insurance to small businesses through Small Business Health Plans, also known as Association Health Plans. Under the proposal, small businesses and sole proprietors would have more freedom to band together to provide affordable, quality health insurance for employees. The proposed rule, which applies only to employer-sponsored health insurance, would allow employers to join together as a single group to purchase insurance in the large group market. The proposed rule would:
- Allow employers to form a Small Business Health Plan on the basis of geography or industry. A plan could serve employers in a state, city, county or a multi-state metro area, or it could serve all the businesses in a particular industry nationwide;
- Allow sole proprietors to join Small Business Health Plans, clearing a path to access health insurance for the millions of uninsured Americans who are sole proprietors or the family of sole proprietors.
Under the proposed rule AHPs could charge individuals higher premiums based on health factors or refuse to admit employees to a plan because of health factors. Interested parties can submit comments at www.regulations.gov, the federal government’s regulation portal, on or before March 6.
OSHA Increases Penalty Amounts for 2018
The Occupational Safety and Health Administration has increased civil penalty amounts for violations of workplace safety and health standards by 2 percent from last year. Under law, the agency is required to adjust penalties for inflation each year. New penalties for willful and repeat violations are $129,336 per violation; penalties for serious, other-than-serious, and posting requirement violations are $12,934 per violation; and failure to correct violations is $12,934 for each day the condition continues.
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