ASA Testifies on Capitol Hill

On Tuesday, February 6, Andrew Christ, current Secretary/Treasurer of ASA National and Chief Operating Officer of Compass Constructors in Kansas City, Missouri, testified before the U.S. House of Representatives Small Business Committee.  The committee hearing examined the impacts that the Small Business Administration (SBA) size standard decisions have on small businesses in the federal procurement marketplace. The hearing also reviewed how government decisions and red tape can prohibit small businesses from fully participating in federal procurement.

In his testimony, Andrew addressed the latter, offering comments on small business contracting reform within the federal government relating to the requirements for past performance and qualifications, the use of payment and performance bonds, the impact of continuing resolutions (CRs) on small businesses, and the bundling of contracts into Multiple Award Task Order Contracts (MATOCs) or Single Award Task Order Contracts (SATOCs).

Additionally, he addressed ASA’s continued support of H.R. 1740, which deals with bonding requirements for federal water infrastructure projects, and H.R. 2726 relating to change order reform. Finally, Andrew addressed our appreciation to Reps. Stauber (R-MN) and Scholten (D-MI) as co-chairs of the Congressional Construction Procurement Caucus.  Congratulations Andrew and ASA on a job well done!

Click here to see Andrew’s full testimony.

Illinois Supreme Court Affirms Ruling in Major CGL Coverage for Construction Defects Case

In December of 2023, the Illinois Supreme Court overturned decades of confusing law on insurance coverage for inadvertent construction defects on projects. The contractor in Acuity v. M/I Homes of Chicago, LLC was supported by an amici curiae brief sponsored by the American Subcontractors Association and its Subcontractor’s Legal Defense Fund (SLDF), in a coalition effort with the Associated General Contractors of America, National Association of Home Builders, and local chapters in Illinois. The Supreme Court answered the call and embarked on a clarification that was extremely favorable to the construction industry and its broad coalition of support. Last week, the Illinois Supreme Court denied Acuity’s petition for rehearing so this matter is now concluded.    

EVERY YEAR, the Subcontractor Legal Defense Fund is fighting for your rights in cases like these across the country. In 2023 alone, we took up five separate cases in Texas, Illinois, New Mexico and Oregon. In order to continue this work, we rely on the generosity and support of members and sponsors like you!

PLEASE SUPPORT THE FUND TODAY by contributing at www.sldf.net. We are also seeking sponsors for our 2024 SUBExcel New Orleans fundraiser. Details on that can also be found at the SLDF site. Any questions may be directed to Shannon Oscar at soscar@asa-hq.com.

Thank you for all your support of this unique and critical fund for subcontractors!

ASA Strongly Supports S. 2928, the Water Infrastructure Subcontractor and Taxpayer Protection Act

ASA joined the National Association of Surety Bond Producers (NASBP) and the Surety & Fidelity Association of America (SFAA) in a letter to the Senate Environment and Public Works (EPW) Committee Leadership urging the passage of bipartisan legislation S. 2928, the Water Infrastructure Subcontractor and Taxpayer Protection Act introduced by Sens. Cramer (R-ND) and Kelly (D-AZ).  This legislation would amend the Water Infrastructure Finance and Innovation Act (WIFIA) program to help protect taxpayer funds, workers, subcontractors and suppliers, including Small and Disadvantaged Business Enterprise (DBE) Program participants and subcontractors, who build water infrastructure especially in at-risk low income communities.  Per their letter, “as the Environment and Public Works (EPW) Committee looks at legislation in the second session of the 118th Congress to continue the important work of addressing our nation’s water infrastructure, this legislation would accomplish this policy goal with a simple solution that we urge the Committee to advance.”

For over 80 years, surety bonds have played a vital role in ensuring subcontractors and workers on public works projects receive compensation and projects are completed within budget and on time if the lead contractor encounters financial distress. Over 95% of all public projects require bonding under either the Federal Miller Act or state-law equivalents (collectively the Miller Acts). However, the applicability of the Miller Acts’ bonding requirements is not always clear on newer forms of project procurement, including public-private partnerships (P3s). Therefore, due to the increasing trend of using P3s to procure and deliver water infrastructure, there is a risk of a substantial amount of Federally-financed projects that do not maintain the same level of protections that have been required on public infrastructure projects over the past century.

This gap would leave workers, subcontractors, small business and taxpayers exposed to unnecessary risks. Without these protections, in the event of a contractor default, the project is halted, and can be terminated, leaving subcontractors, including small, minority and women owned construction subcontractors, and workers without pay. Additionally, states and taxpayers are then forced to absorb additional costs of rebidding and completing the project. We propose to amend WIFIA to adopt a policy solution, such as S.2928, which would ensure all forms of project procurement for water infrastructure using WIFIA-authorized financing, including P3s, utilize the traditionally required protections for workers, subcontractors, suppliers, and taxpayers, ensuring parity for all infrastructure projects.

This solution would have the Secretary of the Army or the EPA Administrator, as appropriate, ensure water infrastructure projects carried out with WIFIA financing have appropriate payment and performance security protections by requiring a surety bond if the project is not subject to State or local payment and performance security requirements. If a State has requirements for security protections, the Secretary or the Administrator could then accept the State requirements if the Federal interest with respect to Federal funds and other project risks related to design and construction are adequately protected. It is a commonsense solution to a complex problem.

This policy solution is currently applied to transportation projects that use the Transportation Infrastructure Finance Innovation Act (TIFIA) program. Congress overwhelmingly supported the adoption of the policy for TIFIA as shown by way of a unanimous floor vote, 97 – 0, to include the provision in the Infrastructure Investment and Jobs Act (IIJA). S.2928 mirrors the TIFIA solution, and would thereby maintain parity between the two programs.

Finally, aside from performance and payment security, surety bonding provides several additional benefits to public infrastructure projects. Ernst and Young performed a study, “The Economic Value of Surety Bonds,” that highlighted a number of these additional benefits, which include, but are not limited to:

• Bonded projects are more likely to be completed on time or ahead of schedule than unbonded projects. What’s more, unbonded projects are 10 times more likely to default than bonded projects.
• Bonded projects cost less than unbonded projects. 75% of project owners report that surety bonding reduces contractor pricing by an average of 3.2%.
• If a contractor defaults on a bonded project, surety companies intervene, lowering the cost of project completion by 85% and reducing the time to complete by two times.

As the EPW Committee continues to address our nation’s water infrastructure needs, we urge the Committee to pursue this policy fix to provide these vital protections to small businesses and workers who build the nation’s vital infrastructure.

Coming Through the Door in 2024!

ConsensusDocs publishes a monthly construction law newsletter that you can sign up for free. ConsensusDocs compiles the top five most-read articles of the year in January as an interesting way to reflect on the previous year as well as indicate some of the trending topics that lie ahead. For 2023, the most-read articles were:

5. Best Foot Forward: Preserving Limited Liability and Leverage in Negotiating Termination for Convenience Payment By: Tiffany Raush, Partner, Jones Walker LLP

4. Betterment and First Costs – Entitlement to Damages from Defects, Deviations, and Deficiencies Doesn’t Come with a Blank Check By: Bradley E. Sands, Associate, Jones Walker, LLP

3. Compendium on State Construction Laws Now Updated and Available , By: Joe Cohen, Partner, Fox Rothschild LLP

2. Tips On Declaring A Downstream Party in Default and Termination, By: Kaitlyn M. Linsner, Associate, Watt, Tieder, Hoffar, & Fitzgerald, LLP

1. And the Most Read Construction Law Article 2023 was Electronic Signatures on Contracts: Are They Truly Compliant? By: Rebecca S. Glos, Partner, Watt, Tieder, Hoffar, & Fitzgerald, LLP

Upcoming ConsensusDocs Webinar: Understanding the Benefits and Challenges of Progressive Design-Build

Want to learn more about Progressive Design-Build (PDB) and its benefits? Join ConsensusDocs on February 28th, 2024, at 12:00 p.m. ET for a live webinar, “Understanding the Benefits and Challenges of Progressive Design-Build”. Current ASA members receive a discount. Look for the code in a recent ASAToday issue. Don’t miss out on this opportunity to better understand the potential benefits and risks of PDB.

Progressive Design Build (PDB) is a contracting project delivery method that has grown in usage, especially for bigger projects. PDB uses a qualifications-based or best-value selection, and then design and price are fixed later. PDB differs from traditional design-build and presents some opportunities and risks. This webinar will equip you to understand the differences through project experiences. This webinar help you decide if PDB helps address fair risk allocation, increases transparency, and reduces change orders and major budget busts.

• Speakers:
  • Joanna K. Horsnail, Managing Partner at Mayer Brown
  • Jeff Miller, VP, General Counsel at The Haskell Company
  • Bert Somers, Contracting Manager, Western US at Ferrovial Construction US & Canada
  • Brian Perlberg, Executive Director of the ConsensusDocs Coalition & Senior Counsel at the Associated General Contractors (AGC) of America