American Subcontractors Association

Legislative/PAC

State Representative Burt Solomons UNPLUGGED

Get an uncensored view of the political and legislative process. After many years our friend State Representative Burt Solomons has decided not to run for re-election. Join us to thank him for his years of service and support of subcontractors and to listen to what he has to say about his years in Austin representing the North Texas area and our construction interests. Find out why you matter and what you can do to make a difference.

Date: Thursday, January 19, 2012
Time: 7:30-9:00 a.m.
Location: Omni Dallas Hotel at Park West
Address: 1590 LBJ Freeway, Dallas, Texas 75234
Cost: $40/person - We will mail invoices
RSVP: RSVP or Decline on or before, Tuesday, January 17, 2012
by phone at 817-640-8275 or by email at lswhite@asa-northtexas.org

Agenda:

7:30 a.m. - Breakfast is Served
7:40 a.m. - Recap of 2011 Legislative Session achievements & 2013 challenges
Discussion of political races & TCA legislative agenda, priorities and...
How YOU can Make a Difference!
8:10 a.m. - Burt Solomons Unplugged
9:00 a.m. - Meeting Adjourned

National ASA Reports

News Release

For Release: January 3, 2012
Contact: Franklin Davis, (703) 684-3450 ext 1317, fdavis@asa-hq.com

ASA Report: Texas Was State With Most Improved Public Policy Environment for Construction Subcontractors in 2011

ALEXANDRIA, Va. - 2011 was a good year for construction subcontractors in Texas. Not only did the Texas economy suffer the effects of the "Great Recession" less than other states, but also legislators tackled many priority issues of the state's subcontractors, according to The ASA Report: The Policy Environment in the States.

The annual report published by the American Subcontractors Association shows that Texas increased from 29th overall to 10th overall among states, in terms of the report's grading of the public policy environment for construction subcontractors.

The report also shows that Alabama, California and Iowa made major gains in their rankings, thanks to subcontractor-friendly changes in their laws.

"ASA members in Texas succeeded in driving legislative reforms in five major areas - electronic reverse auctions, payment bonds on public-private partnerships, risk allocation, lien claims for retainage, and statutory lien forms," said 2011-12 ASA President Kerrick Whisenant, Cornerstone Detention Products Inc., Tanner, Ala. "These victories and victories in other states demonstrate that subcontractors can make a difference working through ASA. In 2012, subcontractors across the country should build on these victories."

In 2011, Alabama, California, Colorado and Nevada improved their laws restricting retainage, while new laws in California, Iowa and Texas will help limit unfair allocation of risk through contract terms.

The ASA Report: The Policy Environment in the States is available on the ASA Web site, www.asaonline.com.

"Many of the reforms that occurred this year were a direct result of the grassroots advocacy efforts of ASA chapters across the country," added Whisenant. "ASA also celebrated important legal victories in California, Maryland and North Carolina courts."

The ASA Report warns both government policy makers and members of the construction team of weaknesses in their states' public policy environment for construction subcontractors. In addition, it helps educate subcontractors about the need to remain vigilant when negotiating contracts in a harsh public policy environment.

ASA's report scores and grades each state in seven policy areas and uses the results to calculate an overall score, grade and rank for each state. States scoring from 91-100 earn an "A." Scores from 81-90 earn a "B." Scores from 71-80 earn a "C." Scores from 61-70 earn a "D," and scores below 60 and below earn an "F."

Taking into account both laws and judicial decisions, the report scores: (1) Prompt payment protections; (2) Treatment of pay-if-paid clauses; (3) Mechanic's lien protections; (4) Payment bond protections; (5) Retainage limitations; (6) Anti-indemnity protections, including limits on "additional insured" endorsements; and (7) Anti-"bid shopping" measures. In 2009, ASA added "extra credit" for states that have taken the initiative to regulate controlled insurance programs. These non-standard insurance programs can have hidden risks for subcontractors.

Retainage Limitation Policies

Alabama's S.B. 437, signed by Gov. Robert Bentley (R) on June 9, 2011, limits the amount of retainage contractors can hold from subcontractors on private construction projects to 10 percent. This will help construction subcontractors in the state get paid faster for properly performed work. Previously, there was no retainage limit on private construction projects in the state. The ASA of Alabama-initiated measure reduces the rate of retainage held to zero after 50 percent of the project is completed. The law took effect on Sept. 1, 2011. The state's retainage limitation score rose from 27 to 59.

California's S.B. 293, signed by Gov. Jerry Brown (D) on Oct. 9, 2011, caps retainage at 5 percent on state and local public contracts entered into between Jan. 1, 2012, and Jan. 1, 2016. Because state law already prohibits a prime contractor from retaining more from a subcontractor than the owner retains from the prime, the new law's effect is a 5 percent cap on funds that can be retained from subcontractors on state and local public projects. The state's retainage limitation score rose from 32 to 33.

Colorado's H.B. 11-1115, signed by Gov. John Hickenlooper (D) on May 26, 2011, limits the retainage that state and local governments can hold to a maximum of 5 percent, instead of 10 percent. The law does not apply to water storage projects or highway and bridge construction projects that are opened to traffic. The law took effect on Aug. 10, 2011. The state's retainage limitation score rose from 10 to 13.

Nevada's A.B. 413, signed by Gov. Brian Sandoval (R) on June 10, 2011, reduces the maximum amount of retainage that may be held during the first half of a state or local public project to 5 percent of the progress payment owed to a contractor. The law provides that, except under limited circumstances, the amount of retainage may not exceed 2.5 percent of progress payments during the second half of the project. The law also allows the public entity to pay some or all of the retainage held during the first half of the project if satisfactory progress is being made in the work or if a subcontractor's portion of the work is complete. The law took effect Oct. 1, 2011. The state's retainage limitation score rose from 26 to 29.

Prompt Payment Policies

California's S.B. 293, signed by Gov. Brown on Oct. 9, 2011, improves the state's prompt payment law by requiring upper-tier contractors on local and state public projects to pay lower-tier contractors within seven days of receiving a progress payment. Previously, upper-tier contractors had 10 days to pay. The state's prompt payment score rose from 53 to 61 - a "D."

Oregon's S.B. 384, signed by Gov. John Kitzhaber (D) on June 30, 2011, makes minor modifications to the billing cycle requirement for prompt payment of amounts due under private construction contracts. The law took effect on Jan. 1, 2012. The state's prompt payment score did not change.

The Maryland Court of Appeals in Board of Education of Worcester County v. BEKA Industries, Inc., ruled that a public school board cannot defend its failure to pay its debt for a subcontractor's work on the grounds that it doesn't have the funds to pay or on the grounds that as a government entity, it has "sovereign immunity" from the subcontractor's claim. This decision will help ensure that construction subcontractors working on state and local public projects in Maryland will be paid for their properly performed work. The state's prompt payment score did not change.

Mechanic's Lien Policies

Texas' H.B. 1390, signed by Gov. Rick Perry (R) on June 17, 2011, defines the deadline for lien claims for retainage, clarifying that subcontractors have 30 days from completion of their work to provide lien notices to owners. The change will allow subcontractors more time to file lien claims for retainage that prime contractors have failed to release in a timely manner. It also extends the time for a subcontractor to file a lien affidavit for retainage to the 15th day of the fourth month after the completion of a construction project, unless the owner has notified the subcontractor that its lien affidavit must be filed within 30 days of the notice given by the owner. The law took effect on Sept. 1, 2011. In addition, Texas' H.B. 1456 establishes statutory lien waiver forms, both conditional and unconditional, for progress payments and final payment on construction projects. As a result, subcontractors and their clients will spend less time developing and interpreting an unpredictable patchwork of lien waiver forms. The new law took effect on Jan. 1, 2012. The state's mechanic lien score rose from 52 to 54.

Massachusetts' S.B. 2512, signed by Gov. Deval Patrick (D) on Jan. 5, 2011, gives Massachusetts-licensed or registered architects, landscape architects, professional engineers, licensed site professionals and land surveyors the same mechanic's lien rights that contractors, subcontractors and materialmen have. The law took effect July 1, 2011. The state's mechanic's lien score is unchanged.

New York's A.B. 5022, signed by Gov. Andrew Cuomo (D) on Aug. 3, 2011, allows subcontractors to file a lien for unpaid retainage on private construction projects up to 90 days after payment of retainage is due. The law took effect on Aug. 3, 2011. The state's mechanic's lien score is unchanged.

Oklahoma's S.B. 277, signed by Gov. Mary Fallin (R) on April 6, 2011, amends the state's pre-lien notice statute, strengthening lien rights on construction projects. A subcontractor or supplier that works on an owner-occupied dwelling can send a pre-lien notice within 75 days after the "last" date of supplying materials, services, labor or equipment for the construction project. In addition, a subcontractor or supplier will not have to send a pre-lien notice if the claim is less than $10,000. Previously, the pre-lien notice threshold for claims was $2,500. Finally, the law states that a subcontractor or supplier only has to send a pre-lien notice to "an" owner. If there are multiple owners on a project, a subcontractor or supplier may be able to satisfy its pre-lien notice requirements by sending the notice to only one owner. The law took effect Nov. 1, 2011. The state's mechanic's lien score did not change.

In the North Carolina case, Wachovia Bank National Association and Preserve Holdings, LLC., v. Superior Construction Corporation, the North Carolina Court of Appeals overturned a trial court's ruling that ignored existing North Carolina law, which establishes a contractor's mechanic's lien as effective on the date on which it first furnishes labor or materials. The state's mechanic lien score did not change.

In the California case, Eggers Industries v. Flintco, Inc., California's 3rd Appellate District Court of Appeals upheld a lower court's ruling that a fabricator of custom components is indeed a "subcontractor" entitled to mechanic's lien and payment bond rights under California law. The state's mechanic lien score did not change.

Anti-'Bid Shopping' Policies

Texas' H.B. 628, signed by Gov. Perry on June 17, 2011, prohibits any use of electronic reverse auctions to obtain contracted services for state and local construction projects on which a surety bond is required. In a reverse auction, a buyer of construction services requests bids using software or an online marketplace, and sellers have to choose whether to engage in multiple rounds of bids. The ban will protect subcontractors from being forced to divulge and change their bids in reverse auctions for bonded state and local work. The law took effect on Sept. 1, 2011. The state's anti-"bid shopping" score rose from 0 to 50.

Nevada's S.B. 268, signed by Gov. Sandoval on June 17, 2011, requires that a contractor forfeit 1 percent of the contract amount back to the state if it does "not comply with the requirements related to the substitution of subcontractors." Current law already prohibits a general contractor from substituting a named subcontractor on a state or local public project, except in certain instances. The law took effect on Oct. 1, 2011. The law does not change the state's anti-"bid shopping" score.

Anti-indemnity / "Additional Insured" Policies

Texas' H.B. 2093, signed by Gov. Perry on June 17, 2011, bans broad-form indemnification clauses in private and public construction contracts and makes additional insured requirements in construction contracts "void and unenforceable," except on consolidated insurance programs and for personal injury claims. The law took effect on Jan. 1, 2012. The state's anti-indemnity score rose from 6 to 94 - an "A."

Iowa's S.F. 396, signed by Gov. Terry Branstand (R) on April 7, 2011, makes broad- and intermediate-form indemnification provisions in most construction contracts "void and unenforceable." Only public contracts for highways, roads and streets are exempt from the law. The law took effect on July 1, 2011. The state's anti-indemnity score rose from 0 to 29.

California's S.B. 474, signed by Gov. Brown on Oct. 9, 2011, bars "Type I" indemnity agreements obligating subcontractors to indemnify general contractors from the latters' active negligence or willful misconduct. The law also establishes a proportionate, or comparative, liability standard that holds each party responsible only for the damage it causes and its defense costs for that damage. The law will take effect on Jan. 1, 2013. The state's anti-indemnity score rose from 18 to 29.

Arkansas' H.B. 1439, signed by Gov. Mike Beebe (D) on March 3, 2011, states that CGL policies sold in Arkansas shall contain a definition of "occurrence" that includes accidents and also "property damage or bodily injury resulting from faulty workmanship." The law was in response to Lexicon, Inc. v. Ace American Insurance Company. In the case, the U.S. Court of Appeals for the 8th Circuit ruled that defective workmanship is not an insured, accidental occurrence if the resulting damage is confined to the subcontractor's "work product." The law does not change the state's anti-indemnity score.

Hawaii's H.B. 924, signed by Gov. Neil Abercrombie (D) on June 9, 2011, states that an "occurrence" in a liability policy "shall be construed in accordance with the law as it existed at the time that the insurance policy was issued." The law was in response to Group Builders, Inc. v. Admiral Ins. Co. In the case, Hawaii's Intermediate Court of Appeals ruled that damage resulting from faulty workmanship was not an occurrence under the CGL policy. The law does not change the state's anti-indemnity score.

South Carolina's S. 431, signed by Gov. Nikki Haley (R) on May 17, 2011, overturns a S.C. Supreme Court ruling that held that damages resulting from faulty workmanship were the "natural and probable cause" of the faulty work and, as such, did not qualify as an "occurrence." The law took effect on May, 17, 2011. The law does not change the state's anti-indemnity score.

Payment Bonds

New York's S.B. 3182, signed by Gov. Cuomo on Aug. 3, 2011, changes the timing for suit against a payment bond. The new law requires suit within one year from the date that the "public improvement has been completed and accepted by the public owner." Previously, a suit had to occur within one year from the date on which final payment under the subcontract was due. This change greatly extends the time for filing claims on a payment bond. The law took effect Aug. 3, 2011. The state payment bond score rose from 58 to 65 - a "D."

California's S.B. 293, signed by Gov. Brown on Oct. 9, 2011, amends existing law and exempts laborers from the state's payment bond preliminary notice requirement. The law takes effect on Jan. 1, 2012. The law does not change the state's payment bond score.

Texas' S.B. 1048 signed by Gov. Perry on June 17, 2011, requires that payment and performance bonds complying with the state's Little Miller Act be provided on projects funded by public-private partnerships. These partnerships combine private and public investments to finance, operate and/or maintain public construction projects. The law took effect on Sept. 1, 2011. The law does not change the state's payment bond score.

Virginia's H.B. 1951, signed by Gov. Robert McDonnell (R) on April 6, 2011, raising the minimum contract amount required for bid, performance, or payment bonds from $100,000 to $500,000 for nontransportation-related construction projects. The law does not change the state's payment bond score.

Consolidated Insurance Program Policies

Texas' H.B. 2093, signed by Gov. Perry on June 17, 2011, requires three years of completed operations coverage on CIPs. The requirement helps protect subcontractors and other members of the construction team against third-party claims for bodily injury or property damage filed after they complete work on a CIP project. The law took effect on Jan. 1, 2012. The state earned three extra credit points.

Other Policy Development

New Mexico's H.B. 64, signed by Gov. Susana Martinez (R) on April 2, 2011, requires litigation and dispute resolution proceedings arising from construction contracts in New Mexico to occur in New Mexico. The law took effect July 1, 2011.

Founded in 1966, ASA amplifies the voice of, and leads, trade contractors to improve the business environment for the construction industry and to serve as a steward for the community. ASA's vision is to be the united voice dedicated to improving the business environment in the construction industry. The ideals and beliefs of ASA are ethical and equitable business practices, quality construction, a safe and healthy work environment, and integrity and membership diversity.

Governor Signs TCA Bills Into Law

Click here for more information!

Retainage Lien Bill
Lien Waiver Bill
CIP and Indemnification Bill

Texas Construction Association - 2011 Legislative Issues - 82nd Legislative Session

The Texas Legislature will reconvene for a 140 day session on January 11, 2011. While new issues may arise, the issues listed below are the priority issues set by the Board of Directors for the Texas Construction Association.

Broad Form Indemnification. A clause found in construction contracts provides that the subcontractor indemnifies the general contractor or owner for its wrongdoing even though the subcontractor may have done nothing improper . These clauses and certain additional insured endorsements should be made void. They are in direct conflict with the concept that a company should be responsible for its negligent acts.

Consolidated Insurance Program (CIPs). Known typically as Owner Controlled or Contractor Controlled Insurance Programs, the use of these "Wrap-Up" programs is increasing in Texas. While possibly a money saver for the Owner, the CIPs are plagued by poor administration, gaps in coverage or lack of coverage, insufficient limits, questionable safety and back to work programs, and auditing practices that cause subcontractor's retainage to be withheld even longer. In many cases, the exposure a subcontractor faces working on a CIP is unknown. In the 2003 session, TCA helped defeat legislation that would have required the use of OCIP's on every public project and has since worked to establish minimum standards for CIPS. Standards should be set for CIPs in Texas.

Education. The construction industry needs people who can read, write, communicate, and have a mastery of math needed by the construction trades. The Texas education system should provide for a reasonable non-college career path which allows for a person to obtain a high school diploma.

Immigration. Monitor Texas Legislature for bills that affect immigration issues. Oppose Texas legislation that makes employers a principal component of enforcement without providing an appropriate safe harbor for employers who act in good faith.

Lien Law Reform. Texas has the most complicated lien laws of any of the 50 States. Our lien laws should be reformed to make them much less complicated and much more user friendly. The existing law needs to be changed to prohibit the waiver of a person’s lien rights prior to getting paid for work performed or materials supplied. The poorly designed process to establish a lien for retained funds should be revised to provide a less onerous system for subcontractors, general contractors, and owners.

Loan Default. A lender should be required to give subcontractors and prime contractors notice of an owner's default on a construction loan. This notice will allow for work to be suspended until the default is cured. If a lender fails to provide the notice, the lenders security interest should become subordinate to the value provided by the work performed by the subcontractors and prime contractor.

Retainage Interest. If retainage will continue to be withheld for properly completed work, then interest should be paid. Contractors should no longer be bankers for construction projects in Texas.

Sovereign Immunity. State sovereign immunity doctrine should be changed for issues involving construction contracts to allow for contractors to sue the state for disputes without the requirement to obtain legislative consent to sue or a legislative appropriation to pay damages.

Workers' Compensation. Some lawmakers have become concerned over recent Texas Supreme Court decisions which interpreted Texas statutes effectively to provide the employer immunity from liability to those who have not been an injured worker's employer previously. While pleasing to many in the construction industry, this judicial solution of providing "statutory" employer or workers' compensation as a sole remedy has created angst for others. A solution to the statutory employer/sole remedy issue on construction projects needs to occur.

TCA Newsletter - September 2009 (pdf format)

TCA Newsletter - June 2009 - Legislative Session Wrap-Up (pdf format)

TCA Legislative News - May 25, 2007 (pdf format)

TCA Legislative News - May 18, 2007 (pdf format)

TCA Fall Newsletter 2006 (pdf format)