Construction Law Blog
Recent case-law, statutory developments, articles and news impacting
the construction industry from the law firm Babst Calland
ABOUT THIS BLOG
The Babst Calland Construction Law Blog contains articles published by the attorneys at Babst Calland to provide timely legal and business information on issues important to the construction industry.
- regulatory developments involving the use of drones on construction projects;
- amendments to Pennsylvania's Contractor and Subcontractor Payment Act (CASPA);
- case law dealing with Mechanics’ Lien claims;
- updates on the use of Project Labor Agreements on public projects;
- updates on "pay if paid" contract clauses;
- forum selection; and
- use of Master Services Agreements in the construction industry.
The use of a PLA is permitted where the contracting agency can establish extraordinary circumstances, and PennDOT did not make that demonstration in this case. The Markely Street Project is a long term road improvement, the first phase of which was completed a year ahead of schedule. Nor is there any evidence that there is a labor shortage in the greater Philadelphia area. The Keystone Report’s recommendations did not justify the PLA because it did not identify any extraordinary circumstances surrounding the Markley Street Project that warranted its use.(Emphasis supplied). Because of the PLA’s inherent unfairness to nonunion contractors and PennDOT’s failure to establish the “extraordinary circumstances” to justify its use, the Court held that the “PLA requirement in the bid solicitation for the Markley Street Project violates competitive bidding” and canceled the bid solicitation. The most signifcant aspect of the Allen Myers case is the Court’s willingness to examine the justifications for the use of PLAs by contracting agencies. If Commonwealth Court really means that PLAs are warranted only in “extraordinary circumstances,” then the routine use of PLAs for government contracts in the Commonwealth is of dubious validity.
Tagged: PennDOT, Procurement Code, Project Labor Agreement, union
Steps you can take:In response to the Act, both general contractors and subcontractors should review their contract provisions with counsel, general contractors may consider requiring subcontractors to obtain a bond or insurance to protect against wage claims by a subcontractor’s employees, and consider adding contract provisions to allow for review of their subcontractors’ pay practices, records, and history of wage claims and lawsuits for at minimum three years following final payment. General contractors should further consider requiring a subcontractor’s principal or officer to sign certified payrolls, thereby attesting that employees were paid properly.
Tagged: Industry news, Maryland, Proposed Legislation, subcontractor payment, wage payment
Tagged: Pipeline construction
- Any contract provision purporting to waive rights afforded under CASPA is unenforceable unless waiver of the right is expressly permitted by CASPA (for example, CASPA permits parties to modify by contract the CASPA right to interest at a rate of 1% per month).
- For contracts lacking a provision permitting suspension of work for nonpayment, contractors and subcontractors now have a statutory right to suspend work for nonpayment under the following conditions:
- Payment has not been made within the period of time required by the contract or the statutory period set by CASPA, whichever is applicable;
- After 30 calendar days have passed since payment was due, written notice of the nonpayment is sent via email or postal service to the person who owes the payment or their authorized agent; and,
- After 30 calendar days since the written notice of nonpayment was sent, written notice is sent via certified mail (to the person who owes payment or his/her authorized agent) of the intent to suspend performance in 10 calendar days if payment is not made.
- Thus, under this statutory right, work may be suspended no earlier than 70 days after payment was due.
- Parties can contract for a shorter period of time to suspend performance after nonpayment. Conversely, any suspension of work provision that provides for a longer period of time (or does not permit suspension in the event of nonpayment) is unenforceable.
- Good faith withholding of payment now expressly requires written explanation of the reason for the withholding within 14 days of receipt of an invoice.
- Most notably, the Act expressly provides that failure to provide a written explanation within 14 days will constitute a waiver of the right to withhold and require payment of the invoiced amount in full. As always, the amount of the withholding must be reasonable (i.e. a reasonable estimate of the cost to correct the deficient work or the damages sustained).
- These written notice of deficiencies requirements must also be followed for retainage to be withheld beyond 30 days of final acceptance of the work; otherwise, the right to withhold retainage is waived.
- Delay of payment due to an error in an invoice is now expressly prohibited. CASPA has always required written notice of invoice errors to be sent within 10 working days of receipt of an invoice. The Act now makes it clear that, once the notice of the error is received by person who sent the mistaken invoice, payment of the correct invoice amount must be made when due regardless of whether (or when) the invoice is corrected.
- Finally, contractors and subcontractors now have the express right to payment of retainage upon substantial completion if they post a maintenance bond for 120% of the retainage amount.
Tagged: CASPA, Industry news
Tagged: Construction Contracts, Construction Economics, Industry news, Payment Bond, Performance Bond, Subcontractors, Surety
Tagged: Construction Contracts, Mechanics' lien, Subcontractors
Tagged: Proposed Legislation, Public Construction Projects