Inside this Edition: NESCA Meets With DASNY To Discuss Payment Problems, ESSA’s Lien Discharge Bill Passed By Legislature, OGS To Implement Change In Insurance Requirements, President’s Message, Federal Court Knocks Down DOL Annualization Regulation, Welcome New Members, Construction Prompt Payment Bill Delivered To Governor Pataki
NESCA MEETS WITH DASNY TO DISCUSS PAYMENT PROBLEMS Go
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On July 15, 2002, a group representing NESCA and the General Building Contractors of NYS met with representatives of the New York State Dormitory Authority to address payment-related problems identified in two separate surveys conducted by NESCA and GBC. In both the NESCA and GBC surveys, members of the two associations, respectively, reported long delays in the processing and payment of change orders by DASNY as well as delays in project closeout and release of retainage. NESCA and GBC subsequently shared the results of their surveys with DASNY officials and requested a meeting to discuss further the problems contractors and subcontractors are having with that agency.
At the meeting, Doug Van Vleck, DASNY’s Managing Director for Construction agreed that the average length of time to pay change orders and close out projects identified in the surveys is far too long and needs to be addressed. When asked for recommendations on how to improve procedures at DASNY, NESCA and GBC offered the following suggestions:
· Adopt an OGS-style field order procedure to promptly handle small changes in the work.
· Standardize procedures and develop more consistency in the field.
· Improve field-level attitudes.
· Improve drawings & specifications.
· Negotiate change orders as the work proceeds, and not at the end of the project.
· Comply with Section 139-f of the State Finance Law regarding release of retainage.
· If a change order or change order amount is rejected, provide a logical explanation for such rejection.
· Develop an expedited dispute resolution procedure for dealing with disputed items.
At the conclusion of the meeting, Mr Van Vleck promised to assign a task force to review internal procedures at DASNY and to meet with OGS about developing a field order system. He asked for another meeting with NESCA and GBC representatives in two months to review DASNY’s progress.
ESSA’S LIEN DISCHARGE BILL
PASSED BY LEGISLATURE Go Top
An Empire State Subcontractors Association (ESSA) bill that would set the amount of an undertaking required to discharge a public or private improvement lien at 110% of the lien amount, has been passed in both houses of the State Legislature and will be sent to Governor Pataki for his action. Currently in New York State, undertakings to discharge liens, which are usually in the form of a bond issued by a surety, are required to be set by a judge or justice with or without a stipulated agreement between the surety providing the bond and the lienor. The time and expense (for both parties) of this procedure can be eliminated by statutorily setting the amount of the undertaking at 110% of the lien amount. This procedure for discharging liens is currently utilized in the State of New Jersey. The ESSA legislation was passed in the Assembly on June 19th and in the Senate on July 2nd. If signed by the Governor, it will represent ESSA’s 32nd legislative success since 1975.
OGS TO IMPLEMENT CHANGE IN
INSURANCE REQUIREMENTS Go Top
At a July 15, 2002 meeting with the New York State Office of General Services, NESCA learned that OGS is planning a change that would impact on insurance requirements for contractors and subcontractors doing business with that agency. Rosemary Keville, Director of the newly created Bureau of Risk and Insurance Management, explained that OGS will soon implement a plan for a Master Builders Risk Policy purchased by OGS that would replace individual builders risk policies currently required of contractors performing OGS projects. Ms. Keville explained that her office believes OGS will save money through this approach, which will become effective sometime after August 1st. The OGS bid form will be amended accordingly. While contractors will no longer have to purchase builders risk insurance, they will be required to participate in the master policy’s deductible for which they will need to obtain gap coverage.
PRESIDENT’S
MESSAGE Go
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Each
year during the summer months while NESCA members are particularly busy bidding
and building projects, NESCA is also busy, albeit, somewhat more behind the
scenes than at other times of the year.
During July and August, NESCA does not hold monthly membership meetings
and the association offers fewer educational seminars, in part due to our
members’ demanding work schedules and in part due to our need for some time to
regroup and plan programs, activities and events for the coming year. I want members to know, however, that NESCA
is actively engaged twelve months a year in working on our behalf and representing
the best interests of subcontractors and suppliers.
Since
our last membership meeting in June, much has occurred in the State Legislature
that has kept NESCA, and our state association ESSA, fully occupied. ESSA successfully lobbied a bill through
both the Senate and Assembly that would save subcontractors and suppliers money
by setting the amount of the undertaking required to discharge a public or
private improvement lien at 110% of the lien amount. This bill will soon be sent to the Governor. In addition, ESSA has been extremely busy
the past month responding to other legislative measures that would either
benefit or hurt subcontractors and suppliers.
NESCA
also recently met with representatives of the New York State Dormitory
Authority to discuss our members’ concerns over the amount of time it takes for
DASNY to process and make payment on change orders as well as to discuss delays
in project closeout and release of retainage.
You may recall that NESCA sent a DASNY survey out to members in May, and
the results of that survey indicated there is a major problem in these
areas. We believe we now have DASNY’s
attention and are hopeful our continued liaison with that agency will result in
improvements in contract administration and more timely payments.
Further,
NESCA recently continued our ongoing liaison with another state agency, the New
York State Office of General Services, and learned about a few new developments
within that agency. OGS has developed a
new department, the Bureau of Risk and Insurance Management, and will soon be
making several changes regarding insurance requirements on OGS projects.
Finally,
several of NESCA’s recently appointed committee chairmen have been organizing
their committees to begin work on planning programs and events for the coming
year. Our Golf Committee, chaired by
Brian Carmer, has already met and will soon mail out information about NESCA’s
September 9th golf outing at Shaker Ridge Country Club. In addition, the Program Committee, chaired
by Jeff Senft, has scheduled a meeting for August 1st to begin
preparations for NESCA’s 2002-03 membership meeting programs.
Unfortunately,
space prohibits me from mentioning everything NESCA has been working on as the
summer progresses. What I can tell you
with confidence is that we’re off to a good start for 2002-03.
President
FEDERAL COURT KNOCKS DOWN DOL ANNUALIZATION REGULATION
The
United States District Court, Sourther District of New York, on July 8, 2002,
decided the case of Rondout Electric, Inc. v. New York State Department
of Labor, et al. The court held
that the New York State Department of Labor annualization regulation is
preempted by the National Labor Relations Act because, as applied, it
impermissibly interferes with the equality of bargaining power between labor
and management on both private and public works projects and affects adversely
the competitive position of non-union contractors with the private marketplace.
In
this case, the DOL had applied its annualization formula to public and private
projects of Rondout Electric and determined that Rondout Electric had
underfunded its prevailing wages and supplements by $321,426.17. The DOL then withheld payments due Rondout
Electric in an amount of over $500,000 to cover the underfunding plus interest
and penalties.
The
court pointed out that under the annualization regulation, the DOL calculates
the employees’ hourly cash equivalent by dividing the actual contribution by
the total annual hours worked on both public and private projects,
rather than just hours worked on public works projects. In support of its holding, the court stated that
the NLRA preempts state law that regulates conduct that Congress intended to be
left to free play of economic forces.
The court in distinguishing situations where the state is acting as a
market participant stated “In the context of the construction industry, this
means that where the state contracts to have work done, the NLRA has no
preemptive effect because the state is acting as a market participant. However, when the conduct involves purely
private parties, to which the state is not a party, the state acts as a
regulator and may only regulate to the extent that it does not interfere with
the free play of economic forces.” When
Rondout Electric engaged in public work projects, the New York State DOL acted as
a market participant and such activity would not be preempted by the NLRA. However, Rondout Electric’s work on private
projects is subject to the NLRA which preempts the regulation.
The
court further stated that by the application of the annualization regulation,
the State of New York assumed the role of regulating and since the
annualization regulation effectively dictates what benefits Rondout Electric
may provide its employees on private works projects, such regulation is overly
intrusive in the bargaining capabilities of the private parties and the state
regulation is preempted by the NLRA.
The
impact of this decision will be far reaching within the construction industry
which is anxiously awaiting any adjustment which DOL may make to the
annualization regulation and/or its application policy with respect thereto.
Terence J. Burke
DON’T FORGET TO REGISTER FOR THE ESSA ANNUAL CONFERENCE
On September 20-21, 2002, NESCA’s state affiliate, the Empire State Subcontractors Association (ESSA), will once again be hosting an Annual Conference open to all members from each of the five affiliated chapters in Buffalo, Rochester, Syracuse, Albany and New York City. This conference will be held at the Sheraton Saratoga Springs Hotel and Conference Center in Saratoga Springs, New York.
ESSA has put together a nice combination of educational programs and social activities to enjoy at the Conference. In addition, at the legislative planning meeting members will be given the opportunity to provide input regarding issues to be adopted by ESSA as part of its 2003 legislative program. Members will have the opportunity to network with subcontractors and suppliers from around the State who face common business issues. This year ESSA has condensed the total length of the conference to allow members to attend without taking a big bite out of their normal business schedules, with meetings and seminars beginning at 12:00 noon on Friday and ending at 1:00 p.m. on Saturday. Members who would like to stay a little longer, can play the Saratoga Spa Championship Golf Course Saturday afternoon and enjoy Saratoga Springs that evening.
The 2002 ESSA Annual Conference is a very important event for all New York State subcontractors and suppliers. NESCA members are strongly encouraged to register. For registration materials, call the NESCA office at (518) 869-9800.
WELCOME NEW MEMBERS Go Top
Armstrong
World Industries
27 Obtuse Road North
Brookfield, CT 06804
(203) 241-0015; Fax (203)
775-1730
Contact: David Sinnott
Newburgh
Windustrial Co.
653 Route 52 East
Walden, NY 12586
(845) 778-2197; Fax (845)
778-3661
Contact: Dean Lucas
CONSTRUCTION PROMPT PAYMENT BILL DELIVERED TO GOVERNOR PATAKI Go Top
On July 11, 2002, a somewhat-neutered construction industry prompt payment bill was delivered to Governor Pataki for his action. This represents the second consecutive year that prompt payment legislation has been sent to the Governor. Last year Governor Pataki vetoed the bill stating that it went too far in limiting freedom to contract and imposed “draconian” interest penalties.
This year’s version made changes in accordance with the Governor’s veto message, but in doing so significantly reduced the practical impact of the legislation. The current bill, S.7724A/A.11526B, establishes a number of billing cycle, invoicing and prompt payment standards, but effectively makes these standards inconsequential by including language that states “the terms and conditions of a construction contract shall supersede the provisions of this article and govern the conduct of the parties thereto”. In other words, the prompt payment protections in the bill would only apply where there is no written contract or there are no contrary provisions in the contractor’s contract with the owner or the subcontractor’s contract with the contractor. Nevertheless, the Empire State Subcontractors Association supports this legislation because there may be certain instances where subcontractors and suppliers will be able to take advantage of the prompt payment protections contained in this bill.
The
bill would essentially apply to private commercial projects exceeding
$250,000. It specifically excludes
public works projects as well as most residential work. The bill: (1) establishes that the billing
cycle shall be the calendar month within which the work is performed; (2)
requires the owner to approve or disapprove invoices within 12 business days;
(3) requires contractors and subcontractors to approve or disapprove invoices
from their subs and suppliers within 12 business days; (4) requires owners to pay
contractors within 30 days of invoice approval, and contractors to pay
subcontractors within 7 days of their receipt of payment from the owner; (5)
allows the contractor to withhold payment to the subcontractor for a
performance deficiency, but requires the contractor to furnish to the
subcontractor and to the owner a written notice of withholding specifying why
payment is being withheld. Payment to
the subcontractor must then be made 7 days after correction of the performance
deficiency; (6) requires the contractor to disclose to the subcontractor at the
time the subcontract is entered into, the due date for receipt of payments to
the contractor from the owner; (7) requires the owner, upon written request of
a subcontractor, to provide notice to the subcontractor within 5 days a making
a payment to the contractor; (8) provides for a one percent per month interest
penalty for either owner or contractor late payments; (9) upon a 10 day written
notice, allows a contractor or subcontractor to suspend performance of work for
non-payment; (10) requires the owner to release retainage to the contractor no
later than 30 days after the final approval of the work under a contract; (11)
requires the contractor to release retainage to subcontractors after receiving
payment of retainage from the owner; (12) makes void and unenforceable any
contract provision that makes the contract subject to the laws of another
state, and any contract provision stating the contractor or subcontractor may
not suspend performance for non-payment by the owner or contractor.