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Retainage in Escrow Account Bill Reported from Senate Judiciary (Go Top)

On March 22, 2005, the Empire State Subcontractors Association’s top priority bill (S2547/A2721), which would require owners of private construction projects to place retainage held from contractors and subcontractors into an interest-bearing escrow account until such time the retainage is released, was reported out of the Senate Judiciary Committee to the floor of the Senate. The Assembly version of this bill has been referred to the Assembly Economic Development, Job Creation, Commerce and Industry Committee.

This legislation, sponsored by Senator Kemp Hannon and Assemblyman Paul Tonko, would require any interest earned on such escrowed retainage to accrue to the benefit of the parties from whom retainage has been held, that is, the contractor and subcontractors working on the project. By having retainage placed in an escrow account, contractors and subcontractors will have far more assurance that they will actually receive the money that they have earned in the event an owner’s financial status becomes questionable later on.

ESSA’s attention has now turned to convincing Senate Majority Leader Joseph Bruno to place the bill on the Senate Calendar for a vote. NESCA members are asked to send a letter to Senator Bruno urging him to do so, using the sample letter enclosed with this Newsletter as a guide.

Senate Judiciary Committee Chair Asks SED to Clarify Design Delegation Issue (Go Top)

Following a February 14^th meeting with Empire State Subcontractors Association representatives to address the common failure of architects and engineers to clearly approve design work that has been delegated to subcontractors, Senator John DeFrancisco, Chairman of the Senate Judiciary Committee, has asked the State Education Department to clarify the design delegation standard.

The Board of Regents Rule on design delegation states that the principal architect or engineer on a construction project may delegate certain specifically defined design work to third-party engineers hired by contractors and subcontractors, but such delegated design work must be limited to project components ancillary to the main components of the project. Further, the Rule states that the principal architect or engineer is required to review and approve any design submitted by the contractor or subcontractor for conformance with the specifications and the overall project design. Unfortunately, design professionals have been routinely violating the approval requirement since 1996 when the Rule first became effective.

In an April 5, 2005 letter to Education Commissioner Richard Mills, Senator DeFrancisco expressed concern about the limited, equivocal “approval” language used by architects and engineers in their review of subcontractor submitted design. “It is my view, notwithstanding the latitude which the courts have extended SED in interpreting the language of the Regulation, the responsibility invested in a licensed professional in managing the overall design of a construction project requires that as a matter of public safety approvals of design elements be unconditional”, DeFrancisco said.

With his letter to Commissioner Mills, Senator DeFrancisco included a copy of ESSA-drafted legislation that would clarify the approval process, but indicated that it would be his first preference to see SED implement such language through regulation. The ESSA drafted bill would require all design submitted by contractors and subcontractors to be approved by the primary design professional and stamped with a seal which shall specifically state “reviewed and approved without exception”.

NESCA Membership Meeting

May 12, 2005

Century House – 6:00 p.m.

6:00 Open Bar/Registration

6:30 Dinner: Sirloin Steak

7:10 Business Announcements

7:30 Program: Avoiding Claims & Litigation:

Silence is NOT Golden

Speaker: Larry True, Managing Director

DR Construction Consultants, LLC

Open Bar, Dinner, Tax & Gratuities - $35

PRESIDENT’S MESSAGE (Go Top)

As many of you know, I place great stock in the argument that all subcontractors and suppliers in eastern New York should support NESCA through membership in the association, if for no other reason, then the fact that NESCA and our state affiliate ESSA perform vital government relations services on behalf of all subs and suppliers each and every year. This is done through an aggressive legislative program, ongoing communications with state contracting agencies, and action in the courts when necessary to protect the interests of our members.

With that said, there are many other benefits of membership in NESCA that all members should remember to take full advantage of whenever possible. For example, how many of you utilize NESCA’s free lien filing service? This service has been operating successfully for more than 25 years, and each year NESCA files between 200 and 300 liens for members who are experiencing payment problems. Over the years, the lien filing service has saved members thousands of dollars in legal and other fees. Essentially, any member who files one or two liens through the lien filing service in any given year recoups the cost of that year’s membership. NESCA also offers members a workers’ compensation safety group, a group statutory disability program, a group employee assistance (EAP) program, a Paychex payroll services discount, a Business Practices Interchange, sample letters, forms and other documents, and many other helpful programs and services.

My point is, take advantage of these programs and services. Try the lien service and look into one or more of our group programs. You might find you can save yourself some time and money. Personally, I view all of these extra benefits of membership as “icing on the cake”. In other words, while these benefits are not the reason and purpose NESCA exists, they do make your membership in NESCA all the more valuable.

Finally, I’d like to provide members with a heads up about several upcoming events. On Monday, June 13, 2005, the 10^th annual NESCA/GBC Mid-Hudson Golf Outing will be held at Wiltwyck Golf Club in Kingston. You should have recently received a flyer with details about the golf outing in the mail. All members of NESCA are welcome to register, so if you enjoy playing on a fantastic golf course, please sign up. Also, please be on the lookout for information coming soon about NESCA’s 7^th Annual Day at Saratoga Racecourse, which will be held on Thursday, July 28, 2005. We’ve reserved 240 tickets in the Paddock Tent for the luncheon package. Reservations for this event will be taken on a first-come, first-served basis.

Kevin J. Garrity, President

NESCA Member Appointed to Board of National HVAC Group

Michael A. O’Connor, President and COO of Alltek Energy Systems, Inc., has been appointed to a two-year term on the Board of Advisors of The Unified Group, a national network of 45 HVAC contractors. The Unified Group is composed of independent HVAC contractors who share a commitment to remaining independent while providing quality service to clients.

Alltek Energy Systems has operated since 1980 in the capital region.

Court Determines That CM Is Not

Entitled to Indemnification Under the Owner’s Contract (Go Top)

On December 2, 2004, the New York State Court of Appeals affirmed the Supreme Court, Appellate Division, First Department’s Decision in Tonking v. Port Authority of New York and New Jersey, et al. In this case, an agreement between the contractor and the defendant Port Authority entitled the Authority and its agents to indemnification from the contractor for liability arising from the contractor’s negligence in the performance of the contracted-for construction work. The construction manager claimed that it had standing to seek indemnification under the agreement as an agent of the Authority. The Appellate Court held that the contracting parties did not, by using the term “agent,” clearly manifest an intention to impose upon the contractor the obligation to indemnify the construction manger. Had the parties intended for the contractor to assume an obligation to indemnify the construction manager, they would have manifested their intention in unmistakenable terms.

Judge Ellerin dissented holding that although the term “agents” is not defined in the contract, “the designation of the construction manager as the Port Authority’s representative defines the construction manager as its agent. Moreover, this agency relationship is manifest in contract provisions referring to the construction manager.”

The lesson to be learned here is to be very specific in drafting indemnification clauses as to which entities are included as indemnities. Catch-all words such as “agent” intended to be all-encompassing may work against the drafter.

Terence J. Burke, NESCA Legal Counsel

ESSA Safety Group Issues 20% Dividend (Go Top)

The Empire State Subcontractors Association (ESSA) Workers’ Compensation Safety Group 560 has announced the issuance of a 20% dividend to members of the safety group for the May 1, 2004 policy period. This marks the tenth consecutive dividend issued since the formation of the Safety Group in 1994. The dividend was approved in conjunction with the May 1, 2005 group renewal, which is offering upfront discounts of 25%. These discounts are offered to all existing members as well as new potential members of the Safety Group. For more information about the Group contact John Blackmore at Allied Safety Management at 516-733-9252.

Comptroller Proposes Competitive Bid Threshold Increases (Go Top)

State Comptroller Alan Hevesi has released a report that proposes significant reform of both state and local government procurement and contracting rules, including a proposal to increase the competitive bidding thresholds for public work contracts. The report, entitled “Strengthening State Procurement Practices” calls for modernizing and streamlining the process through which government entities in New York award contracts.

The Comptroller recommends increasing the state threshold above which competitive bidding is required from the current $15,000 to $50,000. For local governments, he recommends increasing the threshold from $10,000 for purchases and $20,000 for public work contracts to $20,000 and $50,000 respectively. He also recommended that state agencies be allowed to enter into contracts of up to $100,000 with certified minority and women-owned businesses without formal competitive procurement.

Comptroller Hevesi also announced that his office will develop a system to automate and standardize the information gathering process related to bidder responsibility, to include a central repository for data gathered from bidders.

The Comptroller has submitted proposed legislation to the Senate and Assembly to accomplish his reform agenda. Copies of the full report may be obtained through the Comptroller’s web site at www.osc.state.ny.us.

Court Issues Another Favorable Opinion Regarding Labor Law Section 240 (Go Top)

On March 24, 2005 the NYS Court of Appeals decided the case of Charles Reginald Montgomery v. Federal Express Corporation. In this case, Montgomery was injured when, instead of utilizing a ladder, he jumped four feet down from an elevator motor room to the roof level of a building. The Court found that since ladders were readily available, Montgomery’s normal and logical response should have been to use one. Since it was his choice to jump rather than use a ladder, he was not entitled to recover under Section 240 of the Labor Law.

This case continues a trend by the Court of Appeals to narrow the application of Labor Law Section 240 by holding that contractors who have complied with safety requirements may not be liable under Section 240 where the employee’s conduct is the sole proximate cause of his injury.

WELCOME NEW

MEMBERS (Go Top)

Blue Spruce Nursery, Inc.

PO Box 1319

Clifton Park, NY 12065

(518) 877-8177; FAX (518) 877-8577

Contact: Robert Daly

DeRidder Masonry, Inc.

55 Blanchard Road

Gansevoort, NY 12831

(518) 584-2666; FAX (518) 583-2001

Contact: Lou DeRidder

Kuritzky Glass Company, Inc.

487 Lexington Avenue

Mt. Kisco, NY 10549

(914) 666-8929; FAX (914) 241-4989

Contact: Dave Kuritzky

Russell Industrial Services of NY

1 Pruyns Island Drive

Glens Falls, NY 12801

(518) 793-8822; FAX (518) 793-8825

Contact: Jay Conway

CALENDAR OF EVENTS (Go Top)

May 4, 2005

Mid-Hudson Membership Meeting

Reservoir Inn, West Hurley, 6 pm

May 12, 2005

Board of Directors Meeting

Century House, Latham, 5 pm

May 12, 2005

NESCA Membership Meeting

Century House, Latham, 6 pm

May 17, 2005

Binghamton Membership Meeting

Niko’s Char Pit, Binghamton 8 am

Wanted: Your Membership Directory Updates

NESCA has begun preparing for the printing of the 2005-2006 NESCA Membership Directory. The Directory is a valuable service provided to members of NESCA, and it is mailed each year to all members, regional general contractors, architectural/engineering firms, and local and state contracting agencies for their use and reference. To be assured that the latest up-to-date information on your company is included in the 2005-06 Directory, please complete and return the member update forms previously mailed to all members to the NESCA office no later than June 1, 2005.

Two GBC Bills Introduced (Go Top)

The General Building Contractors of NYS (GBC) has had two bills introduced in the NYS Legislature that would strengthen the requirements for performance and payment bonds on public work and would clarify New York’s law on bidder responsibility. Both bills have been introduced by Senator Ray Meier and Assemblywoman RoAnn Destito.

The first bill (S3161/A6660) would clarify the requirements found in Section 137 of the State Finance Law that require prime contractors on state and local public work projects to provide payment bonds. This bill would also require, for the first time, a statutory mandate for contractors to provide performance bonds. Finally, the bill requires that performance and payment bonds be written by surety companies licensed to do business in New York State, are on the United States Treasury list, and be rated “A-“ or better by Best’s Rating Service or equivalent rating.

The second bill (S3162/A6461) provides provisions for state agencies and local governments to establish criteria for determining the responsibility of apparent low bidders and their subcontractors. Such criteria would include experience and performance history on similar past projects, a demonstration of financial responsibility, a history of OSHA violations, prevailing wage violations and other criteria. The bill also establishes an appeals process for contractors determined not to be responsible.

MEMBER ANNIVERSARIES (Go Top)

In May, the following members have reached milestone anniversaries as members of NESCA. Thank you very much for your continued support!

Five Years

Admar Supply

Empire Air Specialties, Inc.

Energy Management of Facilities, Inc. (EMF)

Twenty Years

DeBrino Caulking Associates, Inc.

Jake Burnett Excavating