Vol 20, No. 2 August 2001

Inside This Edition: Prompt Payment Bill Passed * President’s Message * Court Decision Time to Complete * Emergency Contract Law Extended * New Members * Why Belong to NESCA

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PROMPT PAYMENT BILL PASSED IN LEGISLATURE (Go Top)

Legislation which would mandate prompt payment protections for contractors, subcontractors and suppliers on private construction projects has passed in both houses of the NYS Legislature and will be sent to Governor Pataki for his consideration. This bill (S4318B/A7698B), sponsored by Senator Guy Velella (R- Westchester) and Assemblyman Peter Rivera (D-Bronx), passed in the Senate on June 21st and in the Assembly on June 25th. It would establish prompt payment standards for most private construction projects exceeding $125,000. The bill does not apply to public works projects nor developments of ten or less single-family or two-family homes. New York State has a long-standing law covering prompt payment on public works projects. Specifically, the legislation would require the following:

* Progress payments shall be made by the owner every 30 days on all contracts with a duration of 60 days or more.

* The owner must make progress payments within 7 days after the date a billing from the contractor is approved.

* A billing is deemed approved 14 days after the owner receives it unless before the 14-day period has expired, a written statement is provided to the contractor detailing those items in the billing that are not approved.

* An owner may decline to approve a billing for a variety of reasons including: unsatisfactory job progress; defective work or materials; disputed work or materials; failure to comply with other material provisions of the contract; failure by the contractor to make timely payments for labor including collectively bargained fringe benefit contributions and payroll taxes and insurance; damage to the owner; and reasonable evidence that the contract cannot be completed for the unpaid balance of the contract sum.

* Final payment must be made by the owner within 7 days of the owner's approval of the work.

* Failure by the owner to meet these payment standards will result in a 1 1/2 per month interest penalty.

* Upon a written request made by a subcontractor, the owner must notify the sub within 5 days of making progress payments to the contractor.

* The contractor must pay subcontractors and suppliers within 7 days of receipt of payment by the owner.

* A billing by a subcontractor to the contractor shall be deemed approved 21 days after the contractor receives the billing unless before the 21-day period has expired a written statement is provided to the subcontractor detailing those items in the billing that are not approved.

* A contractor may suspend performance or terminate the contract for nonpayment after providing the owner with a 7-day written notice.

* A subcontractor may suspend performance or terminate the subcontract for nonpayment after providing the contractor with a 3-day written notice.

In addition to the prompt payment protections, this legislation would also make certain provisions of construction contracts void and unenforceable in New York State. Specifically, the bill would:

* Render void contract provisions which make the contract subject to the laws of another state or which requires litigation, arbitration or other dispute resolution proceeding to be conducted in another state.

* Render void contract provisions which state that a party to the contract cannot suspend performance or terminate the contract if another party to the contract fails to make prompt payments.

* Render void contract provisions which state that payment by an owner to a contractor is a condition precedent for payment by a contractor to a subcontractor or supplier.

Not so surprisingly, the General Building Contractors of NYS has come out in opposition to this bill. Apparently, the general contracting community is not in favor of prompt payment. To counteract this opposition, NESCA members are urged to fax letters of support for this legislation to Governor Pataki at (518) 474-1513.

There will be no NESCA Membership Meetings during July and August. The next Membership Meeting will be held on September 13, 2001

PRESIDENT'S MESSAGE (Go Top)

With baseball's All-Star game now but a memory, we enter the dog days of summer and await the inevitable fade of the Boston Red Sox. As engaging as this team may be, most Red Sox fans are resigned to accept the certainty of the "Curse of Babe Ruth", and with pained expressions will likely have to endure yet another title run by the Yankees. While a late summer collapse is almost inescapable for the Red Sox, NESCA's own team of board and committee members are hard at work to guarantee yet another successful year for your association.

The Program Committee, chaired by Jim Elacqua with AFSCO Fence Supply Co., Inc., recently met to develop a lineup of speakers and topics for NESCA's 2001-02 membership meetings. Coming off the popularity and success of last year's "mini-seminar" format, this committee is poised to provide members with another year of valuable and interesting dinner meeting programs. And don't forget -- our first membership meeting of the year will be held on September 13th at the Century House in Latham.

Also coming to bat in July was the Golf Committee, chaired by Brian Carmer with Stone Bridge Iron & Steel, Inc. This committee met to prepare for NESCA's very popular Annual Golf Outing, to be held on September 10th at McGregor Links Country Club in Saratoga. Whether you're a scratch golfer or a hacker, all are welcome at this event. Just be sure to sign up early because we generally sell-out the Golf Outing pretty quickly once the registration forms are mailed out to the membership.

In addition, Chairman Dick McNitt with KAMCO Supply Corp. has scheduled a Suppliers Committee meeting for August 14th to discuss details related to NESCA's Annual Trade Show to be held this year on October 11th at the Century House. I have no doubts the committee will hit another home run with this year's Trade Show, but if you have any fresh ideas I'm sure Dick would welcome your input. And finally, hitting cleanup, the NESCA/ECA/GBC Joint Educational Partnership will meet in August to address ideas for the educational seminars and courses that will be offered to members during the coming year. If your business has particular educational/training needs you wish to see tackled by the Educational Partnership this year, please contact the NESCA office with your ideas.

All members have been mailed information about the Empire State Subcontractors Association (ESSA) Annual Conference which will be held September 14-15, 2001 at the Turning Stone Casino Resort. The Conference is open to all members from each of ESSA's five affiliated chapters in Buffalo, Rochester, Syracuse, Albany and New York City. ESSA has put together a very nice combination of educational programs and social activities, and members will be given the opportunity to provide input regarding issues to be adopted by ESSA as part of its 2002 legislative program. But maybe most of all, the Conference will provide members with a great opportunity to network with other subcontractors and suppliers from around the State who face -- and deal with -- the very same business issues you do. I encourage all members to register for the ESSA Annual Conference.

Robert H. Kind

President

CONTRACTOR ALLOWED REASONABLE TIME TO COMPLETE JOB (Go Top)

In a recent case before the Appellate Division, Second Department (Teramo & Co., Inc. v. O'Brien-Sheipe Funeral Home, Inc., May 29, 2001) the Court held where a contract fails to state a date for the completion of a construction project, a reasonable time is implied. In the instant case, the defendant hired the plaintiff to construct an addition to it's funeral home. the parties contract did no specify a date for completion of the proposed work nor did it include a "time is of the essence" provision. The project was substantially completed by the plaintiff who commenced this action to recover the outstanding balance. The defendant asserted counterclaims seeking damages for business allegedly lost due to delay in the construction.

The Appellate Court, in reversing the lower court's decision stated "what constitutes a reasonable time for performance of a contract depends upon the facts and circumstances of the particular case, including the subject matter of the contract, the situation of the parties, their intention, what they contemplated at the time the contract was made, and the circumstances surrounding performance."

Once again, this case reminds us that the completion date is an integral part of the construction contract and where there is a "time is of the essence" clause contained within the contract, failure to meet the construction schedule or to complete the project on the completion date would constitute a breach of the contract by the contractor subjecting him to a claim for damages by the owner. Where, as in this case, there is no completion date in the contract, the court will review the facts of the case and the above-mentioned circumstances to determine what constitutes a reasonable time to complete the job.

Contractors and owners would be prudent in assuring that the construction contract contains a completion date and, if intended, a "time is of the essence" provision.

Terence J. Burke, Esq.

NESCA Legal Counsel

EMERGENCY CONTRACT LAW EXTENDED FOR 2 MORE YEARS (Go Top)

Governor Pataki has signed legislation extending the State's "emergency contract" law for another two years, until June 2003. This extension will allow the Office of General Services to continue awarding emergency contracts in amounts up to $200,000. Since 1993, the Public Buildings Law has authorized OGS to let contracts of up to $200,000 to respond to construction emergencies involving a pressing necessity for immediate repair, reconstruction or maintenance of State facilities. Such contracts may be let without formal competitive bidding, but are required to be based on the solicitation of oral bids by at least three contractors. The $200,000 limit was authorized for an initial 2-year period in 1993, and was extended for additional 2-year periods in 1995, 1997 and 1999 prior to this latest extension. Absent these extensions, the monetary limit for emergency contracts would revert back to the old $40,000 value.

NESCA members had often experienced payment delays in the performance of emergency contracts for the State which had been averaging 115 days to process emergency contract awards for projects which typically had durations of only a few weeks. As such, the 1997 extension included a requirement that the Office of General Services, in consultation with the Division of the Budget, general contractors and specialty trade contractors, study and evaluate the procedures employed in the administration of emergency contracts. The charge was to identify problems and issues under the existing laws and regulations, including the issue of timely payment for services rendered, and to make recommendations for changes in law or regulation to improve the process. NESCA was invited to participate in this process, and after studying the issue it was determined that a number of OGS administrative procedures contributed to such delays, but the primary cause of delays in emergency contract payments was waiting for funding from client agencies. To improve the timeliness of emergency contract payments, several internal procedures were modified at OGS and an administrative process was developed between OGS and client agencies to expedite the funding of emergency contract work.

NESCA will continue to monitor payment problems associated with emergency contracts. Members who experience specific problems should contact the NESCA office.

WELCOME NEW MEMBERS (Go Top)

Harleysville Surety

910 Perinton Hills Office Park

Rochester, NY 14450

(716) 223-7330; Fax (716) 223-8035

Contact: Harry Wolf

Encompass Mechanical Services

20 Loudonville Road

Albany, NY 12204

(518) 432-9023; Fax (518) 432-9680

Contacts: Dave Legge, Ray Gargett

WHY DO YOU BELONG TO NESCA? (Go Top)

Free Lien Filing Service - One of NESCA's most important and most utilized services for over 20 years. Each year NESCA files 250-300 liens for our members on both public and private construction projects.

Workers' Compensation Safety Group - Offered through Allied Safety Services, Inc., NESCA members may take advantage of the safety group concept to reduce your premiums and have access to professional loss control and claims management services.

Legislative Program - Through NESCA's state affiliate (ESSA), members are provided with advocacy in the NYS Legislature, the Courts and in State Agencies. ESSA has successfully authored 31 laws which benefit subcontractors and suppliers statewide.

Statutory DBL Program - Another popular advantage to membership is NESCA's Group Statutory DBL Program. This program is administered by Corporate Benefit Planning and offers low monthly rates to help members save on their DBL costs.

Employee Assistance Program - In this age of motor carrier safety requirements, DOT checkpoints and drug & alcohol testing regulations, members may take advantage of our full-service EAP developed for NESCA by Human Resource Associates for an extremely low annual fee of $25 per employee.

Group Section 125 Program - This free program, administered by Corporate Benefit Planning, allows the employer-paid portion of health insurance premiums, dental expenses, eye care expenses and other qualified health-related expenses to be made on a pre-tax basis saving money for both employers and employees.

Educational Seminars - NESCA has joined with the General Building Contractors of NYS and Eastern Contractors Association in an educational partnership to provide members a vast variety of educational programs, from 3-hour management seminars......to superintendent training courses..........to OSHA 10-hour and 30-hour training programs.

Monthly Newsletter - NESCA members are kept updated on industry developments and changes through our monthly Newsletter and other special bulletins.

Annual Trade Show - NESCA's Annual Trade Show provides members the opportunity to display their products and services to over 500 subcontractors, general contractors, architects, engineers and other building professionals.

Individual Assistance - NESCA's full-time professional staff is on hand to assist members with a wide variety of business and construction-related matters such as: payment assistance; contract assistance; assistance with OSHA regulations; affirmative action; prevailing wage compliance; and a vast number of state and federal laws and regulations which impact on subcontractors and suppliers.