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Here’s the situation: During construction, the rise in material costs have impacted your ability to complete the project as originally bid.

Who is responsible for the change in material costs? The contractor or the owner?

Material Prices Are Going Up, Up, Up

While the economy has struggled for two years, material costs have remained quite steady in recent times. In fact, Ken Simonson, chief economist for the Associated General Contractors of America, documents a 2.3% decrease in material costs in the first 9 months of 2009.

Simonson speculates, however, that this drop in prices in materials is bittersweet. Between the months of October and November 2009, material prices rose 0.6%, and Simonson writes that the construction industry should treat this rise as a “warning call.”

Simonson is not alone.

The San Francisco Business Times reports that "Material costs continue to squeeze contractors."   Likewise, New Jersey Biz writes that "Spiking materials costs may puncture project prices."

Prices Increases Creates Danger Zone for Contractors

The current economy presents a dangerous situation for contractors. On the one hand, material costs are on the rise. On the other hand, the lack of construction work makes the bidding process more competitive than ever.

So, how does a general contractor keep its bid low enough to win, without risking that price increases will render the job unprofitable?

This really boils down to the question of who is responsible for increases in material costs. If the owner, the project bid can be as competitive as possible given the current material costs. If the contractor, the project bid must take price increase into account.

Escalation Clauses In Contract

Here is the good news for contractors: there are ways you can protect yourself from being held responsible material price increases.

How? Well, your contract of course.

As every contractor and developer should know, the contract is the law between the parties.  An "Escalation Clause" in your agreement will shift the burden of material price increases from the contractor to the property owner, or another party.

ConstructionExec.com has a great overview article on escalation clauses:   Price Adjustment Clauses:  A Solution for Dealing with Changing Material Costs.  Or check out this equally good discussion at ModernContractorSolutions.com:  Material Price Escalation Clauses:  A Modest Proposal.

Essentially, if a contractor agrees to construct something for a lump sum price, the contractor typically assumes the risk of material costs increases.    An escalation clause shifts this risk to the other contracting party.  

Here is what it may look like:

The Contract Price is based upon construction material prices as of the execution of this Agreement.   Any significant price increases in lumber, drywall, _______________, and/or other construction material that occurs during the period of time between contract execution and substantial completion of the Project, shall cause the contract price to be equitably adjusted by an amount reasonably necessary to cover any increase.    As used herein, a significant price increase shall mean any increase in price exceed ____ percent (____%) experienced by the contractor from the date of signing.

Certainly, a contractor is motivated to have this type of provision in its contract...but why would the Owner agree?  One reason an Owner may be interested in an escalation clause is that it would increase the Owner's bidding pool and make contractors more comfortable to lower their bid amounts.

Responsibility for Price Increases When There Isn't An Escalation Clause

So, price increases have affected your project's bottom line and the contract doesn't have an escalation clause....now what?

If you're working under a lump sum contract, you likely have an uphill legal battle to get compensated for the unexpected price increases.   While not the case law everywhere, most U.S. courts will take the approached expressed by the landmark Louisiana decision in Standard Oil Co. v. Fontenot, 198 La. 644 (1941), where the Louisiana Supreme Court stated that in a lump sum contract "It is possible that the anticipated and expected profit may turn into a loss because of a low bid or advances in the prices of materials or the cost of labor."

So, how can you challenge this general principal?   Here are a few possibilities:

• Mistake:   The contractor must argue that its bid contained certain mistakes relating to the material prices....and that the mistake was both the contractors and the other party's.   This is a very tall order.

• Impossibility / Impracticability:   These are legal theories that a party cannot be required to perform on a contract if it is impossible or impractical.  While the contractor may feel like performance of a contract is impossible or impractical if material prices rise too much, courts will not likely share the feeling.   Material and labor price increases are not a secret, and therefore, it will be difficult to show that the increases were not foreseeable when agreeing to the lump sum.

• Force Majeure:  If prices increase significantly because of some act of God (i.e. New Orleanians can think of Hurricane Katrina's effect on material costs), the the contractor may be on to something.   Most construction contracts have a Force Majeure clause, and the contractor could potentially rely on this clause to escalate the contract price in the event an act of God effected material costs.
   

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Every construction project starts with good intentions and a shared goal:  successfully deliver the project to the owner on time and on budget.   Of course, that's much easier said than done.

A few groups collaborated to publish some guidelines on how to make this happen.  

The Associated General Contractors of America (AGC), the American Subcontractors Association (ASA) and the Associated Specialty Contractors (ASC) published the updated guidelines at http://www.constructionguidelines.org.   Or you can download the PDF directly here.

Contractors of all sizes can benefit from having these guidelines desk side.  Keep them handy, and pick them up whenever you have a question or concern about a certain phase of work.   While it may not answer your problem directly, it may get you thinking in the right direction.

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Big thank you to our friend Christopher Hill who operates the Construction Law Musings blog for allowing me to become his blog's first three-time Guest Post Friday writer.

This morning, Musing's published a blog post I wrote titled "A Lien By Any Other Name Can Sound Just As Sweet."  

The article provides readers with a broad overview of the lien-like remedies available to them, as they differ based upon the classes of projects. In large part, the article explains the difference between a traditional lien (filed against the property on private projects) and a "claim" type of lien (filed against a bond on a state and federal project).

Of course, this post only skims the surface, but sometimes, it's the basic information that is needed to help folks understand the details. And why is it important to understand these details? The article on Musings concludes with that answer as follows:

Regardless of what class of project you’re working on, a lien-like remedy is probably available to you in the event of non-payment. However, it’s critical to understand the different remedies available at the onset of construction, for each remedy carries different pre-lien or pre-claim requirements.

Take a look at the article by clicking him, and be sure to subscribe to Christopher's blog which posts great information relevant to those in the construction industry.

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Wolfe Law Group is happy to announce the launch two new blog focused on the Pacific Northwest, and particularly the states of Washington and Oregon.

The Northwest Construction Law Blog focuses on construction law issues and updates in Oregon and Washington.  We launched this blog to help your company stay informed about important legal updates in Oregon and Washington, but also to educate contractors and suppliers about legal issues they confront (sometimes unknowingly) everyday

At the Northwest Green Building Law Blog, we’ll be focusing on green building legal matters that affect the states of Washington and Oregon.

Wolfe Law Group practices law in Washington and Oregon, and focuses its practice on the construction industry. We have two full-time LEED AP attorneys who are familiar with green building issues and disputes.

Wolfe Law Group is the leader in the legal industry with its publishing of quality legal resources and information. All of our attorneys consistently publish articles and discussions on our legal blogs, and all of our content keeps you in mind. We strive to post articles and discussions that are relevant to your business, so you can stay advised of legal matters that are important to your company, and get a better all-around understanding of how the law affects your day-to-day work.

Take a look at our listing of industry leading blogs here.

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At the eleventh hour, the U.S. Senate added a provision to the controversial health care bill pending in Congress that has the construction industry on edge.    The Associated General Contractors of America released a statement on their website complaining that "without debate or advance notice, language was added to the Senate health care legislation that singles out small construction firms for harsher treatment than any other industry."

What is the rub?

Well, while employers with less than 50 employees are typically not required to provide health care coverage, the exemption for construction firms is only those with less than 5 employees!   Failing to provide health care coverage could subject the construction firm to fines.

The Wall Street Journal is running a great article about the construction industry's reaction to the recent addition to the Senate bill.  

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Wolfe Law Group's blog, Construction Law Monitor provides clients, colleagues and those interested in learning more about the legal and/or construction industries access to well written, informative and up-to-date blog posts.

Annually, the American Bar Association (ABA) publishes a list of 100 best legal blogs.  If you would like to nominate Construction Law Monitor for one of the best legal blogs, please CLICK HERE.

The deadline for submitting your nomination is Friday, October 2, 2009.

We would like to thank you in advance for not only nominating Construction Law Monitor as one of the 100 best legal blogs, but for reading our blog and being interested in the topics we discuss.

 

 

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Just last week, New Orleans marked the 4 year anniversary of Hurricane Katrina.  Coverage of the anniversary looked back on the somber experience, and then looked forward to the city's continued progress.  

Construction Outlook is Optimistic

The construction market in New Orleans has managed to largely avoid the national recession, giving Hurricane Katrina a silver lining.  As four years have now passed since the storm, many are wondering:  can the construction boom continue?

Fortunately for regional contractors, the answer seems to be yes.

In July, we reported at the Construction Law Monitor that the Army Corps of Engineers were seeking more contractors to perform federal levee projects.   Just last week, the Corps reported more good news for infrastructure projects in Louisiana stating plans to spend $1 billion to restore wetlands.

And while much has already been spent to rebuild the Crescent City, on Katrina's anniversary President Obama vowed to speed the nation's recovery effort.  In the New York Times article covering the topic, it was reported that the government has freed up "hundreds of millions of dollars in assistance that has not been distributed."

Legal Information About Public Works Projects

There's a lot to be optimistic about in the South Louisiana construction industry...but, most heavy spending projects are publicly funded.   Those who have experience working on public projects aren't concerned about this, but many companies who ordinary focus on private work may be shaking in their boots.    There's no need to be concerned.

While public contracts certainly have unique requirements and details, it doesn't need to be foreign territory.   Here are some blog posts here at the Construction Law Monitor to help the private contractor better understanding public contracting:

• The Public Contracting Category.   You can start by reading the articles posted in the "Public Contracting" category.
   
• The Stimulus Package and Your Construction Business.   This blog posts discusses the difference between public and private contracts, and explains how your company can get federal and public work.
   
• E-Verify.   A hot topic in federal contracting, your company should read and learn about the new e-verify requirements when preparing work on a federal contract.   
   
• Getting Paid:   Here are some posts on getting paid (and filing claims to get paid) in public works projects.

 

 

 

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Over the weekend, the New Orleans Times Picayune had some promising news for contractors in the area, and even out-of state laborers and contractors:

Over the next several months, the Army Corps of Engineers plans to advertise three dozen construction contracts that could cost upwards of $3 billion -- more than it has spent since Hurricane Katrina...

So vast and compressed is the construction schedule that corps representatives have advised contractors to consider importing out-of-state labor, lining up temporary housing for employees and working around the clock.

This is certainly welcome news for Louisiana contractors, who are constantly reading grim economic forecasts for the rest of the nation.   Thus far, the post-Katrina market has seemingly insulated the region from economic peril, as New Orleans and Baton Rouge have maintained robust construction markets throughout the downturn.

If your company is going to bid for a piece of the Corps spending, be sure to enter into contracts carefully and protect your company's right to payment throughout the job.

Here are two important things to keep in mind:

Contracting:  Contacting an attorney - like Wolfe Law Group - to review your contracts can pay dividends on the project.   A simple contract review can cost as little as $1000.00, but give your company a better understanding of its rights and obligations under the agreement, and sometimes even point out provisions that can be altered to your company's benefit.

Just because a contract is put before your company, doesn't mean it needs to be signed in that form.  Frequently, contractors and project owners are willing to negotiate common terms, and simple changes to critical provisions can later save your company thousands.

Read more about construction contracts on our blog here.

Liens:   Since they will be funded by the Corps, these projects are all likely to be public.   However, just because a project is public doesn't mean your company is without "lien" rights.   Louisiana's Public Works Act allows unpaid companies to file "Statements of Claims" that protect a company's right to get paid...and since federal and state projects are nearly always bonded, the Statements of Claims can be a very powerful and effective collections tool.

However, filing successfully under the Public Works Act begins before you step foot on the job-site.  

Learn more about public liens and the Public Works Act here.

And for more information about the Corps projects and legal representation from Wolfe Law Group on these types of projects, contact us today.

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The Alaskan Way Viaduct completed on April 4, 1953, is an elevated section of state route 99 that runs along the  waterfront connecting Seattle's Industrial District (home to Wolfe Law Group) and downtown Seattle. It is the smaller of the two major north-south traffic corridors through Seattle, carrying up to 110,000 vehicles per day.

For those of you residing in Seattle or neighboring areas, the topic of the deconstruction of the Alaskan Way Viaduct has been on-going. However, the time is now.  The Seattle Post Intelligencer states,

The Alaskan Way Viaduct's days are now officially numbered.

Simple, strong and to the point.  So what does this means for the infrastructure of Seattle?

Tuesday, May 12, 2009, marked the signing ceremony for state legislation to replace the elevated highway with a deep-bored tunnel.  Although the Governor of Washington is confident in the timely completion of the tunnel, locals remain skeptical. 

As someone who utilizes the Alaskan Way Viaduct on a daily basis, it is hard to imagine, not only the inevitable rush  hour traffic during the "transition period" but a commute without Seattle's skyline, mountain ranges (on a clear day) and Elliot Bay. 

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Recent studies have shown that the homebuilding and home renovation industries in the state of Washington are highly influential with regard to the state of the US economy.  A study completed by Sacramento Regional Research Institute (SRRI) concludes that approximately 194,00 jobs are created annually due to the above mentioned industries, contributing over 10% of Washington state's economic output.

The most recent low and high years with regard to Washington's economic state are 2001 and 2005. Here is a brief comparison.  In 2005, almost 53,000 residential building permits were approved for new home construction. This boom generated $16 billion in output, 110,000 new jobs and $468 million in taxes.  On the downside, in 2001 only 38,000 permits were issued with $8 billion in construction output, 59,000 new jobs created and $250 million in state taxes.

Unfortunately, the present situation isn't much better, in fact its worse. The Building Industry Association of Washington (BIAW) estimates only 20,000 residential permits for 2009 which means the 2001 numbers mentioned above with be cut in half.  What can we do to avoid this rapid downturn of the homebuilding and home renovation industries?  The state and local governments need to revive the economy visa via new home construction.

Along with BIAW, we can only hope that the recent study that was published by SRRI will encourage the government to reject legislation that would further regulate the home building industry. Providing incentives to potential home builders, contractors and other professional in the various field would also aid in jump starting the industries.

Until then and for a copy of The Economic Benefits of Housing Report, visit www.BIAW.com.

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 Chinese Drywall is still in the news and a hot topic among construction lawyers, as evidenced by some of the below blog posts.  Also, with the ABA Green Building Conference in New Orleans, LA, talk on green building has spiked.  

• Re: Chinese Drywall, Wolfe Law Group's Chinese Drywall Blog asked two questions this week: (1) Are Builders Getting a "Free Pass" because of Class Actions; and (2) Are Builders and Homeowners supposed to be Mitigating Their Losses?
  
  
• Stark & Stark's Donald Brenner mentioned our "Free Pass" article in its own post, asking Whether Chinese Drywall Class Action Suits Will Ever Help Homeowners?
   
• The ABA Green Building Conference is in New Orleans this weekend, and Chris Cheatham is attending, posting updates on his blog and starting conversations about his newly coined term:  LEEDigation.
   
• And, unfortunately, there is some bankruptcy news out there.  In New Orleans, Oakwood and Riverwalk malls have filed bankruptcy.  Nationally, General Growth Properties, Inc. filed for Chapter 11 protection.   For those doing construction work on any of these properties (and there are many), having a construction lien filed pre-bankruptcy is the best way to position yourself in the line of creditors.
   
• Last, but not least...Wolfe Law Group got a little closer last week.   Our own Doug Reiser and Jessica  Hunter got married in New Orleans.  Read more, and see pictures, on our Wolfe Law Rocks page.

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Wolfe Law Group officially unveils three new topic-specific legal blogs that relate to legal concerns for the construction industry. The new blogs focus on emerging practice areas for the law firm.

ChineseDrywallBlog.com

Since the emergence of the Chinese Drywall crisis, Wolfe Law Group has been a leader in providing information to builders, suppliers, contractors and other construction participants about how they are affected by the crisis.

Those who may have supplied or installed Chinese Drywall have concerns about their legal rights and obligations, and are interested in learning more about what type of legal options are available to them.

This blog will focus on these topics, and promote the firm's new Chinese Drywall Defense practice area.

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LaGreenLaw.com

The emergence of Green Building and LEED accreditation nationwide has changed building practices.

This is especially true in the state of Louisiana, where Hurricane Katrina relief money has attracted non-profit groups interesting in building the city back green.

Contemporaneously, however, emerging legal issues are coming into focus that are specific to green building.

This blog will track the progress of green building in Louisiana and provide insight on the legal components of "building green" in the state.

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BrazilConstructionLaw.com

The Brazil Construction Law Blog will provide insight on construction law development and news in the country of Brazil, including information about international arbitration and the laws applicable to companies who are interested in doing business in Brazil.

While the blog is written in English, and written to an English-speaking audience, it can be translated into Portuguese and Spanish.

The blog intends to speak to an audience of businesses interested in foreign contracting, international joint ventures and international construction risk management.

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Katrina's Silver-Lining.  Three words New Orleanians didn't ever expect to hear, yet uttered this Sunday in print by both the Seattle Times and the New York Times.

While the rest of the nation's construction industry and real estate market has steadily suffered over the past 12 months, in New Orleans real estate prices hold firm and the construction industry is 'booming.'   Here is a quote from the Seattle Times article about the NOLA construction market, and even a quote from local contractor Landis Construction:

The recovery dollars are paying for projects large and small, including an $800 million replacement of the damaged "twin span" bridges over Lake Pontchartrain and thousands of homes being fixed under the state-administered Road Home program. The Army Corps of Engineers continues to use contractors to strengthen the levee system. In working-class neighborhoods such as the Ninth Ward, laborers are pounding away on small-scale renovations.

"Katrina was a horrible nightmare, but the reality is that, for the construction industry, it's been a blessing," said Theresa Leger, a vice president of Landis Construction, a local firm that has remained busy since the hurricane.

The New York Times article looked at the city's sustaining economy from a different angle; as evidence that a stimulus package can work to improve economic conditions.

The article calls the federal government's $51 billion injection into post-Katrina Louisiana an "unintended trial rune" of the $787 billion national stimulus bill.  

And what are the results?  

The New York Times says the results are good - and especially for the construction industry.  Here's a quote from the piece:

State economists specifically mention what one called “the ongoing building boom” from federal dollars as a main reason for the numbers. Largely a result of the damage caused by Hurricane Katrina, construction projects have not dried up as they have elsewhere, and a few can even be seen in downtown New Orleans.

Construction has “really hung in there and done very well,” said Loren Scott, an emeritus professor of economics at Louisiana State University. “In most states construction is way down, but in ours it has been up.” The relatively low unemployment rate in Louisiana “tells you that the stimulus can have an effect,” Mr. Scott said.

Read more about the Stimulus Package and how it relates to the Construction Industry on the Construction Law Monitor here.

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Rarely do we attempt to "wax political" on pressing legislative issues. So, again we will keep most of our opinion to ourselves and let the BIAW, the Building Association of Washington, do our reporting for us.

The Building Association of Washington is a Washington State Non-Profit Corporation formed back in 1966 to provide assistance to building industry companies who find difficulty uniting to fight government interests to regulate their trades. The BIAW provides more information about its services online and its mission statement is as follows:

The Building Industry Association of Washington is the voice of the housing industry in the state of Washington. The association is dedicated to ensuring and enhancing the vitality of the building industry for the benefit of its members and the housing needs of the citizens.

To accomplish this purpose, the association's primary focus is to educate, influence and affect the legislative, regulatory, judicial and executive agencies of Washington's government. The Building Industry Association of Washington will offer its membership those services which can best be provided on a state wide basis and will disseminate information concerning the building industry to all association members and the public.

Now that we have fully disclosed their interests - your business's interests - it will be easy to see why they so staunchly oppose several pending initiatives before the Legislature.

In a recent newsletter, which you can receive with membership, the BIAW expresses special concern with two specific initiatives.

HB 1393 - Mandated Warranties

The first of these initiatives will hit most of you the hardest. On March 11, 2009, the WA House of Representatives passed Rep. Larry Springer's (D-Kirkland) new home warranty bill, HB 1393. In short, the bill strives to mandate a new home warranty for all new residences, something that Washington state builders have been able to avoid in the past.

Unlike other states which follow the FHA model new home warranties, WA has stayed away from passing legislation in the past which would mandate such warranties.

The BIAW stresses several reasons why the bill is simply - a bad idea.

1) The warranties must be back backed by insurance which is not available -

    Simply put, the bill mandates warranties which must be backed by an insurance policy. Unfortunately, the insurance "product" is not available, and when made available, the costs will render projects impracticable or severely costly. The fear is that many good subcontractors will go under as a result of such a mandate.

    BIAW General Counsel, Timonthy Harris, states:

"Its not as simple as requiring builders to purchase an already-available warranty product"

"This isn't a warranty bill as much as it is a new and easier way to sue builders."

2) The bill prohibits waiving the implied warranty of habitability -

    Similar to the above, the concern is that the bill merely seeks to make consumer-based litigation more simple and easy. BIAW believes that the effect will simply put businesses out of work, limit the pool of contractors, reduce competition, and force unprecedented costs on the homeowner.

The BIAW pledges to fight the bill as it goes before the Senate later this month.

SB 5895 - Mandated Inspections and Bonding Increase

Another bill seeks to impose harsher requirements on contractors. The bill was introduced in the Senate as SB 5895 by Sen. Rodney Tom. In short, the bill seeks to impose "condo-like" warranties on all new homes, mandating third-party inspections prior to closing.

One of the issues that might keep contractors on the fence is the provision to double the contractor bond from $12,000.00 to $24,000.00. Though this raise undoubtedly costs the general contractor additional bond premiums, other contractors - subcontractors and suppliers on jobs - would likely be willing to support such a proposal.

In a time where collecting against defunct general contractors has become difficult and costly, subcontractors have been left to fight over the measly $12,000.00 bond that general contractors must post with Labor & Industries. Mandating a larger bond would provide additional security to contractors who are reluctant to provide labor on larger jobs.

Regardless, the BIAW is more concerned with fighting the costs that are imposed upon contractors in general, and the fact that this proposal is lumped with additional warranty demands makes this bill a target of the BIAW.

SB 6035 - Reto-bution Bill

This bill has been discussed for quite some time. The lingering has provided enough time so that BIAW could put together its defense of this bill.

In short, SB 6035 has been termed "retro-bution' because it seeks to force retrospective ratings programs - such as the one provided by BIAW - to disgorge refunds received from the State of Washington to employers. You can read more about how the retrospective programs work at the Northwest Progressive Institute, who provides a different perspective.

SB 6035 has been termed retrobution against BIAW and the Master Builder's Association (MBA), who each supported Gov. candidate Dino Rossi during the past governor's election.

The funds remaining after refunds are paid to employers are held by the program associations - like BIAW and MBA - to be used as they please. In the past, these funds were used by the organizations to support candidates like Rossi, in their election bids.

It is now alleged by both MBA and BIAW that this bill is simply a democratic party's attempt to restrict the organization's right to free speech, by limiting political contributions and political speech.

Stay tuned for more information and reporting on these battles in Olympia. The BIAW certainly does not intend to back down from protecting its ability to help contractors in Washington state.

 

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This week, some familiar topics were being talked about in the legal blogosphere, from the Employee Free Choice Act to the Chinese Drywall situation in Florida, Louisiana and elsewhere.  Here are some selected articles and posts from around the web this week:

• EFCA - Amidst all of the controversy, three mega-retailers proposed an alternative to the currently pending EFCA act.   Those retailers?   Starbucks, Whole Foods and Costco.
   
• Green building law blogger Shari Shapiro went to a green building conference and asks the question:  Is construction law Where The Boys Are...and The Girls Aren't.
   
• The Business Pundit reports that the Knauf Drywall Fiasco could be the Biggest Home Defect Case In U.S. History.  The question then becomes...are you prepared for that?  Wolfe Law has been blogging on Chinese Drywall here, and they have published an Avvo Legal Guide titled:  What To Do If You Installed or Supplied Chinese Drywall.
   
• The Stimulus is still in the news.  Here is a searchable spreadsheet published by the Contractor's Blog of the 18,000+ Infrastructure projects.
   
• Wolfe Law Group news?   Check out an interview with founding member Scott Wolfe Jr. on New Orleans' Fox 8 about Chinese Drywall.   Also, the firm announced a new practice group to represent, advise and defend builders, contractors, suppliers and other construction industry participants who are implicated by the imported drywall crisis.

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Washington state officials released figures to the media on Thursday, illustrating that the state is due to receive some $225 Million in funding. Initial planning earmarks all of that cash for major public building projects.

A story released by the Seattle Times, indicates that the bulk of funding will be distributed for military projects, including a new water-distribution system at Whidbey Island Naval Air Station, a training facility at Fort Lewis, replacement of a Tacoma pier that supports the Army Reserve Boat Mission, and installation of advance metering systems at Navy hubs that will help monitor energy consumption.

Additional funds will be earmarked for public housing and transportation. One highly anticipated project will likely be the new Amtrak maintenance facility at King Street Station. That project is likely to exceed $40 Million. Ongoing restoration of King Street Station is costing the City of Seattle, its new owner, over $26.5 Million.

In related news, the State Legislature released its $4.3 Billion transportation plan. Under the plan, the State will be able to pay for the new Alaskan Way Viaduct, Highway 520 bridge, and purchase new ferries.

There has been some recent distaste for the laboring that has ensued over the Viaduct and 520 projects. Senate Transportation Committee Chairwoman Mary Margaret Haugen, D-Camano Island probably said it best:

"I really probably shouldn't say this, but I hope those people building those megaprojects would make some decisions and move forward, because the Legislature's only going to have so much patience."

"We're really delighted that a decision has been made on the viaduct. We hope it can be made on 520 also."

The projects continue to come for Seattle. Its hard to imagine more public building - in a city where projects are ever present.

 

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We step away from Washington and Louisiana for a moment to explore the outside construction world, and find that a massive lawsuit has recently come up in Delaware.

The Wall Street Journal Law Blog seems to be the first to report on a Complaint filed in the Delaware Counrt of Chancery alleging the breach of joint venture between MGM and Dubai-based Infinity World Development Corp. A copy of the 13 page Complaint can be found at Wall Street Journal's website.

The suit, initiated by Infinity, alleges that MGM (the shell of wholly-owned affiliates Mirage Resorts and Project CC) has breached a joint venture agreement to develop City Center, a massive Las Vegas epicenter for tourism.

The Complaint states that MGM has issued a recent 10-K statement which illustrates that the massive company can no longer pay its debts as they become due, including a debt to make contributions to the joint venture itself (See Page 2 of Complaint). The business' failure allegedly will cause substantial and irreparable damage to Infinity World Development, who would have to pick up slack in financing the outlandish project.

Now - Infinity World Development wants out. Significant cost overruns and delays have caused the project to run ashore with problems. Estimates for completion continue to grow with each passing day.

Though the suit concers over $10 billion in open obligations, the Complaint itself is quite simple. Infinity has alleged breach of contract, breach of good faith and fair dealing, and sought declaratory relief for its obligations under contract.

No response has yet been offered by MGM in pleading form. But WSJ.com reports that MGM has already issued a public statement:

MGM fired back on Tuesday, calling the lawsuit “completely without merit.” A spokesman later added that the company “is ready, willing and able to fund its share of the costs to complete CityCenter, including a required payment this week.”

The Wall Street Journal further believes that the suit has all the makings of a giant. The celebrity and capital involved makes this case certain to draw considerable legal attention.

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On January 1, 2009, the forecast for the construction industry and the American economy in general was reported grim.  

Since then, however, we've sworn in a new President, Congress passed an aggressive (albeit controversial) "Stimulus Package," and the dead of winter has bowed to a new Spring - typically a more productive time of the year for construction.

So where are we?  

Well, the news for the construction industry carries mixed messages.

Let's start with the bad news:  McGraw Hill Construction reports that February construction dropped 8% from January, and Reuters predicted that construction jobs will continue to report weak throughout 2009.

In an interview with Reuters, Chief Economist for the American Institute of Architects (AIA), Kermit Baker, had this to say about the economy and the stimulus:

The Obama stimulus will put some people to work as soon as next month, but it will not be a major factor until the third quarter, Simonson said. Even then the stimulus will have little visible impact on payrolls, since contractors will use existing workers before they bring back people who have been laid off or start to hire new people.

The good news, of course, is laced within the forecasted bad news: the stimulus. 

No one is certain of how large the impact will be, but many in the construction industry are already sizing up the stimulus opportunities and other available government work.

Ken Simonson, the chief economist for the Associated General Contractors of America, had a positive outlook for business and employment in the construction industry and the benefits of the stimulus.   During a talk to association members, he said:

It’s not going to be enough to bail out construction right away...but it’s a start.

Already stimulus money is being allocated towards real construction projects and creating jobs.  See this story about $101 million in transportation work in Oregon, or the Larose bridge project in Louisiana.  Even Monster.com has published an article about how the stimulus package will spark construction jobs.

The stimulus certainly gives the construction industry optimism, but from all accounts, it appears to be cautious optimism.

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There is a growing fear that the construction market is dead - or at least headed that way. Recent figures indicate that overall building is on the decline and that, specifically, public contracting has falled at least 12% over the month of February.

Despite rashes of optimism that new building is up, the figures tend to tell a different story. Both private and public investment in new building are both on the decline. The drop off indicates that there is certainly a lack of funding and construction "players" who drive the industry.

But some states tell different stories. Some actors seem to be driven by falling costs in the construction market, and secured future sources of funding.

Take the State of Washington for example, who has recently experienced a bounding growth in publicly managed and publicly subsidized projects. Here is a peak at what is going on in the Northwest corner:

 

• Pave Those Highways - Try to drive anywhere in the Seattle area and you cannot miss the traffic. Recent highway projects have taken over Interstate 5 with the intention of improving drive quality for commuters. The state estimates that over $2 billion of repairs are needed to improve I-5 in the Seattle metropolitan area. Unfortunately, the state has earmarked on a small fraction of that amount in order to complete reconditioning. Luckily, Department of Transportation administrators are not backing down, despite potential funding issues. DOT said that 2009 will be "one of its most intense and complicated construction seasons in its history."

 

• Beacon Tunnel Acceleration - The Beacon Tunnel has become one of Seattle's most anticipated projects. The tunnel was funded initially in 2003 by voters who wanted faster transit from the sprawling Tukwila area, north into downtown Seattle. With fears risihing about missing the projected opening of the Seattle Light Rail project, lawmak sought to accelerate the completion of the projects,adding contractors around the clock to complete the final testing stages of the tunnel. Sound Transit, the project's managing agency, is spending millions in order to ensure that the work is completed timely. But recent reports indicate that the $2.4 billion project is on schedule and $125 million under budget.

 

• Clean Energy Money to Spur Wind Power Growth - Klickitat County is a small rural area in the South of Washington state. At times the county had one of the highest unemployment rates in the State of Washington - over 12% in January 2009. However recent trends toward "clean energy" have shown vast investment in the area and resulting job growth. The main reason for this growth, is the influx of wind energy farms, no doubt assisted by the promise of over $129 billion in financial incentives for clean energy. In Klickitat, the incentives are pushing further investment in wind farms, especially for San Diego developer Cannon Power Group. The CA company has invested in two farms which will stretch 26 miles of ridgline on the north shore of the Columbia River, capable of producing power for 250,000 homes. The projects are expected to produce over $15 million annually in property taxes as well as over 500 jobs.

 

• Microsoft Building with Stimulus Bucks - The Seattle Times reported that Microsoft will use around $11 million of federal stimulus funds to build a bridge over Highway 520 in order to connect its westside and Redmond campuses. The funds are being disbursed by the Puget Sound Regional Council, who has been earmarked to receive over $214 million of those stimulus funds. Some are not too thrilled about the use of these funds to assist a multi-billion dollar company, who recently cut around 5000 jobs. Regardless, the project is certain to spur some growth in an otherwise stagnant building industry.

 

• Puget Sound Rebuilding - There has been quite a bit of coverage about the battle of development versus the Puget Sound. Several ecologists are gearing up for the Summer of 2009 with an open eye towards educating builders and local officials on conservation techniques. One interesting technique pays landowners to preserve their land, by making public officials competitors with developers looking to build on land abutting waterways. Unfortunately, the substance missing from all of this reporting is the alternatives - how do builders continue with growth, without disturbing the wilderness?

 

 

 

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Here is a quote from New Orleans' Mayor Ray Nagin in a recent USA Today article titled "$700M in federal aid finally flowing to New Orleans:"

Construction on jails, police and fire stations, playgrounds, theaters and mixed-income housing developments — all battered by the 2005 floods — has started or will start this year, as public federal funds finally were unleashed from bureaucratic tangles, Mayor Ray Nagin said in an interview with USA TODAY.

"You're going to be able to see, touch and feel it," Nagin said. "We're really headed into a year of unprecedented construction."

Certainly this is exciting news for contractors in Southeast Louisiana, who experienced a surge of work in the aftermath of Hurricane Katrina, but has since succumbed to the rigors of the national recession.

The news of Katrina-related aid coming to the region is icing on top of the cake for the Louisiana construction industry, who is looking forward to a large amount of stimulus cash being spent in the state's infrastructure.

Just this weekend there was news out of Baton Rouge that despite previous resistance, Governor Bobby Jindal would likely be accepting all stimulus aid.  The state launched a stimulus spending website, http://www.stimulus.la.gov/, and identified the first LA project to use stimulus funds (the long awaited Larose bridge).

How Do You Take Advantage of The Stimulus?

If your company is interested in taking advantage of the planned stimulus projects it must get familiar with public contracting, Davis-Bacon prevailing wage requirements, the public bidding process and more.

A great resource to learn more the requirements and strategies of public contracting is Mike Purdy's Public Contracting Blog.

With more than 29 years of public contracting and procurement experience, Mike helps government agencies and businesses develop contracting strategies, solve contracting problems, and get better informed on a wide variety of public contracting and procurement issues.  His consulting company, Mike Purdy & Associates, is based out of Seattle, WA.

Here at the Construction Law Monitor, we provide commentary and insight on the legal components of government contractor (state and federal).  You can read posts related to public contracting through the category Public Contracting here.

Last month (Feb. 2009), we posted a particularly helpful article for businesses unfamiliar with the public contracting process called "The Stimulus Package and Your Construction Business." 

The article briefly breaks down the legal and practical differences between public and private work, and outlines the basics for contractors interested in preparing their company to bid on public jobs.

Wolfe Law Group Can Help
If your construction company is in Louisiana or Washington, we'd be happy to discuss Public Contracting with you further, and to help your organization position itself to responsibility bid on upcoming stimulus work.   Learn more about our practice at http://www.wolfelaw.com.

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The Seattle Times is reporting that a local Seattle steel supplier provided falsified statements to the Federal Transit Administration (FTA) concerning the quality of steel provided for the Seattle Light Rail project. In the Times' report, David Appleby, the owner of Appleby NW could face up to five years in prison and fines of $250,000.00 for his misrepresentations to the FTA because the the Light Rail project is a federally managed project, overseen by the FTA.

According to the Times, Appleby supplied over 1.5 million pounds of Oregon-made steel rated for 36,000 pounds per square inch (psi) of force under a $240 Million dollar contract. Unfortunately for Mr. Appleby, the project specifications for the massive Light Rail project, which is managed by Sound Transit and funded by the FTA, required steel rated for at least 50,000 psi.

Appleby's charge stems from mill certificates that he forged, once learning that the steel was underrated for the specifications. General contractors are obligated to follow the strict terms of specifications provided to them.

Appleby's attorney, Irwin Schwartz, admitted that Appleby intentionally changed the certificates.

"People panic and they cover up"

Especially on public works projects, contractors must obtain consent from the managing government authority in order to wane or deviate in any way from given specifications. Permitting a contractor to vary from the specs is not only dangerous, but is competitively unfair to other job bidders who lost out in their bids to perform the work.

In this case, it is certain that the Sound Transit would not have agreed to such a change. Early estimates are that the 50,000 psi demand was a conservative requirement. Thus the 36,000 psi steel may be sufficient to withstand the project's engineering requirements. Based upon this assertion, Appleby intends to defend against any claims for backcharges against his contract.

One final note, the contractor is also under the bus for entering into an oral contract with a subcontractor that provided Appleby's drilling on the project. The Sound Transit, like many public entities, requires that all contracts be in writing.

Though the jockeying has just begun, it is fairly certain that a civil suit between the contractor and Sound Transit is readying, over dollars being withheld from the contractor's pay.

 

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Around the web this week, there was a very interesting blog post titled Green Building Is Dead that shook things up in the blogosphere, and Facebook introduced some improvements across its network that inspired an updated Facebook page by our firm.

• Is Green Building Dead?!  A shocking blog title caused a splash on twitter among construction professionals and attorneys.   The original article is here.  Here is some commentary on that article.   Interesting perspective on a growing and controversial industry.
   
• Is Arbitration Good Or Bad?  That seemed to be a point of contention in the blogosphere this week, as the 5th Circuit published an opinion holding that "manifest disregard for the law" is "no longer useful in actions to vacate arbitration awards."   The matter was discussed at the Smooth Transitions blog here.  And Law.com highlighted that there is now a split in the circuits on this issue.  
   
• Chinese Drywall turns up in Louisiana.   Last week, we warned that the Chinese Drywall may reach Louisiana and Washington, and this week local news-stations are reporting that Chinese Drywall is a problem in Louisiana, and that complaints are widespread.  Thus far, Interior Exterior building supply has been identified as a possible local supplier of the drywall.
   
• New Facebook Page.   Wolfe Law Group announced on its Wolfe Law Rocks page that along with the facebook updates, it has a new updated Facebook page.
   
• Additionally, Oscar - our office French Bulldog - was featured at USAToday.com this week, when the publication ran a story on pet-friendly workplaces.  See our picture on their website, and the write-up here.

 

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This week we reported that a bill tentatively named the Worker Privacy Act had been stricken down in the Washington Legislature. Scott Wolfe, of the Construction Law Monitor provided the report after the Seattle Times ran a story about an email interception which allegedly divulged information about potential illegal campaign contributions linked to the bill.

Again, the bill would prevent employers from forcing employees to attend employer sanctioned "anti-union" information events, if the event interferes with the employees religious or privacy rights.

Well things are heating up once again in regards to that bill. The Washington State Labor Council has launched a full-fledged attack on legislators who have allegedly hid behind the controversy, in order to avoid the issues behind the bill itself.

The Labor Council believes that the inadvertent email slip was merely a scapegoat for state politicians to toss away the bill. The Labor Council firmly believes that Gov. Christine Gregoire has slid the bill under the rug, not because of the email slip, but instead in response to pressure from local employer bigwig, Boeing.

In response to "email-gate" (which is not being considered an illegal communication by the state police), the Labor Council sent a lengthy statement to the press, demanding that the bill be raised from the dead. The statement shows illustrates the Council's great dismay for the manner in which House Speak Frank Chopp, has handled the matter:

No, Mr. Chopp, the bill is NOT dead. It is well within your power as House Speaker, and it is well within the power of Senate Majority Leader Lisa Brown and Gov. Chris Gregoire to allow a vote now that the State Patrol investigation has concluded there was no criminal wrongdoing. The three of you have extraordinary powers to bring bills to a vote of the legislature. It is a power you have exercised before, including on one memorable occasion in 2003 when you ordered a 2 a.m. vote on a Boeing-supported bill that hadn't even had a public hearing but dramatically changed our state's Unemployment Insurance system

It no longer passes the straight-face test to blame what was clearly an internal email among labor leaders -- one that had inadvertently been forwarded, not to you, but to a handful of legislators who already supported the bill -- for denying a vote on the Worker Privacy Act.

For more on the matter, continue to check in at Construction Law Monitor and the SeattleTime.com Politics Northwest column.

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Around the Web this week, there seemed to be a lot of news related to dirty politics in Washington and Louisiana, as well as some interesting blog posts and news articles related to the successes and failures in arbitration.

• Dirty Politics in LA:   After months of investigation related to the New Orleans Affordable Homeownership program (NOAH), the city has sued six contractors seeking repayment of $217,877.
   
• Dirty Politics in WA:  A big "one-sided" labor bill in the Washington legislature was killed this week when emails were discovered linking the success of the bill to campaign donations.   It's believed that labor organizations are behind the bribe.  Read about the matter in the Seattle Times.
  
  
• Arbitrate or Litigate?   The Real Estate and Construction Law Monitor posted an interesting article about the pros and cons of arbitration / litigation this week.  At the same time, the Wall Street Journal blog posted about a recent study that found success for consumers in arbitrations.  All this referred to by our very own Doug Reiser here.
   
• The Illinois Construction Law Blog tries to answer a tired question in construction litigation:  Is Time Really of the Essence?
  
  
• Avvo, a lawyer rating website based in Seattle, WA, launched in Louisiana this week.   Scott Wolfe's profile was already in the database from practicing in Washington, but we're all happy that Avvo's now launched in the Sportsman's Paradise.
   
• Wolfe Law Group's resident french bulldog, Oscar, is featured in a video at Wolfe Law Group's new YouTube Page:   Oscar:  Document Security Officer.
  
  
• New Orleans City Business Magazine has inducted Scott Wolfe Jr., founding member of Wolfe Law Group, into the Leadership in Law Hall of Fame.   Scott is one of 7 total inductees, and was a Leadership in Law honoree in 2006, 2007 and 2008.

 

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With a weak economy, no jobs in sight and an incessant media frenzy, the White House has gone GREEN! Wouldn’t that make it a Green House? President Obama’s stimulus package aims to put about 20 billion dollars into greening the economy.

“Greening the economy” sounds like the US government is trimming hedges, planting bulbs and whacking weeds.  In all seriousness, the focus is on improving the current economic situation while simultaneously reversing the damage done to the environment. Genius! Obama’s goal is to create 2.5 million new jobs in the green sector of the economy by 2011.

Obama’s green stimulus package will also likely include tax breaks for clean tech projects like solar panels, wind farms, biofuels, and carbon capture and sequestration.  Therefore employment opportunities that are categorized as “green- collard jobs” such as green building, LEED certified construction professionals, wind turbine mechanics and jobs pertaining to energy efficiency and production will be in high demand.

All over the world from London to Hong Kong, governments are coming to the realization that “going green” is a necessity for creating jobs and saving the economy. You can read more about the world wide efforts to “go green” at the UN News Centre.

Right here in the the United States of America, states are adopting laws that provide individuals and developers with tax incentives to incorporate Green Building standards into their homes and/or commercial properties. The more emphasis placed on Green Building in the near future, construction professionals with knowledge and certification in Green Building will find themselves at the forefront of an upturned economy.

There are many opportunities for former construction workers in the green sector. In fact, the number of jobs in “renewable or energy efficient” industries is climbing at a fast rate and government support is only going to boost the speed!  Going green on a construction job encompasses using both renewable resources and energy efficient methods. Wolfe Law Group published a series of blog articles relating to Green Building for contractors. To read the Green Building article series click here.


 

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Currently, there are two bills awaiting a decision by the Washington State Legislature that would prevent employers from holding meetings to discuss issues “directly related to” labor unions.  The initial response from the public is that the bill sounds like another vague, loosely defined bill that aims to reduce the rights of one party (the employer) while advocating for another party (the union).

This particular bill was introduced by Representative Mike Sells, a democrat from Everett as House Bill 1528 and by Senator Margarita Prentice, a democrat from Renton, as Senate Bill 5446. 

To give you more clarity on what is going on, we would like to discuss the practical effect of the bill.

* What Does the Bill Do?

If this bill is passed, it gives employees the right not to attend a meeting called by their employer, if the employees have reasonable belief that it is about religious or political matters.

* Is That the Real Reason Behind the Bill?

Well, not exactly. On the one hand, that sounds completely valid, as religion and politics in the United States of America are viewed as very private matters. However, this bill defines “political matters”  as topics including and related to labor unions.  Scratch below the surface and the bill serves to undermine meetings that employers can potentially call when they are in a fight with a union.

* How Are Employers Affected?

Employers have the right to present factual materials to their employees during a dispute with a union. Those individual employees are entitled to vote based on the information they receive and their personal opinions. The bill is an attempt by organized unions, through legislators, to stop employers from discussing their position during union organizing efforts.  The unions want to limit the right of employers to present facts that might sway someone from voting the union in.

* Does This Affect the Construction Industry Too?

Well, of course. The construction industry is familiar with unions. Union strength arose in response to the inconsistency in project availability, the extended lengths of projects and under-regulated monetary compensation for individual workers. 

Last month, President Obama issued an executive order encouraging federal agencies to use project labor agreements on large-scale construction projects. This order requires contractors to enter in a collective bargaining agreement with a labor union that establishes the terms and conditions of employment for the specific construction project.  The motivation behind this executive decision? The answer: purported timely completion of large projects.

With a Democrat-controlled Congress and Democratic leadership right here in Washington State, employers should expect an increase in legislative decision favorable to unions and in employer regulations relating to union disputes.
 

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Around the Web this week, we found lots of commentary and conversation about how the new Stimulus may positively impact the struggling construction industry...and, of course, talk about the upcoming Mardi Gras holiday (celebrated by our New Orleans office).

• Engineering News Record highlights the winners and losers to the stimulus bill.    AGC's SmartBrief reports that the stimulus could mean 670,000 jobs for construction workers.
   
• The Washington Post is already asking what if this stimulus is not enough?  Will there be a Sequel?
  
  
• Does the Stimulus package impact green building at all?  See what Chris Cheatham has to say in The Stimulus:  Green Building Provisions.
   
• With all the talks of recovery, there is still some talk of recession.  Kean Miller's Louisiana Law Blog reports on How Chapter 11 Can Affect Your Business if a Customer or Vendor Goes Bankrupt.
   
• The celebration of Mardi Gras 2009 is only days away in New Orleans.  Visit Nola.Com's Mardi Gras website, or learn about its history at wikipedia.

 

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The National Law Journal published an article last week titled "Stage is Set for Legal Labor Brawl," and the opening line of the article sums it up perfectly, stating:

Business calls it "Armageddon." Labor says it's "a modest step."

The article discusses one of the hot topics in labor law these days, the Employee Free Choice Act.  Around the blogosphere and news agencies, discussion of the EFCA is on fire.   A Google Video search of the topic yields propaganda from both sides, and on Chris Hill's Construction Law Musings, I recently published a guest post summarizing argument from both proponents and opponents of the bill.

While the EFCA is certainly on the forefront of the labor law debate, its clear that its not the only argument in town. 

To the contrary, since the recent inauguration of President Obama, there has been a substantial shift in labor law issues facing the construction industry, and it's expected that more is on the way. 

One of the most controversial actions by President Obama in the construction industry is the repeal of Executive Order 13502, which prohibited project labor agreements (PLAs) on federal and federally funded construction.   ABC issued a press release specifically directed at this action, contending that it opposes PLAs because they "eliminate merit shop contractors from competing for and winning construction projects."  The ACG also came out against the repeal of 13502 here.

Another labor-law related act already performed by President Obama is the signing of the Lilly Ledbetter Fair Pay Act of 2009.  The act was signed by the President on January 29, 2009, and extends the time period allowed for employees to seek compensation for unequal pay practices.  The act is retroactive to May 28, 2007, and applies to all claims of pay discrimination on or after that date.  Read more about the act at the AGC website here, or on CNN, which covered the Act as "Obama's First Law."

From the perspective of the construction industry, it's a love/hate relationship with President Obama thus far, just one-month into his tenure.

On the one hand, as the Wall-Street Journal reported in mid-January, the construction industry has counted on Obama to put together a strong stimulus package that invested in federal contracting projects (and he pulled through).

On the other hand, however, President Obama is leading a potentially historic shift in employment and labor law matters that will seriously impact construction businesses.

Time will tell how the relationship between President Obama and the construction industry will fare.  So far, however, it's been a mixed bag.

Continue Reading...

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Yesterday, we wrote an article on the Stimulus Package and what it may mean to the construction industry.   Today, we're focusing on what it may mean to your specific construction business.

While the private contracting business has suffered setbacks in the current economy, one bright spot has remained:  the growth of public and federal construction spending.

The passing of the new stimulus build with large investments into America's infrastructure and other public works promises to put even more money into the public contracting business.  

ConstructionBusinessOwner.com published two very informative articles about how your business can take advantage of the increased public spending. 

The Differences Between Public and Private Projects
The first article, titled Three Key Steps for Shifting To Public Works Projects, explains some the key differences between private works and public works, and identifies common mistakes made by companies when entering the public sector.

The article encourages companies to consider bidding for and taking on more public work, but warns against doing so without proper preparations.  Here is a revealing quote:

Making the shift to prevailing wage jobs takes preparation. Without proper planning, contractors run the risk of underbidding jobs-and, subsequently, losing money-or getting slapped with steep penalties for improper recording keeping. Establishing protocols for certified payroll and AIA progress billings and having solid audit trails for each transaction are vital if you want to succeed in the government-financed construction market.

So what are the 3 Key Steps to shifting from private to public work?

• Get Educated
• Automate Your Accounting Practices
• Bid on Projects Based on your Strengths

How To Get Federal Work
The second article, Claim Your Share Of Rising Federal Construction Spending, was published immediately after passage of the new stimulus package, and really explains how businesses - and especially small businesses - can intervene in the federal works bidding process and claim some work.

In its discussion of why small or minority owned businesses have a dog in the federal contracting fight, the article states as follows:

Unfortunately, far too few small businesses take advantage of federal contract opportunities, even though the federal government is required by Congressional mandate to direct 23 percent of its contracts toward small businesses. Despite this mandate, the latest figures from the Small Business Administration indicate that the federal government fell short of this figure.

Although there are various factors behind this shortfall, two things are pretty clear. First, if more small businesses were competing for these contracts, more would win them. And second, small business owners who are savvy about the process of securing government contracts are the ones most likely to land them.

Summary of the article's tips for preparing to bid on federal projects:

• The government will want basic information and methods of Identification.   Get a DUNS number (free from Dun & Bradstreet), a Federal Tax ID number (EIN), understand your NAICS and SIC classification, and have accurate financial routing information for your business available.
   
• Create a profile on the Central Contractor Registration database. The CCR is where all government agencies and prime contractors turn when they are looking for potential vendors.
   
• The federal government is obligated to award a certain percentage of its contracts to various underrepresented and disadvantaged groups. If you think your business may qualify, you should register with the U.S. Small Business Administration (SBA), whose Small Disadvantaged Business (SDB) and 8(a) programs are designed to help specific groups secure federal contracts and subcontracts.
   
• Consider Subcontract work.  Getting your foot in the door is sometimes the hardest part in landing government contracts. First-time bidders can be at a disadvantage because the government often relies on established relationships when selecting contractors. Fortunately, large construction projects often depend on a host of subcontractors, which could be your ticket in.

See also Industry Week's article, Your Best New Customer May Be Uncle Sam, for other helpful information.

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It's official:  The Stimulus package has passed Congress and is expecting the President's signature early this week.   

Now that the parameters of the "economic recovery" package have been set, the construction industry can step back to determine whether and how the stimulus can help.

It's no secret that the construction industry has been closely monitoring the economic stimulus legislation.    With residential construction spending sinking to new lows each month, organizations like the Associated General Contractors of America have been lobbying the legislature to "invest in the country's infrastructure" as an attempt to equalize some of the woes of the private sector with growth in the public sector.  

Notwithstanding the lobbying efforts of trade organizations and the monitoring of the stimulus bill, it's nearly unanimous among commentators on the subject that construction companies will likely be the biggest beneficiaries of the stimulus deal.

The clear next question, of course, is "how?"

Frost Brown Todd, LLC published a blog article about "What Contractors Need To Know" about the House version of the stimulus package.  While not a direct analysis of the final bill, the article is still very relevant to it, explaining a number of details about the bill, where stimulus money will be allocated and why the construction industry may benefit from the spending.

Perhaps the best break-down of information comes from The Associated General Contractors of America website, which provides a state-by-state stimulus impact chart. 

The AGC's website also provides PDFs for each state, with a detailed status-briefing of the construstry industry and an explanation of how the stimulus package may help.   You can download the reports on Washingon here, and Louisiana here.

The AGC's summary of the Economic Impact of the Stimulus Investment in Louisiana is as follows:

An additional $1 billion in nonresidential construction spending would add about $2.2 billion to the state’s Gross Domestic Product (GDP), about $698 million to personal earnings and create or sustain 23,000 jobs.

The AGC's summary of the Economic Impact of the Stimulus Investment in Washington is as follows:

An additional $1 billion in nonresidential construction spending would add about $2.4 billion to the state’s Gross Domestic Product (GDP), about $753 million to personal earnings and create or sustain 20,000 jobs.

This article has discussed the stimulus package and how it may impact the construction industry.  Tomorrow, we'll discuss how the stimulus package may affect your construction business....and give you tips on how to take advantage of the increase in public construction spending!

Now, for some comic relief, here is a clip of Mr. Stephen Colbert's discussion of the Stimulus debate:

 

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This morning, we're introducing a new feature to the Construction Law Monitor blog.    Each week, we'll post interesting information about construction law from out there in the blogosphere, as well as some news updates from our Wolfe Law Rocks page. 

This week, we have a few articles related to the Employee Free Choice Act and potential labor law changes under President Obama that's turning out to be a hot issue in the construction biz, commentary on the new stimulus bill, and in the spirit of valentine's day, a sweet gesture by Wolfe Law Group.

• President Obama took office only a few weeks ago, but there's already an uprising about his effects on labor law....and an uprising particularly within the construction industry.   MLive.Com states that the construction industry is expected labor law changes from President Obama.   With regards to one specific change, the Associated Builders and Contractors are averring that there is "Nothing Free About the Employee Free Choice Act." 
   
• While the ABC is clearly against the EFCA, many commentators are discussing its pros and cons.  Law.Com is stating that the "Stage is Set for Legal Labor Brawl." 
   
• Scott Wolfe Jr., founding member of Wolfe Law Group, wrote a guest post for Chris Hill's Construction Law Musings, about the Employee Free Choice Act here.
   
• The Stimulus Bill is also in the news this week, and Frost Brown Todd's blog has a great post about What Contractors Need to Know about the Stimulus Bill.
   
• Shari Shapiro of the Green Building Law blog weighed in on the stimulus bill, calling it a Bandaid when a Transplant is Needed.  Chris Hill seemed to agree, calling the stimilus bill "another bandaid from Washington."
   
• And on a sweet note, for Valentine's Day, Wolfe Law Group announced that it had sent its clients a valentine.   In the spirit of Valentine's Day, the firm said thank you to its clients by granting the wish of a boy named Spencer, 8, who wanted to get out of Louisiana and "play in the snow."   The wish was granted through the Make-A-Wish foundation.

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This morning, Chris Hill graciously allowed me to publish a post on his Construction Law Musings blog about the Employee Free Choice Act. 

In the posts' explanation of the Employee Free Choice Act and how it may impact the construction industry, I quote Dave Seitter of the Midwest Construction Law Blog from a very informative post on the act:

The untold implications of eliminating the secret ballot election are many, and are derived from the protections crafted under the NLRA over the last half-century. Most importantly, employees will be denied access to the normal pre-election debate that shapes informed decision-making, and employers will lose the opportunity to present an alternative point of view.

This radical change will also erode employees' free choice. Importantly, there are currently no restrictions in the EFCA on the time period during which labor organizations can collect authorization cards. A union that collects a single card each week from a workforce totaling 200 employees could potentially acquire cards from the majority of the workforce over the course of two long years.

Read my post at Construction Law Musings by clicking here.   A big thank you to Chris Hill for giving us the opportunity to speak to his readers.

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A recent survey by the Louisiana Workforce Commission found that 1 in 5 Louisiana companies may be violating the state's workers compensation laws.  

The unsettling survey is part to blame for the state's new fraud program, which is aimed at identifying and bringing into compliance businesses not providing workers’ compensation coverage.

As reported by nola.com, violators will face penalties of $250 per employee, per incident. Repeat offenders could face criminal penalties and have the businesses shut down

The fraud program should be a warning call to non-complying contractors in Louisiana. 

While the commissions hasn't singled out the industry, it's safe to assume that contractors will be the target of the commissions new fraud program.   The construction industry faces some of the highest workers comp rates, and most frequently encounter the fine line between an "employee" and an "independant contractor."

When describing fraud problems, Chris Broadwater, director of the LA Workforce Commission, told nola.com that many business list "workers' jobs as less hazardous than they are, or by claiming that their employees are independent contractors."

The Rates
Provided examples of high and low workers comp rates were, not surprisingly, between construction workers (up to $13 per $100 paid) and clerical workers (60 cents per $100 paid).

The difference is clearly huge, and perhaps it's why the first comment to nola.com's story on the fraud program complained about the cost of compliance:

Well, bring the rates down and maybe businesses here in Louisiana could afford to stay in business with less exorbitant rates from a monopoly insurer for all new businesses (LWCC). Small businesses are often forced into questionable cutbacks to feed the "gimmie" attitude of our state!

The comment likely resonates with contractors in Louisiana, who are competing in a down construction market with other contractors who aren't providing workers compensation (remember, only 20% of businesses in Louisiana do).   It's seems nearly impossible to compete with other businesses who - from the start - can discount their bids by 13-15%!

Not surprisingly, construction companies have substantial motivation to classify workers as independent contractors rather than employees.

Employee v. Independent Contractor
The Louisiana Workforce Commission has written an online article about this very problem, reminding contractors that the difference between employees and independent contractors is not a subjective determination - but something subject to specific statutory criteria.

With regard to the applicable statute, the Louisiana Workforce Commission states:

La. R.S. 23:1021 defines an independent contractor as any person who renders a service, other than manual labor, for a specified recompense for a specified result either as a unit or as a whole, under the control of his principal as to the result of his work only, and not as to the means by which such result is accomplished. Independent contractors who meet this definition are not covered by the Workers' Compensation Act.

Interestingly in Louisiana, a key factor in determining whether someone is an employee or independent contractor turns on whether they are required to perform "manual labor."

According to the article, Louisiana courts "have defined 'manual labor' liberally, looking at the hands-on feature of labor combined with the strenuous quality of the work to determine whether a task is manual or not."

If a substantial part of an independent contractor's work time is spent in manual labor, your inquiry is over, and the worker will be covered by the provisions of the Workers' Compensation Act.

Confused?
The workers compensation laws in Louisiana are confusing, and your business may be avoiding the law simply because it's so difficult to understand.   However, the cost of non-compliance is great.  Not only will your business be penalized by the commission, but you'll also find yourself liable if someone gets injured on the job.

The Office of Workers' Compensation Compliance Division has set up a number for businesses with questions about the requirements at 225-342-5658.  Fraud can be reported to the Fraud Division at 225-342-2226.

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Today, Wolfe Law Group is excited to announce the launch of its new blog, the Construction Law Monitor.

Published through the LexBlog platform, the new blog will commentate and provide insight on construction law issues in Washington and Louisiana.

Wolfe Law Group is a construction law practice with offices in New Orleans, LA and Seattle, WA.   The firm first began blogging in early 2006, and has since published over 100 blog posts about construction law and the legal issues facing the construction industry.

Although on a new platform and featuring a new user-friendly design, posts and articles from the old blog are still accessible in the new site’s archives.

Scott Wolfe, the firm’s found member, commented on the new page:

“From day one, Wolfe Law Group has tried to present to our clients and the public free useful information about construction law.  This new blog allows us to deliver that information through a better design and format, and with LexBlog’s powerful blogging engine.”

The new Construction Law Monitor is just part of the firm’s Internet presence overhaul.

Today, the firm also launches a redesigned website (wolfelaw.com) and a public and client relations page (wolfelawrocks.com).

“This firm has always been ahead of the technology curve,” says Doug Reiser, member of Wolfe Law Group.  “And to stay that way, we’re required to change as fast as the technology.  These new websites are more than a different design, they function better, and allow our firm to connect with clients, colleagues, and the public.”

For additional information on the news that is the subject of this release, contact Jessica Hunter or visit Wolfe Law Group’s new media page:  http://media.wolfelaw.com.

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We've written about the controversial E-Verify program scheduled on February 20, 2009, to become a mandatory component of all hires by federal contractors [see articles here and here].

In what Chris Hill has described as a possible "sudden rash of common sense," the program has been temporarily shelved by the Obama Administration. 

While a relief to federal contractors, it's not yet time for any celebrations.  The Obama Administration is only shelving the program so it has time to review it, and this is just one program of many being analyzed.

As things currently stand, unless President Bush's executive order is tossed after the review, the E-Verify requirement will go into effect on May 21, 2009. 

Aside from President Obama's review of the reg, the program faces another legal challenge over its accuracy.   The suit, captioned AFL-CIO v. Napolitano, No. 07-cv-4472CRB (N.D. Calif.), has been delayed until April 10th to allow the government additional time to reply to a motion for summary judgment.

Stay tuned..

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Washington Governor Gregoire has proposed a 54-foot diameter tunnel to replace the Alaskan Way Viaduct in Seattle, and the cost of the project is expected to be more than $4.2 billion, with the possible substantial completion date falling around mid-2017. This reported by the ACG SmartBrief.

While commentators and those interested in politics are worried about the project becoming the "next Big Dig," the huge undertaking is good news to Washington contractors who may be involved with the project. Stay tuned to the Construction Law Monitor for more updates on the project.

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Except that it's back.

As per an executive order by President Bush, starting January 14, 2009, most federal contractors and subcontractors will be required to use an E-Verify system to confirm the resident status of its employees.

The Midwest Construction Law Blog has posted a blog post with a great summary on the E-Verify history, controversy and requirements. Read it here. That post also discusses a recent lawsuit filed by the Society for Human Resource Management to prevent its enforcement.

And so here we are again - more controversial regulations aimed at construction businesses, and more uncertainty for contractors as to whether the requirements are indeed required.

On what basis is the executive order being challenged? Here is a quote from the Midwest Construction Law Blog post:

E-Verify was designed to allow U.S. employers to use a federal government database to confirm the work eligibility of applicants for jobs. Critics point out that the system has a high error rate. And some have challenged the Bush administration's authority to mandate E-Verify for contractors.

"The E-Verify system is far from ready to be mandated on employers. Plus, the authority to mandate it lies with Congress, not a federal agency," commented Michael Aitken, SHRM's director of government affairs, after the suit was filed on Dec. 23, 2008. "SHRM believes the administration is overreaching its authority by mandating an employment verification program designed by statute to be voluntary."

If you are a contractor that does federal work, stay tuned to the Construction Law Monitor for more information about the status of this suit, and the status of the E-Verify requirements.

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Last week, it was snowing in New Orleans. This week, it's snowing in Seattle. Two cities very rarely crippled by the white stuff both affected by it in the middle of December, as the Christmas holidays and new year approaches.

Our IT systems weathered even Hurricane Gustav, so our firm (with offices in both cities) hasn't suffered any setbacks from the winter weather. However, we're not a construction company (See SRTC Transportation Blog for example company affected by Seattle area snow).

The recent snow in New Orleans and Seattle acts as a reminder to those in the construction industry that extraordinary weather happens. And according to advocates of climate change, unusual weather is becoming less and less unusual.

Last December, in fact, the Construction Business Owner magazine published an article about Climate Change and its effect on the construction industry.

While the debate rages...one thing is certain: It's important that your company be prepared for unexpected weather.

It's no secret that unexpected events can affect a construction project. Here's a few possibilities:

• Unexpected weather can delay the project days, weeks, even months;
• Unexpected weather raises special safety concerns;
• Unexpected weather can delay payments.

Remember that while unexpected weather can delay the project, payments, and more....it does not delay contractual and statutory deadlines and obligations.

With that, I'll leave you with a quote from the 2001 film, Bandits:

"One of the things we always like to remind ourselves before we went into any job was expect the unexpected. Right? Right? Always sounds like good advice. Except, of course, if you are expecting the unexpected, then well then it really isn't really unexpected anymore. Is it? And that leaves you vulnerable to the truely unexpected. Because, you're not expecting it."

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In the midst of the "doom and gloom" economy predictions in the U.S., there seems to be some hope for the Seattle construction market.

Recent reports have been optimistic about the nonresidential sector of Seattle's construction industry and about the Seattle economy in general.

Forbes Magazine has gone as far as to call Seattle one of America's Ten "Recession-Proof Cities," and specifically cited the growth of the city's manufacturing industry, calling it the strongest statistical showing in the nation.

The Seattle Times jumped into the conversation this week as well, in an article about the "Tale of Two Construction Sectors." The article discusses the a struggling home building market in the Puget Sound area, but a very robust nonresidential market. Read the article by clicking here.

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Wolfe Law Group, a construction boutique firm on First Avenue in SoDo, can offer something special to the residents of Western Washington in the aftermath of its devastating floods: post-disaster legal experience.

Prior to opening its doors in Seattle earlier this year, the firm practiced exclusively out of its New Orleans office, and weathered the economic and social twists and turns of the post-Katrina era.

Today, the firm published a "Top Ten" list of ways to avoid construction scams, and with first hand knowledge and recent memory echoes the WA Attorney General's warning to residents to beware of post-catastrophe scam-artists.

"Sadly, victims of widespread disasters have to pay close attention to this," said Scott Wolfe, founding partner of the firm. "From our experience in New Orleans, the affected residents get put in tight financial spots during the post-disaster period, and are particularly vulnerable to scams."

Doug Resier, an attorney in the firm's Seattle office, highlights that there's no shortage on those willing to take advantage of the vulnerable.

"A lot of people see the billions of dollars being poured into a disaster area and rush in to take their share," said Reiser. "After Katrina, thousands came into the area to capitalize on the rebuilding work. In fact, we found there were many people who spent their lives chasing disasters and the quick cash that could be made by catching victims off guard."

The firm published an article on its blog with some insight as to why disaster victims are vulnerable to construction scams, how they happen and how to avoid them. A list of the "Top Ten" ways to avoid a construction scam is included in the article, and the list, without its notes, is reproduced at the bottom of this release.

"In post-Katrina New Orleans, our firm has represented hundreds of homeowners, contractors, architects and engineers in projects of all shapes and sizes to help residents rebuild their lives," said Wolfe. "Unfortunately, a poorly informed decision can cost a victim further heartache, expense and delay. Our advice to victims is to take a deep breath before hiring a contractor, do some research, and hire experienced counsel."

How to Avoid Construction Scams
Top Ten Red Flags and Tips

1. If the price is too good to be true, it probably is.
2. Don't let your contractor find you, find your contractor.
3. A permit is not a license, insurance is not a license. A license is a license.
4. Be weary of unstructured payment plans, and upfront deposits.
5. Nothing good can come from dealing in cash.
6. Contractors who promise to work with your insurance company or promise to get you insurance proceeds are likely pulling a scam.
7. Insurance Certificate copies do not always equal insurance coverage, and Insurance will not cover poor workmanship and/or work defects.
8. If your contractor doesn't want to get a building permit, he might not be a contractor.
9. You should get a written contract, and the contract should be more than an "estimate" or "invoice."
10. Hiring an attorney is a prudent investment.

About Us
Wolfe Law Group has construction lawyers in Seattle, WA and New Orleans, LA. Our practice focuses on serving the construction industry and the parties involved with construction projects. In post-Katrina New Orleans we've worked on hundreds of construction projects of all shapes and sizes. Since Hurricane Katrina, the firm has also represented plaintiffs against their insurance companies and negotiated over 3 million dollars in insurance settlements.

Wolfe Law: http://www.wolfelaw.com

Article on how to avoid Construction Scams:
http://blog.wolfelaw.com/2007/12/beware-of-construction-scams-in-post.html

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Wolfe Law Group can offer something special to the residents of Western Washington in the aftermath of its devastating floods: experience with post-disaster environments.

Prior to our opening the Seattle office in July 2007, Wolfe Law Group practiced exclusively in New Orleans, Louisiana, and weathered the economic and social twists and turns delivered courtesy of Hurricane Katrina.

It is with first-hand knowledge and recent memory, therefore, that we can echo this alert from the WA Attorney General to those residents affected by the recent floods: Beware of Scams.

The Seattle Post-Intelligencer has reported that some damage estimates are expected to reach the billions, and with so much money to be spent on repairs, it's almost guaranteed that many will come through the region to take advantage of the unwary.

If you were affected by the recent flooding, it is very important to remain cautious during these trying times. In the aftermath of Hurricane Katrina, thousands of New Orleans' residents were scammed for millions of dollars.

Our New Orleans office has represented many of these individuals in lawsuits against their "contractors." Unfortunately, in nearly every case, the victims of this fraud experienced long delays in repairing their damages, unnecessary legal expenses and serious cash flow concerns as insurance money was spent for construction work not completed. In some cases, even with a judgment, finding and collecting from the illegitimate contractors is trying, slow and expensive.

Why Getting Scammed Can Happen To You and Why You'll Be Faced with Tough Decisions
If the price is too good to be true, it probably is. Victims of disasters are vulnerable to scams because of the attractiveness of low bids and problems with their insurance.

From our experience, the hands-down number 1 reason why some New Orleans residents ended up with an illegitimate contractor, and a bad disaster recovery experience, was because of money. Go figure.

The price quoted by an illegitimate contractor will always be cheaper than the price quoted by a more reputable outfit. After all, without a less expensive bid, it's impossible for a scamming contractor to compete with reputable outfit.

An abnormally low bid, therefore, should be your first red flag that you might be getting scammed. Unfortunately, however, disaster victims are pressured by a number of factors to turn their heads from these "warning signs" and accept the low bidder for their project.

The uninsured or under-insured victim
One reason why low bids might be attractive and tempting to disaster victims is because they could be under-insured or uninsured. In this situation, a nice gentlemen with a low price, who seems to have good intentions, can be convincing.

While financial times might be hard, and the low-bid offer might be tempting, a construction nightmare might be awaiting you if you fail to adequate investigate the contractor and take precautions before hiring.

The insurance problem - Why even those with adequate insurance are vulnerable
Many argue that we have a problem with the insurance industry here in America. Without weighing in on the debate, we will highlight some of the reasons why those with adequate insurance coverage and limits might still find themselves financially pressured to select an abnormally low price:

• Insurance is not immediate. Let's face it, before you get any money from your insurance company, you'll have to make your claim, wait for your adjuster, wait for the adjustor's estimate and then wait for the payment. The entire process can easily take sixty days. Victims find themselves unable to sustain the financial burdens of the wait.
• The first check from your insurance company is rarely enough. First, in the aftermath of a disaster it is common for construction costs to increase. It is not safe to assume that the insurance company's price lists will increase with the times. Further, many insurance policies will cover you for "Replacement Cost Value," but only pay its insureds the replacement costs after replacement! From our experience in New Orleans, with the inaccurate insurance price list and the payment of only the depreciated value of your losses, your first insurance check might only be 20-40% of your damages! Try paying a contractor $100,000.00 for work performed when you've only received $30,000.00 from insurance.
  

As you can see, the next few months can be very trying to victims of disasters. When a victim has its back against the wall in these financial conundrums, it is difficult for them to even entertain hiring a reputable contractor with its "high" prices. And as a result, unfortunately, illegitimate contractors looking to make a quick dollar have a very large customer base, and a customer base full of victims with broken spirits and few choices.

The sad part, is that these "illegitimate" contractors may not always be con artists or criminals. In some instances, they are even fellow-victims.

With billions of dollars being poured into a disaster area, many consider it a golden opportunity to get into construction and take a share. While these individuals proceed with good intentions, it's their lack of construction knowledge and inexperience that results in the "scam."

For example, an inexperienced and unlicensed contractor with good intentions may have a low bid because they're too inexperienced to properly bid a job. Mid-way through construction they're asking to double the cost, or they're abandoning the project amid embarrassment and cash flow problems.

If you're a victim of a disaster, times will be tough, and you'll be faced with difficult decisions in your quest to rebuild your home, business and/or life. Unfortunately, because of scams and bad situations, its important to move forward with caution.

How to Avoid Scams and Bad Construction Experiences
Your Top 10 Red Flags

From our experience in the construction market post-Katrina, we've compiled a list of the top 10 things to be weary of when hiring a contractor in a post-disaster environment.

1. If the price is good to be true, it probably is.
One of the most common red flags is a low bid. It's important to never over-pay for a project, and its common to hire the lowest bidder in the construction industry, but its critical to ensure that your low bid is a responsible low bid. One of the most tell-tale signs that you might be dealing with an illegitimate or illegal contractor is when you receive an abnormally low bid.

If the price is too good to be true, it probably is, and you may end up paying exponentially more than your highest bid in defective work, legal fees and heartache.

2. Don't let your contractor find you, find your contractor.
It's very common for illegitimate and inexperienced contractors to solicit its customers. Take a deep breath and perform some research on the person who solicited you before allowing them to sell you on their services at your door. Spend time looking for contractors in your area online, and compare different companies.

You're embarking on a large and likely expensive purchase, and the job will go smoothly if you do some homework and select your contractor.

3. A permit is not a license. Insurance is not a license. A license is a license.
Illegitimate contractors looking for work learn very quickly that they'll be asked to provide a license to potential customers. They also learn very quickly that most customers aren't exactly certain as to what a "license" is or looks like.

As a result, many victims of scams find themselves thinking their contractor is licensed because they were showed a work permit or an insurance policy.

Research your contractor's license. It is possible for someone to get insurance or a permit without a construction license, and its even possible for someone to forge a Washington construction license.

Fortunately, there are resources on and offline for you to research your contractor's license.

Check a contractor's registration with Washington's Labor and Industries at http://contractors.lni.wa.gov. You can also call 1-800-647-0982.

Talk to someone if you don't understand the licensing systems and requirements, look into when the contractor was licensed and what type of license they hold. It is possible that they are licensed to fix your toilet, but not rebuild your living room. It's also possible that the person was a science teacher last week and a contractor after the disaster.

If you know someone is unregistered and passing themselves as a contractor, report them to the Labor and Industries by calling the industry's fraud hotline at 1-888-811-5974 or online at http://contractors.lni.wa.gov.

4. Payment Demands and Problems
Even without the backdrop of a disaster, payment procedures in construction is complex. During a disaster, however, things are even worse as contractors across the region will be busier than ever before and cash flow problems will be omnipresent.

It's difficult to advise you to never pay an upfront deposit (because many legitimate contractors will require a draw before work begins), but it is something to handle very delicately.

You should never pay more than 10-15% of the project costs before work begins, and once work begins you should avoid making payments for portions of work that is not already completed.

Scamming contractors are very skilled in collecting nearly 70-90% of the job's costs when only 0-30% of work is complete, and by the time you're catching onto the problems, they're already left town.

Payment terms and procedures in construction are complex, but use fiscal sense and trade money for work performed.

5. Nothing Good Can Come from Dealing in Cash.
Another tell-tale sign of an illegitimate contractor is one who seeks payment in cash. Nothing good can come from dealing in cash.

Make sure that you triple-check those who request cash payments, and when you do pay your contractor, keep detailed records of the payments, and be sure you can get copies of cashed checks or other evidence of payment in case of a dispute.

6. Contractors Who Promise to Work With Your Insurance Company or Who Promise that you'll receive Insurance Coverage
Even legitimate contractors are not insurance adjustors, lawyers or experts in reading or applying insurance policies. Accordingly, you should be weary when a contractor claims they will assist you in your insurance claim.

Contractors build things, and when they are promising to get you more insurance money, they're likely going to fail at both.

7. Insurance Certificates Do Not Equal Insurance Coverage, and Insurance Will Not Cover Against Bad Work
In the post-Katrina construction environment, illegitimate contractors will produce fake, expired or otherwise invalid insurance certificates in an effort to fool their potential customers. Construction insurance is quite expensive, and in order for these illegitimate outfits to compete in price, cutting down on overhead in this area is quick and easy.

If you ask for proof of insurance, accept a copy of their insurance, but look a little deeper into whether the contractor has coverage. You can make a phone call to the insurance company to ensure that the policy exists and is in effect, and you can even request from your contractor that your name be placed on the policy as a "certificate holder" during the progress of the construction project.

One common misunderstanding about construction insurance is that it covers bad or faulty construction work. This is not true. Construction insurance simply protects against "accidents" at the job site (i.e. injuries).

Do not make the mistake of hiring a questionable contractor because he is insured. His poor performance as a contractor will likely not be covered by the insurance policy.

8. Contractor who cannot get a building permit, may not be a contractor.
Many unlicensed or illegitimate contractors request that the owner - you - secure the building permit for the construction project. They may represent that this will "save on costs," or is "required," or any number of excuses - the simple fact is, however, that in 95 out of 100 occasions when this request is made, it is because the contractor is not properly licensed and is unable to get the building permit.

9. You should get a written contract, and the contract should be more than an "estimate" or an "invoice."
A written contract is important for a heap of reasons: it memorializes the parties' agreement, it provides critical information about the progress of the project, it imposes clear obligations on both parties to perform under the contract, etc.

Construction projects can be complex, involve multiple parties and disputes are very common. We cannot stress enough how important it is to sign a written contract with your contractor.

One indication that your contractor is illegitimate or not properly licensed is if he doesn't want to sign a contract, provide or contract or otherwise "doesn't use a contract."

10. Hiring an Attorney is a prudent investment
Rebuilding after a disaster is challenging, and there are many traps for the unwary. You may potentially be dealing with large amounts of money provided by insurance companies and/or construction loans, and rebuilding your home or business can be a monumental task.

While hiring an attorney is an additional expense during the difficult time, in many circumstances it can be a money and headache saving decision.

Before committing to a contractor, have an attorney with construction law knowledge review the contractor's credentials and the contract provided.

In regards the contractor, an experienced construction law attorney should quickly recognize any "red flags" that would indicate that this contractor is a potential liability.

In regards to the project as a whole and the contract, an experienced construction law attorney can review the terms and provisions of the supplied contract and help you enter into a contract that is fair to all parties, and a contract that will help the project run smoothly.

About Us
Wolfe Law Group, L.L.C. is an experienced construction law practice with offices in both Seattle, WA and New Orleans, LA. In the aftermath of Hurricane Katrina, we represented homeowners, contractors, architects and engineers in projects of all shapes and sizes to help residents rebuild their lives. We bring a wealth of post-disaster construction and insurance legal knowledge to Western Washington in its post-disaster environment.

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