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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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We've monitored the federal government's potential E-Verify requirement for nearly a year now.   After a number of delays starting in 2008 and continuing until this summer, the E-Verify requirement was finally given the green light in July 2009.

While backed by the new President and slated to take effect on September 8, 2009, there seemed to be just one more hurdle:   The litigation challenging it.

Today, AGC's Smart Brief reports that a federal district court has ruled on the legality of the controversial E-Verify requirement, holding that the requirement is legal.  

On September 8th, therefore, systems are a-go for the E-Verify requirement.

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E-Verify, a government web-based system that helps employers verify a workers legal status, has been in the news before.  

Originally a George W Bush executive order, E-Verify was slated to become mandatory for federal contractors beginning January 15, 2009.   The change in executive administrations and a handful of lawsuits, however, pushed the requirement back indefinitely.

This week, the Obama administration chimed in on the subject, and announced that it would support the E-Verify requirement, and that it would take effect across the country starting September 8, 2009.   Appropriately, the day after Labor Day.

Any federal projects or businesses receiving money under the federal stimulus program will be subject to the rule, and required to register and use the E-Verify system.

Differences Between Obama E-Verify and Bush E-Verify

When comparing the Obama E-Verify requirement and the Bush E-Verify requirement, one difference stands out:   Obama has ditched the "No-Match" system.

As a result, for better or worse, the requirement going into effect this September will have substantially less teeth.

Ditching the "No-Match" component of the E-Verify requirement will benefit employers because they will not be required to terminate (on such a tight time-line) employees whose social security numbers do not match with the system.

It will benefit workers, too, because Obama will not allow the federal government to use mismatched SSN data to find illegal immigrants in the workplace.

Is It Really Going To Happen This Time?

The short answer:  Yes.

While it has been delayed repeatedly in the past year, and there's always a possibility for more delay, it looks like the latest effective date will stick.  

The Obama administration has reviewed the requirement, and is now standing behind it, and by ditching the most controversial aspects of the rule, there will be fewer legal and political challenges.

Beginning September 8, 2009, therefore, the government will award contracts only to companies in compliance.

Who Needs to Be Prepared?

A lot of people need to be prepared for this E-Verify requirement.  

While the controversial components of the requirement have been removed by Obama, the scope of the rules applicability has actually gotten broader.   The requirement will not only apply to contractors and subcontractors on federal projects, but it will also apply to any business receiving money under the federal stimulus project.

With the influx in federal and state spending on construction projects, and the decrease in private work available, more and more contractors are being forced into bidding and working on public works.  And with the now wider reach of the E-Verify program, contractors and subcontractors need to prepare themselves.

In February 2009, we wrote a post here at the Construction Law Monitor titled "The Stimulus Package and Your Construction Business."  

The post discussed the differences between private and public works, and addressed some of the issues private contractors face when working on its first public project.   

Add the new E-Verify requirement to the list, and the article is still a good read.

Is this Still Controversial?

Even with Obama's backing of the system and some tweaks to its enforcement power, the E-Verify program definitely still has its detractors.

The San Bernardino Sun News just ran an article about how the E-Verify system puts Obama at odds with some democrats.   

Despite the controversy, the E-Verify requirement will take effect on September 8th, and construction companies around the country must be prepared.

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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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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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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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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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On February 6, 2009, President Obama overturned previous Bush administration policy regarding labor usage on federal projects, by passage of an executive order. The order eliminates the Bush prohibition of the use of "project labor agreements" on federally-funded projects. In the past, the Bush administration had sought to limit the use of these agreements to lessen Union strength in the bargaining process.

"Project labor agreements" ("PLA") are similar to collective-bargaining agreements but they are issued prior to the initiation of work on a project. The Associated Builders and Contractors, Inc., states that a typical PLA requires that all contractors become bound to:

• recognize unions as the representatives of their employees on that job
• use the union hiring hall to obtain workers
• obtain apprentices exclusively from union apprenticeship programs  
• pay into underfunded and mismanaged union benefit plans 
• obey costly, restrictive and inefficient union work rules

In the end, the alleged benefit to the federal government, and to the contractors down the chain, is that labor rates are set, benefits are provided, and strikes are prevented.

Duane Morris LLP, a San Francisco multi-purpose firm, first reported the effect of the order against large construction firms:

"......many construction firms may be compelled to agree to PLAs on federally-funded construction projects for the first time. Not only will these firms face likely difficulties in navigating the uncharted waters of participating in the negotiations for a PLA, but they may also be forced to pay higher, union-level wages and benefits to their workers than they are otherwise accustomed to paying on projects. Many construction firms may be compelled to agree to PLAs on federally-funded construction projects for the first time. Not only will these firms face likely difficulties in navigating the uncharted waters of participating in the negotiations for a PLA, but they may also be forced to pay higher, union-level wages and benefits to their workers than they are otherwise accustomed to paying on projects."

Duane Morris also finds that the order will only promote the use of PLAs on projects over $25 Million. However, the order opens the gate for the use of PLAs on lesser projects, where they are no longer prohibited.

While several organized units are certainly thrilled at the reinstatement of PLAs on federal projects, construction companies raise considerable concern. The Associated Builders and Contractors states:

"ABC strongly opposes union-only PLAs on construction projects. These agreements not only exclude merit shop contractors from bidding on projects paid for by their own tax dollars, but also drive up the cost of construction by reducing competition for the work."

Construction companies who engage in federal projects should be keen to new changes in labor law. One thing is for certain, President Obama aims to bring swift changes to the way the U.S.A. does business with private interests.

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The Washington Supreme Court decided yesterday to add to the already growing worries of contractors in the State of Washington, and perhaps across state lines. The High Court decided to apply an open-ended statute of limitations to claims brought against a contractor who built Safeco Field, the Seattle Mariners' home ballpark. The opinion controverts the previous belief that the construction claim would be limited by a 6 year limitation period on such claims. (RCW 4.16.040)

Due to the Court's findings, contractors must now be aware that work that they provide on a publicly-funded stadium will be subject to the open-ended statute, as opposed to the normal 6 year period for other constructions.

Washington Construction Law, a blog by Davis, Wright and Tremaine LLP, has reported that the Seattle Mariners and the State MLB Public Facilities District stand to recover more than $3 Million in damages for faulty construction completed by Hunt Construction Group and Kiewit Construction Group, which was substantially completed back in 1999.

The opinon, which can be found at Washington Construction Law's website, illustrates that the Court was unwilling to apply RCW 4.16.040 which provides a 6 years limitation period for contract claims. Instead, the Court applied RCW 4.16.160 saying:

We hold that the construction of Safeco Field by the PFD involves the exercise of sovereign powers traceable to delegated sovereign powers of the State, and claims based on its construction fall within the “for the benefit of the state” statute of limitations exemption in RCW 4.16.160.

Washington Construction Law states that the opinion is the first of its kind in the United States. Regardless, it certainly sets the tone for further litigation across the states.

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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.

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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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