Posts Tagged ‘Public Works Act’

Louisiana Supreme Court Reverses Bad Decision That Allowed Bidders to Defraud the State

On August 4, 2011        

If you recall, on October 19, 2010, I discussed what I believed to be a very poor decision rendered by the Louisiana First Circuit, concluding that when a bidder on a public project defrauds the State, the State is refused any remedies.

Well, apparently the Louisiana Supreme Court agreed with me (for once), because it just reversed the First Circuit’s decision!

On May 10, 2011, the Louisiana Supreme Court decided that the decision rendered by the First Circuit in State of Louisiana v. Infinity Surety Agency, LLC, et al, 2010 CA 0123, Louisiana First Circuit Court of Appeal (Rendered September 10, 2010) was wrong and the case was remanded for trial. This decision by the La. Supreme Court definitely changes things for the better.

Before this decision was rendered, the First Circuit decided that a successful bidder to a public works project in Louisiana could defraud the State by providing an unauthorized surety and, despite the misrepresentation and failing to perform the contract in a specified time, the State would not be entitled to liquidated damages. The reasoning behind the line of thought was that State should have known that the surety was unauthorized thereby making the bidder unresponsive. The First Circuit placed an affirmative duty upon the State alone that was unfair and certainly unduly burdensome.

Now, the Supreme Court has decided that an appeals court does not have the power to make such a determination.

Whether Joint Venture breached the contract; whether Joint Venture’s bid was responsive; whether Joint Venture was the lowest responsible and responsive bidder; whether the State, as opposed to the bidder, had the sole and affirmative duty to determine if Infinity Surety was an authorized surety under the bid form; whether the State could instead reasonably rely on the representations of the bidder and the surety in the bid form; whether the State should have or could have rejected the bid as defective; whether the insurance codes precludes Infinity Surety as an unauthorized insurer from asserting its surety contract is void; and whether the State could have waived any purported defects in the bid bond, are all issues that should be resolved at trial…

These were all factual determinations that were not for the appeals court to decide and should be decided at trial. The La. Supreme Court here very smartly narrowed in on the particular issue that was to be resolved, namely whether the State alleged enough facts to assert a legitimate cause of action against the defendants, rather than allowing the decision of the court below extend its power beyond that which is lawful.

The unnecessary burden placed on the State in public works projects to investigate a surety that is being represented as authorized and fit for the purpose of the contract has been lifted.  In public works projects, the State should be allowed to rely on representations made by the other party that should be made in good faith, a notion that is fundamental to the law of contracts, and this decision properly reflects that.

Posted in:     Bidding, Louisiana, State & Federal Contracting  /  Tags: , , ,   /   Leave a comment

For Louisiana Contractors Bidding on Public Works Projects: This Case is for You

On August 2, 2011        

For all you Louisiana public works contractors out there bidding for public works projects to expand your private business or bidding for public works projects because that’s what you’ve always done – whatever the case may be – the 4th Circuit Court of Appeals is on your side. For cities and states trying to construct public works projects to improve their turf, take notes please.

We’ve written before about what happens in Louisiana when a bidder on a public project violates time requirements under the Louisiana Public Works Act, but what happens when Louisiana or a city within violates time requirements in failing to execute contracts  and notices to proceed with a winning bidder for a public project?

On April 27th of this year, the 4th Circuit Court of Appeals decided in the Wallance C. Drennan, Inc. v. City of New Orleans case, nuances of certain provisions of the Louisiana Public Works Act (La RS 38:2252 and 38:2212) that ultimately address the question above and render the law more stringent for cities and states advertising for public works bids.

In Wallace, the City of New Orleans advertised bids for two different public works projects under the Louisiana Public Works Act to renovate some streets around town. These two projects were to be partially or fully funded by the Louisiana and Federal governments, but financing was not finalized at the time the bids were received. Wallace C. Drennan, Inc. was the contractor that was the lowest responsive bidder and, thus, won both jobs.

However, because the City delayed executing the contracts for the two jobs within the required 45-day time limit from the day it awarded it to Wallace and because it did not thereafter within 30 days issue “Notices to Proceed,” Wallace sued the City for damages due to delay and tardiness under La. R.S. 38:2215 and 38:2212 of the Louisiana Public Works Act, both provisions cited above.

Wallace won on the issue of liability before trial began. The City appealed to the 4th Circuit, arguing that it gave the requisite notice of delay, but they lost again.

Why? Well, La. R.S. 38:2212(B) states that, “in the event the time limit stipulated herein is not applicable [namely the 45-day and 30-day notice requirements] because of…[an] exception [i.e. delayed financing], this fact shall be mentioned.” Ultimately, the City did not “mention this fact,” according to the 4th Circuit.

If a statutory time limit will not apply, in this case for the reason of tentative financing, that fact must be stated within the project specifications and the official advertisements. A reasonable bidder must be lead to believe that there will be a time delay. Because this was not the case in Wallace and the City did not give requisite notice, it lost the appeal.

The City tried to argue, in what was likely a last ditch effort to save itself from losing, that Wallace waived its right to complain about the imprecise notice. But, as is clearly stated in the statute, the applicable provisions are not subject to waiver by the bidder.

What should cities and states furthering public works projects take away from this case? As the Court itself advises, if a situation like this arises regarding the possibility of delayed financing and time delays in general, rejecting all bids for just cause or extending the deadline by mutual consent with the lowest bidder are both wiser routes to take.

It’s important to remember that public bid law and public works law are founded on the notion of public policy; Courts will almost always refuse to take any action inconsistent with these laws, so all builders take note!

Posted in:     Bidding, Delays, Louisiana, State & Federal Contracting  /  Tags: , , , , , ,   /   Leave a comment

Leasing Equipment in Louisiana? How To Protect Your Lien Claim

On July 20, 2011        
You are in the business of leasing heavy equipment to contractors. You are beginning to provide more and more machinery to jobsites. You just hit your first snag with payment. What do you do?

Chances are you are stuck in rough spot and have to defer to your contract for remedy. There is likely no answer for you under the lien law – unless you filed a notice of lease agreement with the owner within the appropriate time frame.

Lessors often do not learn about the dreaded notice provision until after they have been bitten by a bad customer. Both the Private Works Act and the Public Works Act each require that the Lessor of equipment to a construction project provide advance notice to the owner of the equipment’s use and existence at the jobsite.

Luckily, satisfaction of this requirement is quite simple. Under both Acts, a Lessor of movables (equipment, vehicles, etc.) must “deliver a copy of the lease to the owner not more than ten days after the movables are first placed at the site of the immovable for use in the work.” La. R.S. 38:2242(c). If the job is private and not public, you must also provide a copy of the lease to the contractor. La. R.S. 9:4802(G)(1).

The official comment for subsection G of La. R.S. 9:4802 states that the purpose of this law is to give notice to the owner and the contractor that equipment being used by a contractor is leased and thus potentially creating liability under the Private Works Act.

Though the type of delivery is not specified, it is commonplace to use hand delivery or certified mail. If hand delivery is utilized, it is important that the courier fill out a simple affidavit specifying what was delivered, when it was delivered, who it was delivered to, and where it was delivered.

Finally, the Notice of Lease Agreement does not have to be in any specific form – simply a copy of the contract should suffice. We do prefer that you use a cover sheet to inform the owner and contractor of the purpose of the delivery, reserving your rights under either La. R.S. 9:4802 (Private Works) or La. R.S. 38:2242 (Public Works).

Think Different To Send Notices of Lease Easily

So, now you know about this notice of lease requirement…but really, does your company have the time or attention to detail required to send these notices to each and every customer every time you sign a rental agreement?  It’s likely that you either don’t have the time, or if you can make the time, that it’s a waste of time for your company.

Think different about these notices…how about outsourcing them?

A company like Zlien (which was started by Wolfe Law Group founder Scott Wolfe Jr) is in the business of sending notices like the Louisiana Notice of Lease. They have many equipment rental companies who simply send them a copy of each new rental agreement, and Zlien prepares and sends the preliminary notice for them, keeping evidence of its delivery and a copy of the notice for you to access within your account at anytime.  It’s a great alternative to trying to send all of these complex notices yourself, and can be done so it will actually save you money.

Posted in:     Filing Requirements, Louisiana, Mechanics Lien  /  Tags: , , , ,   /   Leave a comment

When Bidder on Public Project Defrauds the State, Louisiana 1st Circuit Refuses the State Any Remedies

On October 19, 2010        

In my view, the Louisiana First Circuit just rendered a very poor decision.   The decision was written by Judge William J. Kline (serving pro tempore) in the matter State of Louisiana v. Infinity Surety Agency, LLC, et al, 2010 CA 0123, Louisiana First Circuit Court of Appeal (Rendered September 10, 2010).

In Louisiana, when a successful bidder to a public works project fails to execute the contract within the specified time frame, the State has a right to retain the bid bond as liquidated damages.

So, what happens when the successful bidder represents that it could provide an acceptable performance…but through an unauthorized surety?    In such a case, the successful bidder is awarded the contract, but cannot proceed with work within the required time frame because of a failure to bond the project pursuant to the La. R.S. 38:2219 requirements.

A case last month out of the Louisiana First Circuit addressed this question, concluding that the State was not entitled to liquidated damages.

The reason?

Since the purported surety was unauthorized, the bid itself did not meet the statutory requirements of the Public Works Act.   The bid, in other words, was non-responsive and should have been rejected by the State.

What if the bidder made a misrepresentation – an outright fraudulent misrepresentation – that the surety had authority to bond the project and would in fact bond it?   The First Circuit says it doesn’t matter:

Although the State also argues that [the contractor and surety] should not be allowed to escape paying the penalty by its alleged fraud, there is no ambiguity in the statute.   The bid did not meet the requirements of the statute and is null and void.  When a law is clear and unambiguous and its application does not lead to absurd consequences, the law should be applied as written.

Doesn’t this remedy seem harsh, or maybe an absurd consequence?   After all, the contractor and surety defrauded the state intentionally….while the State was just guilty of an oversight, or was duped.   The First Circuit says this:

Admittedly, this conclusion seems harsh because in circumstances of this sort, when there are two breaches of statutory responsibility, one breach could be intentional and the other an oversight…Had the State rejected the bid up front, however, there would have been no delay in awarding the contract to the lowest responsible bidder.

I think the Court might have made a mistake here.   This explanation for the “harsh” conclusion is lacking of any good logic, acknowledging two breaches of statutory authority, but failing to acknowledge that maybe the State couldn’t have rejected the bid upfront…because it was lied to.

In this decision, the First Circuit has chosen to read one statutory mandate as more important than the other.  Namely, the First Circuit reads the duty of the State to reject non-conforming bids literally and without sympathy, but merely glazes over any statutory and legal requirement that the contractor and surety not commit a fraud on the State.

Further, the First Circuit ignores clear language elsewhere in the Public Works Act:  that if the bidder is awarded the contract, and does not perform, it forfeits its bid bond.   Here, clearly, the bidder was awarded the contract, and did not perform.   The conclusion that the bid might have been unresponsive because of a mistake in the bid or outright fraud, doesn’t change the facts:  the bidder won, and could not perform.

What about the State’s tort claim against the contractor and surety for the misrepresentations?  Surely, the tort claim would have merit – or at least be deserving of a trial….

Not so, said the First Circuit.   “The alleged tort claim should never have arisen,” it concludes, because the bid should have been rejected.

Posted in:     Bidding, Louisiana, State & Federal Contracting  /  Tags: , , , , ,   /   2 Comments

More Contractors Sought in New Orleans?

On July 7, 2009        

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.

Posted in:     Construction News, State Bond Claims  /  Tags: , , ,   /   Leave a comment