Rhode Island has traditionally required employers to pay their employees on a weekly basis. However, legislation that recently passed the general assembly would allow certain employers to pay their employees every two weeks instead. However, the law requires the companies to obtain a surety bond and meet other requirements. For more details, please see the attached article from eastbayri.com.
Research found that many subcontractors have experienced a practice known as “baiting and switching.” In such a scenario, a prime contractor teams with a subcontractor to win a bid and then removes the subcontractor from the project. A prime contractor could decide to do that for a few different reasons; for example, it might want to keep the whole contract, or it might discover that the subcontractor doesn’t have the necessary skills.
In a recent decision a California court ruled that a supplier of construction materials is considered a subcontractor. This is important because it then qualifies that supplier to make a claim against a public works bond. General Contractors have argued that this opens the floodgages for potential claims, especially if the supplier is a 2nd or 3rd tier supplier and thus not directly engaged by the general contractor themselves, but by a subcontractor they have engaged for a specific scope of work (framing or roofing for example). However, the court relied on several pieces of state and supreme court precedent and ruled against this line of argument.
This case is important because it reinforces the need for general contractors to obtain ongoing lien releases from their subcontractors. The practice has become more prevalent during the economic downturn, but the Eggers Industries v. Flintco, Inc. drives the point home even further and sureties will likely increase their enforcement of this practice as a result. For more details, please see the attached article from JD Supra.
Calnet, a defense contractor based in Reston VA, agreed to an $18.1 mln settlement with the Department of Defense over alleged inflation of overhead rates on three contracts to provide services to Guantanamo Bay. A former employee triggered the lawsuit by filing suit under the False Claims act and will receive $2.7 mln as a result. For the full article, please see the attached article from the Washington Post.
Given the slow down in office, retail, and residential building in most markets, public work has become increasingly important to all varieties of general and subcontractors. However, securing the contracts can be difficult for small companies and a large government job can present significant diversification risk to a small company. Thus, the practice of teaming has gained traction among small companies. The practice gives small contractors a better shot at winning the work, allows them to spread the risk, and often makes them more bondable. For more information see the following article from GovWin.com.
A grand jury was recently impaneled in the City of Fresno California to determine if there really is a “Fresno Factor”, which sureties and contractors have complained about for years. The report revealed that both sureties and contractors feel is “at best difficult” to work with the City of Fresno. Thus many build in significant premiums to do work with the City or avoid jobs altogether. This obviously leads to higher costs for the City and/or project delays. The grand jury made some great suggestions to improve the situation and these suggestions are applicable for nearly any municipality in the country. Follow the attached link for more on this subject.
After several change orders were made on a stadium-renovation project in Tacoma, Wash., state auditors have advised the city to strengthen its internal controls to make sure such orders are handled in the proper fashion. An auditor also advised the city to “ensure that evidence of an increased performance bond is obtained for each change order that is approved.”
Change orders are commonplace on major projects. However, it is critical that the surety is notified of these changes and that the bond amount is updated when necessary. This will help avoid any unnecessary issues if a bond claim is necessary. For more information on this case, please follow the link to the article below. For more questions on surety, give us a call.
The planning commission in Michigan’s Huron County has approved a plan for a wind farm. The company in charge of the project has filed a surety bond to cover the costs of decommissioning the turbines. One commissioner expressed concern that no similar protections are in place for another wind project by the company that was approved in 2005. The company says it plans to address that issue.
A recent Reuters article highlighted the opinion of a panel of experts at the Federal Association of Municipal Analysts conference in Las Vegas about longer-term transportation-funding legislation. The experts believe that a long term approach instead of more temporary extensions would spur the formation of many public-private partnerships. Federal and local governments face tight budgets, but “there is ample [private] capital available to invest in revenue-backed U.S. infrastructure projects,” said analyst Richard Little.
For the full article, follow the attached link.
The term “fracking” has recently entered the American lexicon as concerns over ground water contamination as a result of chemicals being used in the process of hydraulic fracturing with horizontal natural gas wells. Stories from the Great Plains States to the Northeastern United States have led to added concerns with the process. In addition, to potential contamination concerns the heavy construction equipment necessary to build wells has led to concerns over potential damage to surrounding infrastructure. That has led at least one County Engineer in ohio to consider added bonding requirements.
These potential changes mean that it is important for drilling companies to have the appropriate bonding capacity with their surety company in order to meet potential added requirements. At Surety Placement Services, LLC we issue performance bonds for well construction companies and drillers throughout the country. We have the expertise necessary to help you understand what type of surety program you will need to maintain and build your success and we’re here to help.