ASA Of Texas Scores Multiple Legislative Victories For Construction Subcontractors

Construction subcontractors in Texas will have more assurances they will be paid for their work, more confidence in the integrity of the bidding system for public work, and fewer concerns about risk-shifting on projects, thanks to five ASA of Texas-supported bills signed by Gov. Rick Perry (R) on June 17.

“Each of the bills passed will enable us as specialty contractors to be more profitable and grow our business,” said ASAT President Mackie Bounds, Brazos Masonry, Waco, Texas.

“During the legislative session we scored some critical wins for construction subcontractors,” said ASAT Immediate Past President Brian Chester, United Mechanical, Dallas, Texas. “ASA of Texas fought hard for these reforms that will help keep the doors of good subcontracting firms open.”

To increase the quality of construction services the state procures and to combat the practice of electronic “bid shopping,” the legislature passed H.B. 628, which bans the use of reverse auctions on public projects that require a bond. In a reverse auction, a buyer of construction services requests bids using software or an online marketplace, and sellers have to choose whether to engage in multiple rounds of bids. Reverse auctions rely on subcontractors divulging and changing their bids, unraveling the integrity of the competitive bid system. The new law takes effect on Sept. 1.

S.B. 1048 requires that payment and performance bonds complying with the state’s Little Miller Act be provided on projects funded by public-private partnerships. These partnerships combine private and public investments to finance, operate and/or maintain public construction projects. Letters of credit could be required for the development and operations portions of the project. Payment bonds will provide the construction subcontractors working on these projects with assurance in case of payment default by prime contractors, while performance bonds will protect taxpayers when contractors fail to properly complete the project. The new law takes effect on Sept. 1.

H.B. 2093 dramatically limits the ability of the parties on construction projects to transfer risk to subcontractors when subcontractors are not at fault. It bans broad-form indemnification in private and public construction contracts (except municipal public works, oil field and residential construction) and mandates that “a consolidated insurance program that provides general liability insurance coverage must provide completed operations insurance coverage for a policy period of not less than three years.”

Subcontractors forced to broadly indemnify prime contractors and other parties can be held contractually liable for others’ mistakes or negligence on job sites. Additionally, the law places new limits on how much a subcontractor can be made responsible for insuring the mistakes or negligence of another party. The law limits the scope of “additional insured” requirements, except on consolidated insurance programs and for personal injury claims. Subcontractors forced to name prime contractors and other parties as “additional insureds” on their commercial general liability insurance policies can pay huge premium increases for others’ mistakes or negligence on job sites. The new law takes effect on Jan. 1, 2012.

H.B. 1390 defines a deadline for lien claims for retainage, clarifying that subcontractors have 30 days from completion of their work to provide lien notices to owners. The change will allow subcontractors more time to file lien claims for retainage that prime contractors have failed to release in a timely manner. It also extends the time in which a subcontractor is required to file a lien affidavit for retainage to the 15th day of the fourth month after the completion of a construction project, unless the owner has notified the subcontractor that its lien affidavit must be filed within 30 days of the notice given by the owner. The new law takes effect on Sept. 1, 2011.

H.B. 1456 creates statutory lien waiver forms, both conditional and unconditional, for progress payments and final payment on construction projects. As a result, subcontractors and their clients will spend less time developing and interpreting an unpredictable patchwork of lien waiver forms. The new law takes effect on Jan. 1, 2012.

“The enactment of these five bills is a result of ASA of Texas and the Texas Construction Association standing up for the specialty contractors of Texas,” added Chester. “It proves what we can do when we will stand united together.”The American Subcontractors Association of Texas, Inc. is the state association for ASA in Texas, and represents the advocacy interests of the ASA-Houston Chapter, ASA-North Texas Chapter, Heart of Texas ASA, ASA-Rio Grande Valley and ASA-San Antonio Chapter, with over 450 subcontractor and supplier member companies. ASAT is also one of 14 Texas subcontractor associations that are members of the Texas Construction Association. With over 1,200 subcontractor and supplier member companies, TCA provides leadership and strength in advocacy for the Texas subcontractor. ASAT is the leader among Texas subcontractor associations in supporting TCA with PAC fundraising and grassroots efforts.

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