Thursday, April 23, 2009

FINALLY, Some Positive Construction Economics News!

Ok, we all know the construction industry has taken it on the chin for while now, from the balance sheet to the evening news and everywhere in between. Well, the AIA finally gives us some positive news.

After a series of historic lows, the Architecture Billings Index ("ABI") was up more than eight points in March. As a leading economic indicator, the ABI is supposed to reflect the approximate 9-12 month lag time between architecture billings and construction spending. The March ABI reflected a decrease in overall demand for design services, but the score was nonetheless the highest it has been since September 2008. This news should probably be taken with cautious optimism, but any optimism represents an improvement for many builders.

Mixed design practices fared the best, followed by institutional, multi-family residential, and commercial/industrial.

So what is the legal take on this? Increased work equals new contracts. And with new contract formation comes the potential for contractual pitfalls–indemnity clauses, limitations of liability, pay-when-paid provisions, etc. As I’ve discussed in previous articles, many of these provisions are not quite as cut and dry as they would appear. The key is to get things right on the front end in preparing the contracts that govern the relationship (and obligations) of the parties. You negotiate hard for certain terms–be sure they are enforceable. On the flip side, be sure you’re not stuck with responsibilities (and liabilities) you didn’t think you had.

I’ve seen it countless times–the ounce of prevention really does beat the pound of cure.

Tuesday, April 21, 2009

Deadline to Implement Federal E-Verify Requirement Pushed Back

On November 14, 2008, a Federal Acquisition Regulation ("FAR") rule was changed to require that certain federal agency contracts (and some subcontracts) include a provision mandating the use of the E-Verify program. But exactly what is E-Verify? In a nutshell, the E-Verify program is an online program, jointly administered by the Department of Homeland Security and the Social Security Administration, to verify employees’ information, including immigration status. This new rule would be in addition to the current Form I-9 requirements.

The E-Verify rule would require all federal solicitations and contracts over $100,000, lasting for a period of 120 days or more, to include a provision that contractors:

1. Enroll in E-Verify;
2. Use E-Verify for all new hires in the US;
3. Use E-Verify for all workers assigned to the contract; and
4. Include a provision in certain subcontracts for services and construction that are over $3,000.

There are some exceptions to the E-Verify requirement–namely, contracts for items that are commercially available off-the-shelf.

This rule was supposed to go into effect on January 15, 2009; however, this date was recently pushed back for a second time and now it will not be implemented until at least June 30, 2009.

The reason for this most recent delay is the pending litigation Chamber of Commerce v. Chertoff, et al., in U.S. District Court for the District of Maryland. In December 2008, the U.S. Chamber of Commerce, among other groups, sued the Department of Homeland Security to have the mandatory E-Verify rule deemed illegal and to enjoin its enforcement. The plaintiffs in that case have filed for summary judgment, while the DHS and other defendants have asked the court for additional time to respond so that the Obama Administration can first complete its review of the federal contractor E-Verify requirement.

The political aspects of this issue notwithstanding, the E-Verify program is of particular significance to the construction industry because the time and cost-intensive nature of the program would add another layer of expense and burden to companies that enter into federal contracts. While the ideas behind E-Verify might be on the right track, the execution of the program would likely add to the strain of a construction industry that is already reeling from the current economic climate.

Whatever the courts decide about the E-Verify program, it is likely that some change in employee verification will be on the horizon–either the full blown E-Verify, a scaled-back version, or some other yet-to-written legislation. In the meantime, the best practice is to stay on top of employee I-9s for now and be mindful of potential changes in the future.

Wednesday, April 8, 2009

Give 'Em A Brake

Most of us drive through highway or road construction zones regularly, if not daily. I personally drive through two each day in my daily commute. We do it so often that we frequently give little thought to the workers who are actually out there improving our roadways. So I was surprised to hear that for the past decade, there have been an average of 1,000 fatalities per year in highway work zones, with another 60,000 people injured, according to the Associated General Contractors (AGC). As a result, this week has been named National Work Zone Awareness Week.

The AGC has set a goal for federal and state governments to reduce the number of highway work zone fatalities by 50% within the next two years. Many states (including Texas) have already doubled the fines for moving violations in these areas in an effort to increase safety. Still, we drivers need to do our part too.

So in honor of National Work Zone Awareness Week and, more importantly, in honor of the contractors improving our roadways, slow down and pay attention when you see roadwork being done. It shouldn’t cost a life to repair a road or bride.