Subcontractors give states failing grades for 2005

ALEXANDRIA, VA. " The ASA Report: The Policy Environment in the States," published by the American Subcontractors Association, ranks New Mexico as No. 1 for its overall public policies affecting construction subcontractors. Even with the top ranking, however, New Mexico still earned a D. The annual report, now in its second year, scores each state in individual policy areas such as retainage and bid

ALEXANDRIA, VA. — " The ASA Report: The Policy Environment in the States," published by the American Subcontractors Association, ranks New Mexico as No. 1 for its overall public policies affecting construction subcontractors. Even with the top ranking, however, New Mexico still earned a D.

The annual report, now in its second year, scores each state in individual policy areas such as retainage and bid shopping, and uses the scores to assign an overall score and grade to each state. All states other than New Mexico had overall scores of less than 58 points of 100, failing grades, as calculated by ASA.

"The overall policy environment for subcontractors in the states remains unacceptable," ASA President Vincent Terraferma said. " While there are some states that improved in particular areas, such as prompt payment and retainage, even highranking New Mexico's overall score was 69 points of a possible 100. ASA is committed to improving the policy environment for subcontractors, including using this report to educate policymakers and others about the needfor reforms."

ASA is contacting media, legislators and other public officials across the country to share the results of its report. ASA's campaign will warn subcontractors of deficits in their state laws, provide advocacy information to help change laws and educate subcontractors about the need to remain vigilant when negotiating contracts in a harsh public policy environment.

ASA calculated the overall grade for each state (and the District of Columbia) by scoring seven key state public policy areas, and then combining the points for a final score and grade for each state.

ASA scored: prompt payment protections; treatment of pay-if-paid clauses; mechanic's lien protections; payment bond protections; retainage limitations; anti-indemnity protections, including limits on "additional insured" endorsements; and anti-bid shopping measures. The scoring in each policy area took into account both laws and judicial decisions.

Kansas showed the greatest overall improvement among the states in the past year, with its state ranking increasing from 29 to 19 of 50. This shift was due to a sweeping law (S.B. 33) for private construction (except small residential work) requiring construction owners to pay prime contractors within 30 days for completed, undisputed work and contractors to pay their subcontractors within seven days of receipt of payment for subcontractors' work. The law preserves contractors and subcontractors' ability to assert mechanic's lien rights notwithstanding pay-if-paid clauses; provides for suspension of work after progress payments are 14 days late; limits retainage to 10%; establishes equal retainage levels at all tiers; bans out-of-state arbitration and litigation on disputes over Kansas construction; provides attorney fees for the prevailing party in disputes; and prohibits waivers of subrogation for workers' compensation losses.

ASA's report reveals significant legislative and judicial activity in individual policy areas affecting subs in Arizona, Florida, Kansas, Kentucky, Maryland, Montana, North Carolina, Oklahoma, Oregon, Rhode Island and Tennessee. Kentucky showed the most improved anti-indemnity policy due to enactment of its first anti-indemnity statute (H.B. 449) for construction, which limits contractors' indemnity obligations under hold harmless clauses to the extent of their own fault.

Tennessee showed the most improved mechanic's lien law with enactment of a law (H.B. 743) prohibiting contractual lien waivers in construction contracts.

Legislatures in Arizona, Florida and Montana passed bills that limit retainage on public works jobs. Florida also enacted time limits for when contractors have to make progress payments to subcontractors.

North Carolina legislators extended lien rights to anybody who supplied labor or materials on a project.

The Maryland Court of Appeals preserved payment bond rights of subs and suppliers in a surety case..

The full report is available on ASA's Website, www.asaonline.com.