Contractors Center Point

CASPA: A Contractor’s Best Friend

 As many Pennsylvania Contractors know, the Pennsylvania Legislature passed a law entitled the “Pennsylvania Contractor and Subcontractor Payment Act” (CASPA) in 1994, the purpose of which was to protect contractors and subcontractors with respect to prompt payment for their work on privately owned construction projects and to encourage fair dealing among parties to construction contracts. CASPA, sometimes referred to as the Prompt Payment Act, specifically authorizes, among other things, an award of both statutory and penalty interest as well as attorney’s fees to contractors and subcontractors in the event that their upstream contracting partner, be it the owner or a contractor, fails to pay invoices in accordance with the required timelines in the contract or the statute where the withholding of those payments was done in bad faith. Contractors doing work on public projects are provided with prompt payment rights thru the Commonwealth Procurement Code.

Since the enactment of CASPA, both the trial and appellate courts of Pennsylvania have addressed many disputes involving alleged bad faith failure to pay and the appropriate remedies therefore under CASPA. Most recently, in October 2009, the Pennsylvania Superior Court addressed the issue of whether statutory interest, penalty interest and attorneys fees as authorized under the CASPA continued to accrue throughout all appeals as well as through the entire period in which the judgment is sought to be collected by the prevailing contractor. 

Be Careful Calculating Wage and Fringe Benefit Costs When Bidding Government Contracts

Contractors handle wages and fringe benefits for their employees in a number of different ways. Traditionally, contractors have paid the “base” amount of wages in cash but have then chosen different ways to pay fringe benefits. As federal government compliance increases, ensuring that wages are paid in accordance with federal and state laws, such as the Davis-Bacon Act, are critical when bidding on federal contracts. By evaluating payment of fringe benefits, contractors may also identify more accurate labor costs resulting in more competitive bids.

With residential and commercial backlog low, government provided opportunities have provided contractors with additional avenues of diversification of their business models. However, competition for this work is fierce. Just within the last 12 months there are 50,000 new registrants who have filed with the federal government to bid on federal project work (see http://www.contractorscenterpoint.com/2009/11/accessing-federal-stimulus-projects-where-to-go-and-what-to-do.html for further details on bidding federal stimulus projects). This new focus on federal work has increased compliance regulations and overall enforcement of federal stimulus work. 

One of the biggest challenges facing contractors is how to satisfy the wage obligation. Many contractors will pay the “base” amount of wages in cash and then choose how to pay the “fringe” portion. Some examples of how the “fringe” portion may be paid is 

• For vacation and holidays,
• Into approved apprenticeship programs,
• “Bona fide” fringe benefits, or
• As cash, and have it treated as wages

Non-Residential Construction Spending Remains Slow in October

American Builders and Contractors (ABC) reported that private nonresidential construction spending continues to slump, falling 2.5 percent in October and reaching levels 20.6 percent below those from one year ago, according to the Dec. 1 report by the U.S. Census Bureau. Total nonresidential construction spending, which includes both private and public construction, fell 1.5 percent for the month and 10.5 percent on a year-over-year basis to $652.2 billion.  

Only four subsectors experienced increased spending in October and only two were up more than one percent. Conservation and development construction was up 18.2 percent, and religious-related construction was up 2.5 percent. Subsectors with the largest increases from October 2008 were transportation, up 7.7 percent; public safety construction, up 5 percent; and highway and street construction, up 4.6 percent.  

In contrast, subsectors posting the largest decreases for the month include lodging, down 5.8 percent; communication construction, down 5.1 percent; and water supply construction, down 5.1 percent. On a year-over-year basis, lodging construction is down 45 percent, commercial construction is down 37.8 percent, and office construction is down 27.9 percent.  Manufacturing construction is also down 5.9 percent on a year-over-year basis after being a bulwark of stability for many months.  

Meanwhile, residential construction spending increased 4.2 percent for the month, but is still down 22.9 percent from October 2008. Total construction spending is unchanged from September and down 14.4 percent year-over-year. 

For more information on this report please feel free to contact David B. Blain at dblain@macpas.com.

More Good News - Architectural Billing Index on the Rise

The Architectural Billings Index rose in October to 46.1 — the highest mark since August 2008. The inquiries score was 58.5, the AIA announced in a news release on November 18^th.

 

“This news could prove to be an early signal toward a recovery for the design and construction industry,” said Kermit Baker, chief economist for the AIA, which produces the index based on surveys sent to firms. He adds, however, that many firms continue to struggle and “it is far too early to think we are out of the woods.”  

The ABI reflects a nine- to 12-month lag between architecture billings and construction spending. A score above 50 indicates an increase in billings, and below 50, a decrease.

 

October regional averages:

South, 46.1

Northeast, 44.3

Midwest, 43.0

West, 42.8

October sector breakdown:

Institutional, 48.7

Multi-family residential, 45.4

Commercial / industrial, 41.7

Mixed practice, 39.1

 

This news comes on the heals of the American Builders and Contractors (ABC) release of their Construction Backlog Indicator for September which indicated a rise in construction backlog of 3.2% compared to August. The Backlog reached 5.9 months in September from 5.68 months in August. For more information please contact David B. Blain at dblain@macpas.com.