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Onshoring to Mitigate Supply Chain Problems

posted 8 days ago
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By Joseph Natarelli of Marcum LLP Originally published February 1, 2023 Onshoring for construction contractors is a strategy aimed at reducing supply chain delays by bringing production and manufacturing processes back to the home country. This shift away from relying on offshore suppliers is driven by various factors, including the COVID-19 pandemic and geopolitical tensions that have disrupted global supply chains. Here are some of the plusses and minuses of onshoring, and some strategies to consider. BENEFITS OF ONSHORING •    Reduced Supply Chain Delays: Onshoring helps to mitigate supply chain disruptions and delays by reducing the number of intermediaries ...
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Construction Adapts to New Lease Accounting Standards and Balance Sheets

posted 8 days ago
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By Joseph Natarelli and James Wiedemann of Marcum LLP Originally published February 1, 2023 After several delays due to the economic impact of the COVID-19 pandemic, the new lease accounting standards (that already applied to public companies) are now in effect for all private companies, including construction companies . The updates will affect financial statements and balance sheets for fiscal years ending after Dec. 15, 2022. Companies that have not already prepared for this change will be working overtime between now and March to ensure compliance. Let’s review how the new standards will affect your financials and strategies to mitigate the impact, ...
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Price Escalation Considerations in Construction Contracts

posted 9 days ago
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By Amy K. Wolfshohl of Porter Hedges Originally published February 7, 2023 With material cost volatility in the current market, the topic of price escalation clauses is more prevalent. Some material costs are up and other costs are now down. Traditional lump sum contract structures do not take into account price escalation or de-escalation; whereas cost plus structures entirely and naturally account for such changes. Owners of construction projects tend to prefer lump sum projects due to certainty in budgeting and other reasons. A potential mechanism to account for volatility is to include a price escalation clause. This blog post provides the basics of ...
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March 28 NASBP Virtual Seminar - A Construction Economic Outlook for 2023

posted 12 days ago
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Now that 2022 has come to a close, the construction and surety marketplace continues to remain active. The market has seen an up-tick in investment in residential, commercial, data storage and large distribution fulfillment center production. In 2022, contractors struggled to keep up with labor pricing pressures and general materials input that was necessary to perform on contracts. Despite this, production levels were up, margins were relatively favorable, and financial results should demonstrate positive net results.  2023 will likely continue to be a strong year for the construction market, as backlogs are generally very strong and middle market contractors ...
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Litigation--Court grants surety’s motion, orders principal to deposit collateral

posted 18 days ago
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By Keith Langley of Langley LLP Originally published December 2022 Surety wins on motion for preliminary injunction with order that the principal post collateral and provide the surety free access to the principal’s books, records, and accounts. Frankenmuth Mut. Ins. Co. v. Nat'l Bridge Builders, LLC , 2022 U.S. Dist. LEXIS 205753 (W.D.N.C. Nov. 13, 2022). The surety issued several bonds. After several payment and performance claims had been asserted against multiple bonded projects, the principal informed the surety that it lacked the financial means to pay its vendors, subcontractors, and employees on its bonded contracts and needed $1.5 million to complete ...
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Bid Rigging

posted 18 days ago
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By Jim Hundley of Briglia Hundley Originally published May 5, 2022 In an ideal free market system, open competition among suppliers ensures that the consumer receives the best quality products for the lowest possible prices. One of America’s most important pieces of economic legislation is the Sherman Antitrust Act. Enacted in 1890, the Sherman Act prevents dishonest pricing and preserves the competitiveness of the free market system. Specifically, this Act prohibits any agreement among competitors to fix prices, rig bids, or engage in other anticompetitive activity[1]. One form of collusion prohibited by the Sherman Antitrust Act is bid rigging. When ...
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CDA Claim Series Wrap Up: Best Practices for Government Contractors

posted 22 days ago
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By Nicholas T. Solosky of Fox Rothschild LLP Originally published December 20, 2022 This is the eighth (and last) of an eight-part series addressing cutting-edge strategies for Certified Claims under the Contract Disputes Act (CDA). Certified Claims are the primary avenue available to government contractors to recover damages due to changes, delays, inefficiencies, and other government-caused issues – a particularly important point for contractors seeking to maintain positive cashflow while facing the prospect of an economic slowdown or recession. You can check out previous posts starting here . In this series, I’ve covered contractor CDA ...
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SBA OHA Rejects Unique Ostensible Subcontractor Affiliation Defense

posted 22 days ago
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By Nicholas T. Solosky  of Fox Rothschild LLP Originally published January 6, 2023 Small business government contractors are (or should be) aware of the SBA’s affiliation rules . In a nutshell, the rules set the standard for whether/when another business controls – or has the ability to control – the small business. Affiliation is a huge red flag for small business contractors. A finding of affiliation can lead to lost contracting opportunities and the inability to access the set-aside contract marketplace. The kind of control that leads to affiliation can manifest in many ways. Often, it arises out of the business’s corporate control and management ...
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Cybersecurity in 2023: What Government Contractors Should Expect

posted 22 days ago
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By Eric S. Crusius of Holland & Knight LLP Originally published January 3, 2023   Highlights In addition to implementation of the Cybersecurity Maturity Model Certification (CMMC), several new cybersecurity regulations for civilian government contractors, including those working for the U.S. Department of Homeland Security (DHS), are planned for rollout in 2023. Among proposed DHS regulations are new incident security reporting requirements that specify the windows of time incidents must be reported based on the type of information involved. Other new regulations address cybersecurity requirements for U.S. ...
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Construction Lender Found Liable for Payments to General Contractor Despite Lack of Contractual Relationship

posted 29 days ago
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By Gregory M. Boucher of Saul Ewing LLP   Originally published July 4, 2022 A Delaware trial court, applying New Jersey and Delaware law, recently ruled that a general contractor, despite not being a party to either a loan agreement or loan commitment, could successfully recover damages from a construction lender.  See BCD Assocs., LLC v. Crown Bank , No. CV N15C-11-062 EMD, 2022 WL 1316234, at *1 (Del. Super. Ct. May 2, 2022). The court explained that even though the loan agreement expressly provided that there were no third-party beneficiaries to the contract, “contractually, factually, and practically,” the general contractor was ...
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Northern District of Illinois: Personal Liability Against Construction Company CEO and President for Breach of Contract and Fraud

posted 29 days ago
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By Brandon R. Clark of Saul Ewing LLP   Originally published September 20, 2022 A federal jury in the Northern District of Illinois recently awarded nearly $23 million to the developer of a luxury hotel in Chicago’s trendy West Loop arising from multiple breaches of contract and fraud by its design-builder. What is particularly striking about the judgment in  NHC LLC v. Centaur Construction Co. Inc., et al ., No. 19-C-6332, is that more than $20 million of it was awarded jointly and severally against the design-builder, its CEO, and its president. Moreover, the award contained more than $2.5 million in punitive damages assessed against each ...
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Global Supply Chains Under Increased Cyber Threats

posted 29 days ago
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By Brion G. St. Amour , Eric A. Baker , Tyler P. Biddle , and Gene F. Price of Frost Brown Todd Originally published January 6, 2023 With the arrival of 2023, we have some thoughts on the ever-growing cyber threats to our digital infrastructure. Foremost is the reality that supply chains are becoming favored targets. They share substantial amounts of data across multiple networks with enterprises whose abilities to withstand an attack are often unknown. They enjoyed increased revenues during COVID, with some companies sitting on large cash reserves. Nation-states recognized the crucial role logistics plays among interdependent economies. These and ...
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What Do Government Contractors Need to Know Moving into 2023?

posted 02-14-2023
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By Kristen Soles of CohnReznick Published January 9, 2023 Since March of 2020, the world has changed drastically, including how companies operate, how they manage employees, and how they approach strategy and business plans for Government customers. We offer a five-point inspection for Government Contractors to consider to remain successful in the changing landscape of the 2023 fiscal year. These five points cover the lifecycle of a government award and will give contractors critical things to keep in mind as they continually redefine their approach to how they serve their customer. What programs do I want to pursue? (Steering ...
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The Design-Build Contract Blueprint: Exploring the Boundaries of Architectural Services for General Contractors

posted 02-14-2023
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By Alexandra E. Ferri and James W. Norment of Ward and Smith, P.A. Published February 1, 2023 Do design-build contracts allow general contractors to perform as architects?  Not directly. As design-build contracts grow in popularity, it's important that general contractors, owners, and architects understand which design-build arrangements are permissible under North Carolina law—and which are not. In a design-build contract, one entity, often a general contractor, contracts with an owner to undertake both the design and construction aspects of a project. This can be an attractive project delivery method for all parties involved. Owners ...
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The Enforceability of “Pay-If-Paid” Provisions Affirmed in New Jersey

posted 02-14-2023
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By Levi W. Barrett , Michael S. Zicherman , and Brian Glicos of Peckar & Abramson, P.C. Published December 20, 2022 On December 7, 2022, the Appellate Division affirmed the New Jersey Superior Court decision in   Jersey Precast v. Tricon Enterprises, Inc. et al . , finding that the “pay-if-paid” clause in a material supplier’s purchase order with a general contractor was binding and enforceable. While clauses conditioning a general contractor’s obligation to pay its subcontractors on the general contractor’s receipt of payment from the project owner are not unique—this is the first time that a court in New Jersey ...
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An Introduction to Workers’ Compensation Insurance for Construction Companies and Contractors

posted 02-06-2023
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By Saxe Doernberger & Vita, P.C. Published January 31, 2023 Workers’ compensation insurance is one of the most important coverages for construction companies and contractors. A workers’ compensation policy typically provides insurance for accidents on-site or in the workplace, and other injuries sustained while working. This coverage includes medical expenses, lost wages, worker death, and related costs. Although independent contractors might not be required to carry workers’ compensation insurance, they should also obtain this coverage if they have any employees. In some states, construction companies who employ independent contractors could also be ...
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Contractors Can’t Ignore the Section 174 Capitalization Rules, Effective for 2022 Returns

posted 02-06-2023
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By Benson P. Theuninck , CPA, MBT, CCIFP of CliftonLarsonAllen Published January 24, 2023 The Tax Cuts and Jobs Act of 2017 (TCJA) made significant changes to Section 174 research expenditures that went into effect for taxable years beginning after December 31, 2021. Contractors, large and small, that engage in research-based activities have relied on full expensing since Section 174’s enactment in 1954. CLAs Michael De Prima  goes into more detail on what’s changed, who’s impacted and what’s next in this most recent article:   A Costly Situation for Businesses: Section 174 Capitalization is Here  with his key insights:  Capitalization of research ...
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Top Five Provisions to Review in Your Construction Contract

posted 02-06-2023
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By John R. Hawkins of Porter Hedges Published January 26, 2023 It’s 3:00 p.m. on a Friday and you’ve been tasked with reviewing a construction contract by close of business. It’s long, and you only have time to review the most important terms. Which ones do you choose? Divide and Conquer Contract terms can be divided into three general categories of terms. There are commercial terms like scope of work, price and schedule deadlines. There are procedural terms such as payments, change order requirements and notices for events like substantial completion. Presumably, the project team is addressing the commercial and procedural terms. This leaves the third ...
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New Certification Requirements for Veteran-Owned Small Business Concerns and Service-Disabled Veteran-Owned Small Business Concerns Seeking Public Procurement Contracts

posted 01-30-2023
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By Jennifer Harris , Timothy D. Matheny , Abby Bello Salinas of Peckar & Abramson, P.C. Originally Published January 26, 2023 Effective January 1, 2023, Veteran-Owned Small Business Concerns (VOSBs) and Service-Disabled Veteran-Owned Small Business Concerns (SDVOSBs) will be required to obtain Small Business Administration (SBA) certification to participate in any federal government agency VOSB or SDVOSB sole source or set-aside prime contracts. This change originated from a Final Rule (87 FR 73400) published by the SBA on November 29, 2022. As a result of this Final Rule, not only will VOSBs and SDVOSBs be required to re-visit, and in some cases re-apply ...
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Virginia’s Ban on “Pay-If-Paid” Clauses Goes Into Effect

posted 01-30-2023
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By Lauren P. McLaughlin , Shoshana E. Rothman , and Joshua E. Holt of Smith, Currie & Hancock LLP Originally published January 20, 2023 As we previously reported, Virginia recently enacted legislation banning the use of conditional payment clauses, known as “pay-if-paid” clauses, on both public and private construction projects within the Commonwealth. The legislation, known as “SB 550,” went into effect on January 1, 2023, and applies to all construction contracts executed on or after that date. As a reminder, SB 550 changes the law governing construction contracts in Virginia in two important respects. First, it prohibits contractors and subcontractors ...
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