Midwest Construction Law Blog

Tuesday, January 03, 2012

A Benefit for Small Businesses

Linda Rodden reports “The FAR Council issued an interim rule Nov. 2 establishing a set aside option for orders placed under GSA Schedules and other IDIQs.  In the past, the FAR Guidance on ordering from small businesses under GSA Schedule ordering procedures was simply that agencies may consider socio-economic status when identifying contractors for consideration or competition for award.  They could also credit for their small business goals. GSA would from time to time set aside some Special Item Numbers for small businesses, too.

The new changes make clear that contracting officers can set aside task or delivery orders or Blanket Purchase Agreements (BPAs) for small businesses under the GSA Multiple Award Schedules or on blanket purchase agreements, and on any other multiple-award contracts. The revisions add a new section in the FAR. It authorizes agencies to set aside one or more contracts for small business on a multiple-award contract, including any of the socio-economic programs, such as the service-disabled, veteran-owned small business program.”

Posted By: David C. Seitter on Tuesday, January 03, 2012

Friday, December 30, 2011

Understanding surety bonds in the Midwest

Whether you’re a new or experienced contractor, you need to make sure your firm complies with every applicable surety bond requirement at all times. Unfortunately, finding information on contractor bonding can be difficult even though the U.S. construction industry has enforced surety bond regulations for decades. This article will explore what contractors who work in the Midwest should know about surety bonds.

Surety bond basics

Surety bonds are risk mitigation tools that government agencies use to enforce industry regulations. Each surety bond functions as a line of credit that deters a bonded individual or business from unethical business practices. However, surety bonds are not insurance policies and should not be confused as such. Whereas insurance claims are inevitable, surety bond claims are relatively rare because surety providers are so stringent when issuing construction bonds. Contractors get bonded to guarantee project completion. When a surety provider issues a bond to a contractor or construction firm, the bond acts as a legally binding contract among three parties.

• The principal is the contractor or contracting firm that purchases the bond as a financial guarantee to fulfill certain obligations.
• The obligee is the the entity that requires the bond, which is the government agency or other project owner.
• The surety is the agency that sells the bond and then acts as an intermediary between the principal and obligee.

If a bonded contractor leaves a project incomplete or does unsatisfactory work, the obligee can make a claim on the bond to gain reparation. If the surety finds the claim to be valid, the bond's penal sum will be used to compensate the harmed party. In certain situations, the surety might be able to pay a new contractor to fix or finish inadequate work as apposed to releasing the bond funds to the principal. Although surety providers expect principals to reimburse them after paying claims, they're ultimately held accountable and thus can incur financial losses when claims are made.

Surety bond regulations

Contractors have to abide by surety bond regulations that the government has set at the federal, state and local levels. For example, the federal Miller Act requires all contractors to post separate payment and performance bonds on any federally funded project that costs $100,000 or more. However, some state enforce their own "Little Miller Acts" that lower the minimum project limit. Kansas statutes section 60-1111 requires contractors to provide contract bonds on all public projects that cost $100,000 or more. Iowa code section 573.2 requires contractors to provide contract bonds on all public projects that cost $25,000 or more. Missouri revised statutes section 107.170 requires contractors to provide contract bonds on all public projects that cost $25,000 or more. Nebraska revised statutes section 52-118 requires contractors to provide contract bonds when 1) public projects proposed by the state cost more than $15,000 or 2) when public projects proposed by local authorities cost more than $10,000. Before beginning work on a new project, contractors should always check with local authorities to determine if any additional bonds are required.

How to get a surety bond in the Midwest

Finding the right surety provider in the Midwest is easier than ever in today's market because most surety providers offer comprehensive websites that guide contractors through the process, no matter where they operate. Many of these sites offer online applications that contractors can complete in just minutes. Surety specialists then review the application and contact the contractor to discuss the options. To determine a surety bond premium, the surety provider will conduct a thorough background check of the applicant's financial credentials. Attributes that could affect the rate include credit scores, bank records and previous project performance. The actual surety bond premium will also vary depending on what the contracted project cost is. Finally, always be sure to find a surety provider that understands your financial situation and bonding needs.

 

Danielle Rodabaugh is a principal for SuretyBonds.com, an online surety bond agency that issues surety bonds nationwide. As a part of the company's ongoing educational outreach program, Danielle writes informational articles that help construction professionals and their lawyers better understand surety bond regulations and their legal implications.

Posted By: David C. Seitter on Friday, December 30, 2011

Monday, December 05, 2011

Are You Getting the Liability Protection You Need From Your LLC?

A comment by Jay Adkisson regarding a bankruptcy opinion rending the protections of a single-member LLC null and void In re Advanced Custom Builders LLC (2011) at Forbes.com does certainly speak to the “formalities” not the “realities” of adhering to creation and maintenance of business entities.

But, note that the trigger was a claim of fraud under the Bankruptcy Code. As a former bankruptcy trustee, I have seen bankruptcy courts used to reveal and punish bad behavior. Results will vary outside of bankruptcy in a state court proceeding and from state to state as well.

Posted By: David C. Seitter on Monday, December 05, 2011

Wednesday, November 16, 2011

Do You Think Moving to a "Tax Friendly" State is a Good Idea?

A good reminder for all in this tough economic time when considering a move to a “tax friendly” state  is highlighted by a recent CBIZ article offered by Craig Williams, CBIZ’s National SALT Practice Leader (http://www.cbiz.com/

This issue is one many folks have asked about over the years.  The five steps outline offered by CBIZ is a good checklist of considerations. BUT, remember to factor in the cost of retaining an attorney to defend the position you are taking  IF you fail to adhere to the guidelines Mr. Williams outlined. I have seen government offices from a County attorney to the state tax authority ask probing questions most folks would rather not answer!

Posted By: David C. Seitter on Wednesday, November 16, 2011

Wednesday, November 09, 2011

Is This Good News for the Construction Industry?

Caterpillar reported a 44% surge in third-quarter earnings and is supposedly forecasting a 10% to 20% increase in sales in 2012.

Wait, wait! It looks like the increase may be OUTSIDE of the US and Europe. Is it time to diversify?

Posted By: David C. Seitter on Wednesday, November 09, 2011

Wednesday, November 02, 2011

Starting July 2012 It Will Be "Sunny in Philadelphia" for Contractors Employees

Effective July 1, 2012 the city of Philadelphia will mandate its contractors and subcontractor provide sick days to their employees. Better factor this in to any new bids you are undertaking in Rocky Balboa’s city!

Posted By: David C. Seitter on Wednesday, November 02, 2011

Tuesday, November 01, 2011

Do Contractors Really Want To Be the "Terminator"?

This informatiom was shared by New York attorney Vincent T. Pallaci. The decision of American Curtain wall v. NTD Construction Corporation allowed the defendant to terminate its contract with the plaintiff due to failure of payment.

It makes sense to me but here's the question: Do contractors really want to go to this extent to prove their right to terminate?

Posted By: David C. Seitter on Tuesday, November 01, 2011

Wednesday, September 14, 2011

Why You Need to Run, not Walk, to Your Accountant's Office

Per Attorney Pete Hartweger of Spencer Fane, Office of Management and Budget Director Jack Lew outlined for reporters on September 12th. $467 billion in savings, primarily from changes to several tax provisions, that the president is proposing to use to pay for the American Jobs Act. The specific offsets in the jobs bill are a series of changes to tax provisions the administration proposed earlier this year that they believe stands on the merits, Lew said.  

First, there would be a limit on itemized deductions for individuals earning more than $200,000 and families earning more than $250,000, Lew said. That limitation is expected to raise $400 billion over 10 years, he said. "   

There is no increase in the income tax rates but this is still a tax increase on those making more than $200K(individual)/$250K(jointly) who itemize.   

Better run to your accountants immediately for tax advice!

Posted By: David C. Seitter on Wednesday, September 14, 2011

Tuesday, September 13, 2011

Spencer Fane Attorney Peter Hartweger's View on President Obama's Stimulus Plan

Pete Hartweger of Spencer Fane takes on President Obama’s $447-billion stimulus plan:

“If the proposed plan is passed, business owners could see up to $155,000 in savings for 2012.  The plan is to reduce the 6.2% of the employer-side of social security tax to 3.1% on the first $5 million in wages. 

There is the opportunity for additional savings if employers hire new employees or provide raises for existing employees.  The plan is to have no employer-side social security tax for new employees or on the raises of existing employees (up to a total of $50 million in wages).

Also proposed is a 50% reduction for the employee-side.  I assume that the employee and employer reductions would apply to business owners paying both sides of the social security tax (self-employed, members of pass-through entities subject to the self-employment tax), reducing their social security tax liability by $6,820 (assuming that the 2012 threshold on social security tax is $110,000 (6.2% vs. 12.4%)).”

Posted By: David C. Seitter on Tuesday, September 13, 2011

Tuesday, August 30, 2011

BREAKING: Affirmative Action Plan (AAP) Now Available for Federal Contractors

The United States Government is contracting out large amounts of work.  Every company that take on this work will need to have an Affirmative Action Plan (AAP).  Spencer Fane has resources internally and external to our firm to assist you with these needs.  The need for examination of this issue has never been greater because the OFCCP has recently been awarded unprecedented finances and staffing with the mandate to vigorously pursue federal contractors!

Posted By: David C. Seitter on Tuesday, August 30, 2011