Mechanic's Lien Law Changes: Updated

Updating my earlier blog about pending HB 1265, those changes will not be adopted, at least this year. Sen. Purkey had made some "accommodation" changes to try and make it more palatable to the construction industry, such as limiting it to residential construction and changing the notice period to 30 days, but that was not enough to satisfy the State Senate, which passed on the bill for this year and referred it to the 2013 session of the Senate Courts of Justice Committee by a 15 to 0 vote. This now allows plenty of time for those with any interest in this draft bill to provide their input to their elected representatives. Even as changed it is not a good bill for contractors, in my opinion; so if you are involved in construction, and in particular residential construction, you should consider explaining your concerns and why they should vote no if it comes up for vote next year.

New FAR Rules Confirms No Priority Among Socio-Economic Programs

FAR Part 19.203 has been modified to confirm that there is no priority among socio-economic programs. This applies to the 8(a), HUBZone, SDVOSB, and WOSB programs. This was adopted, in part, to contravene prior GAO decision that the HUBZone program "trumped" the other SE programs. The new regulation is effective as of April 2, 2012. Also addressed in this new rule as intended clarifications of the existing programs are the following:

• for acquisitions above the SAT, contracting officers shall consider a SDVOSB sole-source award before considering a general small business set aside, but a competitive SDVOSB set aside should be considered before a SDVOSB sole-source award;

• contracting officers may award a general small business set aside or use the SDVOSB program when the acquisition is below the SAT;

• for acquisitions above the SAT, the contracting officer shall consider an award under the 8(a) program before considering a general small business set aside;

• contracting officers may award a general small business set aside or use the 8(a) program when the award is below the SAT;

• the CO shall consider 8(a) set asides or sole-source awards before considering a general small business set aside;

• for acquisitions above the SAT, the contracting officer shall consider a HUBZone sole-source award before considering a general small business set aside, but a competitive HUBZone set aside should be considered before a HUBZone sole-source award; and

• contracting officers may award a general small business set aside or a competitive HUBZone set aside when the acquisition is below the SAT, but HUBZone sole-source awards are not permitted at or below the SAT.

Full text of the new rule is at the following link:

It is available at: http://www.gpo.gov/fdsys/pkg/FR-2012-03-02/pdf/2012-4488.pdf.

HB1265: Significant VA Mechanic's Lien Change Bill Pending

Del. Purkey has advanced HB1265 to require pre-notification of intention to file mechanic's liens by contractors at least 60 days in advance before filing the lien.  If passed, this bill would have a significant impact upon current Virginia mechanic's lien law, and have significant practical implications for not only contractors, but also owners and clerks of court too.  The bill and its current status can be seen in their entirety at the following General Assembly page link:
http://lis.virginia.gov/cgi-bin/legp604.exe?ses=121&typ=bil&val=hb1265&Submit2=Go

The key add to existing law is the following:
At least 60 days prior to filing a memorandum of lien pursuant to this section, a lien claimant shall send a copy of the memorandum and written notice of the lien claimant's intention to file the memorandum by certified mail, return receipt requested, to the owner of the property at the owner's last known address. After the expiration of this 60-day period, the lien claimant may file a memorandum of lien. The lien claimant shall also file with the clerk a copy of the written notice sent to the property owner and certify that such notice was sent. The clerk shall not accept or record any memorandum of lien filed prior to the expiration of this 60-day period or that is not accompanied by a copy of the notice sent to the property owner.

If adopted, there are numerous unresolved questions and complications, including:
- what if the payment status changes in the interim?
- how does one deal with payments that are not even yet due, such as jobs on a 30 day payment cycle, or retainage, among other questions?
- where will the clerk record the notices, and how will they affect the owner's title (will it be a cloud on title) and how might it affect owner obligations to others, such as loan agreements that often can trigger default by such notices?
- what if the "draft" lien has defects?  Can they be cured?  Will drafts be strictly construed like filed liens are currently?

There are many other questions and complications of course, and regardless of intention for this proposed legislation, the result is likely going to be confusion, and lead to a plethora of litigation if passed.  Every contractor should be opposed to this bill, as should government bodies, and clerks of court in particular, and owners.  If the intention is to address a particular concern with the current law, other options should be explored as the only persons that will benefit from the passage of this bill will be us construction lawyers.

Hampton Roads Building Products Show 2012 - Feb 7, 2012

The Hampton Roads Building Products Show features innovations in construction products and installation methods, along with various educational opportunities.  This year's program is February 7, 2012 and is located at the Holiday Inn Executive Center in Virginia Beach. Neil Lowenstein with Vandeventer Black LLP is one of the featured speakers, and is giving a presentation on contractor qualifications. Neil's program is from 3 - 4pm. For more information about the show, please go to the following link:
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=1&ved=0CCAQFjAA&url=http%3A%2F%2Ftidewater.csinet.org%2FFunctional-Menu-Category%2FUpcoming-Events%2FProduct-Show%2FProducts-show-flyer.aspx&ei=S4MdT4_oLenn0QH_mNGhBw&usg=AFQjCNFStLoUwfpxu80M3uLyX-9pmWhyJg&sig2=NlbNFcNwEZS09AWEIlpMCQ

New Congressional LEED spending restrictions for DOD

Below is a summary of the new Congressional LEED spending restrictions for DOD prepared by one our firm attorneys, George Nicholos.

Sudden Policy Re-direction / Congress Restricts LEED Spending at Department of Defense

The Department of Defense (DoD) has been at the forefront of implementing goals in areas of energy efficiency, renewable energy, recycling, water conservation, and use of sustainable building strategies which were set by Executive order 13423 which was enacted by President George Bush in 2007. In fact, the U.S. Navy led the DoD’s effort as it was the first to adopt Leadership in Energy and Environmental Design (LEED) certification in 2000, and as late as May 2011 announced that all applicable Department of the Navy Military Construction (MILCON) projects for FY11 and FY 12 would be required to achieve sustainable design requirements equal to or above the LEED Gold requirements with certain exceptions, and by FY13 would be required to achieve requirements equal to or above the LEED Gold requirements without exceptions.

However, on December 15, 2011 Congress passed the National Defense Authorization Act which was recently signed into law by President Barack Obama on December 31, 2011. According to Section 2830, the DoD will now be required to review its energy efficiency building practices, report to Congress regarding its strategy for its continued use of design and building standards for sustainability goals, and to curtail any spending associated with the implementation of any LEED Gold or Platinum certifications. With an apparent reversal of policy, Section 2830 states “no funds authorized to be appropriated by this act or otherwise made available for the Department of Defense for fiscal year 2012 may be obligated or expended for achieving any LEED gold or platinum certification.”

By exemption, the DoD may continue to pursue projects seeking LEED Gold or Platinum certifications, however it may only do so if those measures impose no additional costs to the department and are supported by a mandatory cost-benefit and return on investment analysis for energy efficiency attributes and sustainable design measures. It is too early to determine whether the DoD will continue to pioneer LEED green-sustainability strategies in its facilities when faced with anticipated budget cuts. It is also too early to determine whether this sudden shift in policy is due to legislative lobbying efforts from competing building certification systems such as the Green Building Initiative (GBI) seeking equal standing within the federal government or by similar efforts from competing timber certifications with the sole timber certification presently accepted by LEED, yet hotly contested.

In either case, based on its prior commitment, it is highly unlikely that the federal government will retreat from promoting sustainable green building strategies in its projects, however for now, builders and designers should look for DoD projects to likely forego LEED Gold and Platinum certifications as well as advanced design and system attributes they typically include. Builders and designers should also watch to see if the federal government retains LEED as its sole certification standard for sustainable design or whether it will be replaced by a competing standard, or hybrid federal green building certification system which will likely require additional training and subsequent readjustments.

Another federal protest dismissed for lack of standing

As protest continue to increase, the GAO and Court of Federal Claims continue to toss them on procedural bases rather than their merits. One of the latest is Joint Venture of Comint Systems Corp. and EyeIt.com Inc. v. United States, Fed. Cl., Nos. 11-400 C, 11-416 C, 12/19/11, dismissed because the court concluded the protestor was not in a likely position to obtain award, even but for the protest grounds. Prospective awardees continue to increasingly fight procurement decisions, but this case further exemplifies that protest alone does not lead to decision on the protest merits. Increasingly agencies are seeking to dismiss protests on such procedural grounds and so avoid the protest merits. The court in this case again agreed with that approach, leaving the merits for decision in another case, if at all.

Misrepresentation or Good Negotiation: KBR Hit With Multi-Million Dollar Verdict

Prime contractors often negotiate claims, including subcontractor pass-through claims, with owners. This can put the prime contractor at odds with its subcontractors, depending upon what the owner is willing to negotiate, for how much, for what, etc. A recent Fourth Circuit decision involving the negotiation of Kellogg Brown & Root with one of its subcontractors resulted in a multi-million dollar verdict in favor of the subcontractor against KBR for $12.5m, plus $2.5m in interest and another $4m in punitive damages as the Fourth Circuit upheld the lower court's decision that KBR misled the subcontractor into taking less for its pass-through claim, including by telling the subcontractor that KBR did not have any discretion to raise or lower the amount offered to the subcontractor when in fact it did. Prime contractors are often forced to take lesser amounts from owners and then "negotiate" similar reductions from various subcontractors, and almost always have discretion regarding what they negotiate, with whom, for what amount, etc. This case is an eye opening lesson in the need to be clear and forthright in doing so.