8/21/2012 Pre-Co Pre-Contra ract Ph Phase ase Con Contract ct - - PDF document

8/21/2012 1

 Pre-Co

Pre-Contra ract Ph Phase ase

 Con

Contract ct Ph Phas ase/Co Contract Te Terms d l d l

 Statutory Assistance

Statutory Assistance on

• n Fe

Federa eral Project Projects

 Liens

Liens

 Post Con

Post Contrac ract Ph Phase ase

 Litigati

Litigation Risks

• n Risks

 Due

Due Dilige Diligence ce Client Invest Client Investigat ation

• Dunn &

Dunn & Bradstr Bradstreet et

• Courtlink

tlink Search

• What is

What is the the Contra Contract cting Entity? g Entity?

• Proof of

Proof of Financi Financial Solve lvency y

8/21/2012 2

 Due

Due Dilige Diligence ce Proje Project Invest Investigatio ion

• Likelihoo

lihood o

• f completion
• n/succe

ccess ss

• Fundin

Funding

• Other

Other Player Players

 Clear Stan

Clear Standard rd Contrac Contract Terms Terms

• When

When invoic invoiced

• When

When paymen payment t due due

• Inter

Interest or

• r finance

finance charg charge for for late late payment payment

• Costs

sts for for colle collect ction, inclu including attorne attorneys f s fees ees , g , g y

 Unde

Underst rstand upfro upfront the the Client Client’s Billin Billing g Pr Practice ce

• Elect

Electron

• nic billin

billing procedu g procedures

• Thir

ird party party review reviewer ers/ s/pa payer yers

 Le Lend nders  Insu Insurance compan companie ies  Proje

• ject invest

investor

• rs

8/21/2012 3

 Othe

Other Contrac Contract Conside Considerat ations

• Advanc

Advance De e Deposit posits

• Secu

curi rity Arrangem Arrangemen ents ts

• Guaran

Guarantees es

• Ri

Right ht to to Withhol Withhold Deliver Deliverables g

• Obli

Obligation to to Wo Work rk when when Paymen Payment in t in Dispute spute?

 Clauses w

uses with Signif ificant icant Conseq equences uences

• Pay

Pay-wh when en-pa

• paid/

d/Pay- y-if-p

• pai

aid

 Desir Desired by by Prime Prime; Detested Detested by by Sub Sub  Samp Sample le Claus Clause:

 Paym Payment. Subcontractor shall submit its invoices by the ___ day of each month for services rendered during the prior month. Architect shall review such invoices and upon approval process them for payment by including them in the next billing to the Owner. Payment shall be made to Subcontractor within 10 days following receipt of made to Subcontractor within 10 days following receipt of payment from the Owner for Subcontractor’s work. Subcontractor understands that it is accepting the risk of non-payment by the Owner and agrees that Architect’s

• bligation to make payment to Subcontractor is expressly

conditioned upon Architect’s receipt of payment from the Owner for Subcontractor’s work. This clause does not create an implied postponement of payment for any period of time, but rather expressly conditions payment to Subcontractor upon prior payment by the Owner.

8/21/2012 4

 Clauses w

uses with Signif ificant icant Conseq equences uences

• Pay

Pay-wh when en-pa

• paid/

d/Pay- y-if-p

• pai

aid

 Enfor forcea eabi bilit lity

 Unenfo enforcea eabl ble as e as against p against public ic polic licy  Impl plied “rea “reasonable” ti time peri period fo for pay r payment  Enforce forceable ble i if clear a r and u unambigu mbiguous us  Clauses w

uses with Signif ificant icant Conseq equences uences

• Waiv

Waiver er o

• f Lien Right

Lien Rights

• Subord

rdinat ination ion C Clauses

 Pro

Prompt pt Pay Paymen ent (31 U.S. (31 U.S.C. Sec.

• Sec. 39, 5

39, 5 C.F. C.F.R. Pa Part 1315) 1315)

• Applicability

ility

 Proc Procurement contr contract cts for for servic services es with with federal federal a agenc ency g y g y  Ex Exemptions

8/21/2012 5

 Pro

Prompt pt Pay Paymen ent (31 U.S. (31 U.S.C. Sec.

• Sec. 39, 5

39, 5 C.F. C.F.R. Pa Part 1315) 1315)

• Deter

Determining pay g paymen ent t due due dates dates

 Speci Specifie ied in in contrac contract  Receip Receipt of

• f a proper

proper invoic invoice  Acce cceptan ance ce

• Failu

Failure re to make to make payment payments on time

• n time
• Taki

Taking d disc scounts

• State counter

ate counterpa parts

 Pro

Prompt pt Pay Paymen ent (31 U.S. (31 U.S.C. Sec.

• Sec. 39, 5

39, 5 C.F. C.F.R. Pa Part 1315) 1315)

• Failu

Failure re to make to make payment payments on time

• n time
• Taki

Taking d disc scounts

• State counter

ate counterpa parts

 Mille

Miller Act Act Paym Payment Bonds Bonds (41 (41 U.S. U.S.C. Sec Sec 3131 3131

• et. seq.)
• et. seq.)
• Applicability

ility

 All const ll construction contrac contracts in in excess excess of

• f $100,

$100,000  Cove Covers subs and subs and 2nd

nd tier

tier subs if subs if proper proper notice notice  Profe

• fessional servic

al services es if if pa part rt of

• f origin
• riginal scope of

al scope of work work (desig (design/buil ild)

8/21/2012 6

 Mille

Miller Act Act Paym Payment Bonds Bonds (41 (41 U.S. U.S.C. Sec Sec 3131 3131

• et. seq.)
• et. seq.)
• Rig

Right to to Rec Receiv ive Co Copy of Bo Bond

• 90 day

days withou without being t being paid paid Ri Ri ht t B i Ci il A ti ti i U S Di t i t C t

• Ri

Right ht to

• Bring

ng Ci Civil il Acti tion

• n in

n U.S. . Di District Cour

• urt

whe where contract e contract pe performed rformed

• If 2

If 2nd

nd Tier Sub,

Tier Sub, must must provide provide notice to notice to Prime Prime within within 90 90 days o ys of last wo last work

• Must file

Must file lawsui lawsuit withi within 1 1 year followin year following last last day day

• f work
• f work
• State counter

ate counterpa parts

 Liberally C

berally Construed/Creatur trued/Creature of

• f

Statute/Vari atute/Varies es from S State t e to State

 Key time period

Key time periods from s from last day last day of

• f work

work

 Dete

Determinin ing Last Last Day Day of

• f work (impr

work (imprope per exten extensio ions for for lien lien filings) ilings) extensi nsions ns for for lien lien filings) filings)

 Notic

Notice to to Owner Owner requir requirements

 Spec

Special circum l circumstances f s for pr prof

• fessiona

essional ser servic ices

• Doing work be

Doing work before fore obvious

• bvious construc

construction

• n be

begins

 What

at pr profess

• fessional
• nal services

ices are cov

• vered

ered?

 Wha

What profess professional al serv services are are covere covered?

8/21/2012 7

 When

When to to Start F Start Forec reclosu

• sure of
• f the

the Lien Lien

 Pri

Priorit rity of

• f Lien Claiman

Lien Claimants

 Inv

Invali lid Liens d Liens

 Moni

Monitor A/R A/R

 Ev

Evaluate uate Security bef rity before F re Foreclosur closure/ e/ Execu Executio ion

Liti Litigat gation

• n guarant

guarantee (title title report) eport) for for real eal propert roperty

• Liti

Litigation

• n guarant

guarantee (title (title report) report) for for real real propert property

• Secr

Secretary of y of State filings State filings for for UCC UCC

 Ne

Nego gotiating Pay Payment

• Use of
• f promiss

promissory note notes

• Discount

unts

 Execu

Executin ing on

• n securi

security ty

• Lien

Lien foreclo foreclosure

• Payme

Payment bond bond civil suit civil suit

• Perso

Personal al pro propert erty ex exec ecuti ution

• Person

Personal al propert property ex exec ecuti ution

8/21/2012 8

 Obta

Obtainin ing a g a Judgm Judgment

• Gener

Generally good for 1

• od for 10 years

years (check (check state state law law) )

 Execu

Executin ing on

• n the

the judg judgme ment nt

 Bankruptcy c

nkruptcy cautions ions

 When

Whenever a a lawsu lawsuit is filed to is filed to collect collect on

• n

unpa unpaid d servi services, a a real real risk risk exist exists that that the the clien client will will defend the lawsu defend the lawsuit by by allegin alleging profe professio sional al negli negligence ce and and filing a filing a count counterclai aim again gainst the the plaint laintiff ff design design count counterclai aim aga against the the pla plaintiff ntiff design design profe professio sional!! al!!

 Case Studie

Case Studies

 Key T

y Take ke-Aways ways:

• 1) Know y

Know your ur clien client, the project the project partici participan ants and the and the project project

• 2)

2) Nego Negotia tiate c e clear payment ear payment terms using bo terms using both th swords swords and and carrots carrots

• 3) Consider

nsider special special securit security arrang arrangem ement ents for for hig higher er risk risk jobs jobs

8/21/2012 9

 Key T

y Take ke-Aways ways:

• 4)

4) Know the Prompt Know the Prompt Payment Payment and Miller and Miller Act Act requi requiremen ements ts for for your ur federal federal jobs jobs

• 5)

5) Maintai Maintain an an intern internal procedu procedure for for lien timeli lien timeline nes and decisi and decision

• ns
• 6) Make

6) Make sure decisio sure decision to to file a file a lawsui lawsuit is is an an inform informed decisio decision