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ASA President’s Letter—April 2018

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ASA President’s Letter—April 2018

Dear ASA Members,

The roots of mechanic’s liens date back to the Roman Empire. The roots of surety bonds are even older, dating back to Mesopotamia. In the United States, Thomas Jefferson led the effort to establish mechanic’s liens in 1791 and Congress passed a law requiring surety bonds on federal construction projects in 1894.

Although mechanic’s liens and surety bonds predate ASA by more than a millennium, ASA and its local chapters have been the leaders in protecting subcontractor and supplier payment rights under these important laws for more than 50 years.

ASA has watched these laws evolve, sometimes for better and sometimes for worse. All the while, ASA’s mission has been to evaluate proposed changes, advocate for them when they provide additional payment protections, and oppose them when they erode subcontractor payment rights. ASA tackles these lien and bond issues before the legislative, executive and judicial branches of government. Because of its immersion in these issues, ASA is among the first to spot trends for further changes.

For example, in recent years, some state legislatures have enacted a pre-lien notice requirement, designed both to provide construction owners with information about entities to which they have potential liability and to help prospective lien claimants resist pressure from customers to not tell construction owners of payment problems. Other states have adopted mechanic’s lien registries, Web-based repositories for information needed by all the members of the construction team.

The laws governing statutory payment bonds also have been evolving. State legislatures and courts have examined the required value of bonds, notice requirements, access to copies of bonds, and the threshold for when statutory bonds are required.

In addition, too many subcontractors and suppliers have found out the hard way that they have neither lien rights nor payment bond rights when they do work financed through a public-private partnership. State mechanic’s lien laws generally do not apply to construction on public real property; yet federal, state or local governments often own the real estate on which projects financed through P3s are built. A prime contractor almost certainly is required to provide a payment bond on a contract awarded by a public owner; yet the primary contracting entity on a P3 project is likely to be private or partially private. Thus, neither mechanic’s liens nor payment bonds may provide payment assurances to subcontractors and suppliers on P3 projects.

The impact of these trends is magnified because each state’s laws governing mechanic’s liens and statutory payment bonds differ from every other state’s laws. That is, although the fundamental structure and purpose may be the same, the requirements vary widely. (For information on each state’s mechanic’s lien and statutory bond laws, see the Foundation of ASA’s Lien & Bond Claims in the 50 States. For more information on subcontractor payment assurances on P3s, see the ASA guide, Public-Private Partnership Laws in the States, Including Surety Bond Requirements (2018 Edition).

Of course, ASA can’t and doesn’t just sit back and watch these trends. ASA strives to impact these trends—and, indeed, contribute its own ideas to these trends. ASA’s first step is to make sure its own policies reflect the latest trends. That’s why for more than a year, the ASA Task Force on Government Advocacy has been reviewing and last month recommended the modernization of ASA’s policies on both mechanic’s liens and statutory payment bonds. The ASA Board of Directors approved the task force’s recommendations.

As part of its discussions, the ASA task force developed two new tools to help ASA chapters and other subcontractor advocates evaluate their state laws and determine what changes need to be made to provide stronger payment protections for subcontractors and suppliers. By answering the questions contained in these documents, an individual subcontractor or lobbyist can outline legislation to reform the state’s mechanic’s lien or surety bond law. Both documents, Strengthening Subcontractor Rights Under a Mechanic’s Law: A Checklist for Subcontractor Advocates and Strengthening Subcontractor Rights Under Statutory Payment Bonds: A Checklist for Subcontractors Advocates are available under “Contracts and Project Management” in the members-only area of the ASA Web site.

Once a subcontractor advocate decides to seek improvements to these important laws, ASA is ready to provide other assistance. An advocate’s first step may be to develop an advocacy plan based on ASA’s Guide to Establishing and Maintaining a Government Advocacy Program in Your ASA Chapter.

Sincerely,

Jeff Banker
2017-18 ASA President


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