Construction Law Toolbox : Mississippi Construction Lawyer & Attorney : Biggs, Ingram, Solop & Carlson, PLLC : MS & Southeast Construction Law Toolbox

A tolling agreement is an agreement to suspend or extend the statute of limitation (the time within which you are required to file a lawsuit or lose the right to sue). These types of agreements are typically proposed to delay the filing of a lawsuit while parties attempt to settle the matter in dispute. However, you should proceed with caution when considering such agreements, because Mississippi has another law that forbids changing certain statutes of limitation.

Recently, the Mississippi Supreme Court considered these types of agreements again. Although the Court decided that the statute of limitation could be tolled for certain kinds of actions, the Court also ruled that the statute of repose cannot be touched. The statute of repose is a maximum period of time under which a lawsuit can be filed no matter what the circumstances may be.

The Court also listed five requirements that must be met in those situations where a tolling agreement is allowed:

A tolling agreement may be enforceable if (1) it is not prohibited by statute; (2) it contains a definite and reasonable time period; (3) it is formed after the cause of action has accrued, or in the instance of a statute of repose, after the plaintiff has notice of the cause of action; (4) it is not made at the same time as, or part of , the obligation sued upon; and (5) it is entered into before the expiration of the applicable limitations period.

If you are considering entering into a tolling agreement, don’t make that decision alone. You can be giving up substantial rights if a Mississippi court refuses to recognize the agreement. Before signing, consult with legal counsel experienced in contract law.

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Today the Small Business Administration published a proposed rule to increase the size standard for Land Subdivision and for Dredging and Surface Cleanup Activities, which are both in the Heavy and Civil Engineering Construction sector. SBA proposes to increase the size standard for Land Subdivision (NAICS 237210) from $7 million to $25 million in average annual receipts. Dredging and Surface Cleanup Activities is an "exception" sub-category of Other Heavy and Civil Engineering Construction. For Dredging and Surface Cleanup Activities, SBA proposes to increase the size standard from $20 million to $30 million in average annual receipts. Otherwise, the size standard for Other Heavy and Civil Engineering Construction (NAICS 237990) remains at $33.5 million.

If adopted as a final rule, these changes would allow contractors that have outgrown the previous size standards to become "small" again and prevent contractors that may be on the "other than small" bubble to remain "small". These changes also increase the pool of small businesses in these industry categories, allowing agencies to set more procurements aside for small-business concerns.

Interested parties must submit their comments not later than September 17, 2012, to SBA. The proposed rule is attached here.

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There are only two pieces of construction related legislation that passed during the 2012 session worthy of mention.  The first piece of legislation is HB 1301.  Click here to see HB 1301.  This bill amends Miss. Code Ann. § 85-7-185 to add the requirement that an owner or contractor furnish a copy of a payment bond when requested by a subcontractor or supplier.  The second bill is SB 2902.  Click here to see SB 2902.  This bill makes it a misdemeanor for a contractor to negotiate a joint check "tendered in payment for material or equipment furnished or labor performed" without the authorization of the other party.  The offending contractor could also be fined up to $500.00, ordered to make full restitution and be required to pay the attorney’s fees.

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Lynn Patton Thompson recently secured 2 wins for client W.B. Construction and Sons, Inc. before the General Accountability Office (GAO) in Washington, DC. The protests involved separate procurements and different issues, and Ms. Thompson prevailed on both.

On December 16, 2011, the GAO issued its public decision sustaining W.B. Construction’s protest of an award made by the Department of the Army for various construction and maintenance services at Fort Polk, Louisiana. The procurement was advertised as an 8(a) set-aside. When the Army announced award to an entity that was not certified as an 8(a) concern, W.B. Construction protested. You can read the full decision here.

On January 4, 2012, the GAO issued its public decision sustaining W.B. Construction’s protest of an award to Tanner Heavy Equipment, LLC by the Army’s Corps of Engineers. Award was to be made on the basis of the lowest, technically-acceptable bid. W.B. Construction submitted the lowest bid and was deemed technically acceptable. However, the Army refused award to W.B. Construction because its bid had omitted a price for one line item and was alleged to be unbalanced. GAO sustained W.B. Construction’s protest. As demonstrated by Ms. Thompson, omission of the price for one line item did not render W.B. Construction’s bid non-responsive, and the Army did not comply with applicable regulation in determining that W.B. Construction’s bid was unbalanced. You can read the full decision here.

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On October 1, 2011, "redesignated" HUBZone areas will expire. These areas were previously set to expire at earlier dates, but in 2004, Congress extended and "grandfathered" their HUBZone status until the results of the 2010 Census were published. The original "redesignated" expiration date was June 1, 2011, but it was extended and now will take effect on October 1, 2011. The Small Business Administration is encouraging all currently-certified HUBZone concerns to assess the impact expiration of "redesignated" areas will have on their eligibility to remain in the HUBZone program, whether a concern’s principal office is currently located in a "redesignated" area or if it relies upon the employment of residents in redesignated areas to meet the "35%" rule.

The HUBZone program does not require termination of existing HUBZone contracts if a concern is no longer eligible after October 1, 2011. However, because a concern must be properly certified and eligible as of the date (a) it submitted its initial offer for the contract and (b) the date the contract was awarded, expiration of "redesignated" areas may impact pending offers. Also, regardless of whether a current HUBZone concern has an offer pending for a federal contract, it must always notify the SBA of any "material" change which could impact its HUBZone eligibility. Firms that will no longer qualify for the HUBZone program as of October 1, 2011, can voluntarily de-certify. If that is not done, the SBA will send proposed de-certification letters which must be responded to within thirty (30) days.

Concerns which voluntarily decertify or otherwise become non-compliant with the HUBZone program as of October 1, 2011, can re-apply after ninety (90) days have passed since the date of a voluntary decertification agreement or decertification.

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In an article published on June 9, 2011, by Brenda Redfern, employers were reminded that effective July 1, 2011, the Mississippi Employment Protection Act requires all Mississippi businesses to E-Verify all new employees. In conjunction with this statutory mandate, the Mississippi Department of Employment Security ("MDES") has announced it will E-Verify any prospective employees for employers who are looking to retain workers through MDES.  Click here to see the article published regarding this e-verify service in the Mississippi Business Journal on July 18, 2011.  An employer simply has to place a job order with MDES by calling 888-844-3511 or contacting a WIN Job Center. MDES will send a list of prospective employees, all of whom will be E-Verified. When an individual is hired, the employer simply notifies MDES and it will send an official "Certification of I-9 Completion" to the employer. This service can assist contractors in identifying potential employees and save many administrative hours and headaches.

In addition, MDES has also agreed to implement a process it calls "reversal referrals". This is where an employer identifies a prospective employee and can send him/her to a WIN Job Center where the individual is E-Verified. The name of the individual is sent back to the prospective employer by MDES and, if hired, MDES will send the required certification. Employees that use MDES for E-Verification may relieve themselves from potential liability under the Mississippi Employment Protection Act.

Contractors should consider taking advantage of this free service by MDES in these difficult economic times.

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By now, most employers have heard of the federal "E-Verify" program which is designed to identify and prohibit employment of illegal aliens. In the 2008 legislative session, the Mississippi Legislature adopted the "Mississippi Employment Protection Act" ("MEPA") which has features similar to the "E-Verify" Act, but is broader in its application.

Unlike federal law, the MEPA applies to every employer. An "employer" is defined as "any person or business that is required by federal or state law to issue a United States Internal Revenue Service Form W-2 or Form 1099 to report income paid to employed or contracted personnel in Mississippi." In other words, the MEPA applies to virtually everyone.

So what must the employer do under the MEPA? "Every employer shall register and utilize the status verification system [i.e., the federal E-Verify Program] to verify the federal employment authorization status of all newly hired employees." There are no exceptions! So if you are a small business and hire just one new employee, you are still covered and expected to verify the employment authorization status of the employee. Under the law, employers in the state of Mississippi shall only hire U.S. legal citizens or legal aliens. The E-Verify Program is the authorized means by which employers can verify the employee’s status.

The MEPA was implemented in stages since its adoption. However, effective July 1, 2011, the MEPA is fully implemented and, as mentioned previously, applies to all employers.

What are the consequences for failing to comply? Substantial! Any contract with the state or other public body can be cancelled and you can be ineligible for any public contracts for up to three years. You can also lose any license, permit, certificate or other document issued by any public entity which gives you the right to do business in Mississippi for up to one year. Effectively, these consequences could put you out of business, even if you do not hire an illegal alien! The mere failure to follow the verification requirements could subject you to these penalties.

Can the state do this? Yes. On May 26, 2011, the United States Supreme Court handed down a decision affirming similar laws in Arizona. In the case of Chamber of Commerce of the U.S.A. v. Whiting, the U.S. Supreme Court upheld Arizona’s law which the Court concluded did not preempt the federal law, but instead merely imposed licensing conditions on businesses operating within the state. The Supreme Court further concluded that nothing prevented states from making mandatory the federal E-Verify program. The MEPA appears to be consistent with the U.S. Supreme Court’s ruling and, therefore, would likely be upheld.

Bottom line: Comply with the MEPA. If you have not already registered for E-Verify, do so now and learn how to use it so that you will be ready on July 1^st.

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In Mississippi, workers’ compensation laws replace traditional negligence actions against the employer in exchange for a no-fault system of payment to the employee. This exclusivity of remedy is the product of the "bargain" underlying the workers compensation laws. According to that bargain, the benefit to workers is compensation for all work-related injuries without reference to fault of either the employee or employer. Employees, in return, surrender the right to pursue "all other liability." Employers benefit by having the amount they have to pay to any worker capped. Employers in turn agree to assume the financial burden (through insurance) of all work-related injuries without reference to fault.

The exclusive remedy creates immunity to suits for damages by the employee against the employer but only if the employer actually provides the insurance required by the statutes. If the employer is required to provide insurance and fails to do so, then the employee may pursue a claim under the workers’ compensation act or can sue the employer for damages. The employee gets to decide which route to take and, if a suit for damages is filed, the employer is even prohibited from asserting that the employee assumed the risk or contributed to the injury.

The penalty for failing to maintain required workers compensation insurance gets even stronger. The employer (including the president, secretary and treasurer if the employer is a corporation) can be subject to criminal prosecution for a misdemeanor which carries a potential penalty of $1,000 and/or imprisonment of up to one year, in addition to the recovery to which the employee is entitled. A civil penalty up to $10,000 can also be assessed by the Mississippi Workers Compensation Commission.

For contractors, the burden is even greater. General contractors are considered "statutory employers" of the employees of subcontractors. If the subcontractor provides workers compensation insurance, then the general contractor gets the same protections as the subcontractor has. However, if the subcontractor does not provide workers compensation insurance, the general contractor is statutorily responsible to provide the insurance and be liable for payment or compensation to the injured employee.

The potential consequences (damages, fines and jail time) for failure to provide required insurance are too great to ignore. General contractors cannot assume that subcontractors are carrying workers compensation coverage. As a matter of routine, general contractors should require proof of such insurance, together with an acknowledgement from the insurance provider that coverage will not be cancelled without advance written notice to the general contractor. It is also wise for the general contractor to require that the subcontractor’s coverage add the general contractor as an additional named insured.

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On October 4, 2010, the U.S. Small Business Administration published a final rule in the Federal Register establishing a federal contracting programs for WOSBs.  See Press Release.  In a press release of the same date, the SBA says the new WOSB program will be used to help achieve a statutory goal that 5% of federal contracting dollars go to women-owned small businesses. [insert pdf] Under the program, contracts may be set-aside for competition among WOSBs when the anticipated contract price is not expected to exceed $3 million, except in the case of manufacturing contracts, is not expected to exceed $5 million.

The basic requirements to qualify as a WOSB are that the company be owned and controlled at least 51% by one or more women who are U.S. citizens and "small" according to its primary industry classification. According to the SBA, it will "pursue vigorously punitive action against ineligible firms which seek to take advantage of this program and in so doing deny its benefits to the intended legitimate WOSBs."

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In March, the United States General Accountability Office ("GAO") issued its finding and recommendations concerning fraud in the 8(a) Program. 8(a) Program Report. During its investigation, GAO discovered that at least 14 ineligible firms had received $325 million in sole-source and set-aside contracts. The GAO investigation discovered evidence of an entity fraudulently reporting adjusted net worth; an entity that was merely an extension of a graduated 8(a) firm; a top executive who was not disadvantage controlling the management and operation of the certified firm; an entity that was merely a shell company for a large construction firm managed by a non-disadvantaged individual; failure on the part of the president of an entity to report ownership in significant assets to the SBA; an entity that continued to receive 8(a) contract after it graduated from the 8(a) program by using other certified firms as pass-throughs; and a president who falsely reported his annual salary to the SBA.

The GAO report contains extensive details on the 14 entitles that were investigated and recommendations to the SBA for addressing the seemingly pervasive fraud in the SBA 8(a) Program. The report makes for interesting reading. More importantly, however, it should serve as a warning to individuals and entities "gaming" the SBA’s 8(a) Program that greater scrutiny of applicants and certified firms can be expected.

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On March 17, 2010, the Governor signed into law Senate Bill No. 2370 which amends what is know as the "preference statute". Miss. Code Ann. § 31-3-21(3). The statute requires that "[w]hen a nonresident contractor submits a bid for a public project, he shall attach thereto a copy of his resident state’s current law pertaining to such state’s treatment of nonresident contractors." (Emphasis added.) The Mississippi Attorney General has opined that the failure of a nonresident contractor to include "his resident state’s current law" was not sufficient to justify rejecting the nonresident contractor’s bid as nonresponsive. This has resulted in numerous public projects being awarded to nonresident contractors that did not comply with the statute’s mandatory requirement.

Senate Bill No. 2370 clarifies the ambiguity created by the Mississippi Attorney General’s office as to the mandatory requirement of the "preference statute" and which now unequivocally states:

Any bid submitted by a nonresident contractor which does not include the nonresident contractor’s current state law shall be rejected and not considered for award.

The AGC of Mississippi was instrumental in promoting this language for the benefit of the construction industry. The amendment will be effective on public projects bid from and after July 1, 2010.

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Effective October 1, 2009, the American Arbitration Association issued amendments to the Construction Industry Arbitration Rules and Mediation Procedures.  The revised rules and procedures can be viewed by clicking on this link:  Construction Industry Arbitration Rules and Mediation Procedures.  The American Arbitration Association has also provided a Summary of Significant Changes that can be found by clicking on this link: Summary of Significant Changes.

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Effective July 1, 2009, "any document or instrument presented to the clerk of chancery court for recording" will be required to comply with the requirements set forth in Miss. Code Ann. § 89-5-24 (House Bill 475).  The detailed requirements were apparently made necessary to bring uniformity to instruments filed with the chancery court.  Although the statute identifies a number of instruments that are exempt from the new formatting requirement, construction liens are not included in this list.  Fortunately, the "[f]ailure to conform to the format standards specified…does not affect the validity or enforceability of the document or instrument".  Miss. Code Ann. § 89-5-24(5). However, you will be assessed an additional ten dollars ($10.00) for each document or instrument that does not comply.  Miss. Code Ann. § 89-5-24(4).  Click here to see a copy of the Rankin County Chancery Court’s instructions concerning these new formatting requirements and a sample form.

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If you are bidding on projects awarded through the Mississippi Department of Finance and Administration, Bureau of Building, Grounds and Real Property Management ("the Bureau"), you might not be awarded the contract, even if you are the apparent low bidder.

The Bureau is very particular about with whom it does business. Effective May 18, 2009, the Bureau has expanded the grounds for disqualifying a bidder from competition. (Link to rules.) These recent changes are highlighted below.

1.04 DISQUALIFICATION OF BIDDER: A Bidder may be disqualified for any of the following reasons:

A.  Failure to comply with the bid requirements.  (This provision was in 600.53 but missing in 1.04 of the Instructions to Bidders.

B.  Bidder is in arrears on existing Contract with the Bureau or another state agency.

C.  Bidder is, or anticipates being, in litigation or arbitration with the Bureau or another state agency.

D.  Bidder has defaulted on a previous Contract.

 

BOB Manual, Instructions to Bidders, Section 00100, Part 1, General, Paragraph 1.04.

Mississippi’s Public Procurement Statute requires award to the "lowest and best bidder". However, the Mississippi Courts have recognized that the lowest bid may not necessarily be the best bid. Thus, state agencies have been afforded considerable deference when deciding which contractor has submitted the "lowest and best bid". One of the areas the Mississippi Supreme Court has recognized may be considered in the evaluation of bids is a contractor’s past performance record. However, in my opinion, the Bureau’s grounds for disqualification impermissibly expand the area of inquiry by seeking to penalize a contractor for exercising its contractual right to pursue a claim against the Bureau or another state agency with which the contractor has a contract.

The Bureau’s new grounds for disqualification gives it the authority to now reject a bid if the contractor "anticipates" being in litigation or arbitration. Hypothetically, this means that if a contractor has a contract with the Bureau or another state agency, writes a "claim" letter stating the contractor believes it has a right to an equitable adjustment in the contract price and/or time and subsequently submits a bid on another Bureau project, the contractor’s bid may be rejected because the letter could be construed as a sign the contractor "anticipates" being in litigation or arbitration with the Bureau. The Bureau may even require a certification as part of its bid requirements wherein the contractor must represent it does not anticipate being in litigation or arbitration with the Bureau or another state agency. The obvious intent of this provision is to discourage contractors from asserting claims against the Bureau or another state agency on construction projects. It appears the Bureau has made the decision that such draconian tactics are more effective then dealing with legitimate claims which the contractor has a right to assert under the Bureau’s contract documents.

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Approximately $354 million will be coming to Mississippi for highway usage as a result of the American Recovery and Reinvestment Act of 2009.  Of that $354 million, approximately 70% will be utilized for state projects and the remaining 30% will be allocated to other projects such as small urban projects.

The Mississippi Department of Transportation ("MDOT") expects to let approximately $120 million of the recovery money for projects at its March 24^th meeting.  The remainder of the projects will be let over the period of time from April through June.

You can view on their w a complete listing of the projects which MDOT plans to let with the recovery money.

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The Mississippi Department of Finance and Administration, Bureau of Building, Grounds and Real Property Management is currently updating its BOB Construction Manual.  This is your opportunity to participate in the process.  If you want to be heard, you should email Glenn Kornbrek, the Assistant Director for the Bureau of Building, Grounds and Real Property Management (KornbrG@dfa.state.ms.us).  Mr. Kornbrek’s telephone number is (601) 359-3894.

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