Senate Bill No. 2622--Proposed Legislation Changing Mississippi Lien Law

The Mississippi construction industry is about to undergo a radical change to its lien law in response to the Fifth Circuit’s decision in Noatex Corp. v. King Construction of Houston, LLC, 732 F.3d 479 (5th Cir. 2013). Noatex affirmed a district court’s ruling that Mississippi’s "stop payment" statute was unconstitutional because it included no due process.  Construction Law Toolbox reported on this decision on October 15, 2013 [Click here to view Noatex post].  Rather than revise the "stop payment" law to cure the due process issue, legislators have decided to re-write Mississippi’s lien laws.  Senate Bill No. 2622 was introduced and would extend lien rights to second tier subcontractors and suppliers who currently have no lien or "stop payment" rights in Mississippi. [Click here to view SB No. 2622] This legislation can be followed by logging into www.legislature.ms.gov/. ‎

Biggs, Ingram & Solop, PLLC’s construction attorneys Christopher Solop and Lynn Thompson are closely monitoring the legislation. When a new lien law is passed lenders, owners, contractors, subcontractors and suppliers will need to understand the intricacies of all lien rights, including effectively filing a lien, penalties for false representation of actual and conditional payments; defending or eliminating a claim of lien, deadlines for initiating litigation or arbitration of a claim of lien, and penalties for false liens.

PREGNANCY COSTS J.C. PENNEY $40,000 - WHAT WILL IT COST YOU?

On January 16, 2014, the EEOC issued a press release advising the public that J.C. Penney had agreed to pay $40,000 to settle a pregnancy discrimination lawsuit brought by the EEOC. In the lawsuit, the EEOC charged J.C. Penney refused to hire a female applicant for a salon position after she told the manager she was pregnant. Such actions are in violation of the Pregnancy Discrimination Act ("PDA"). The EEOC tried to resolve the matter without litigation, but was unsuccessful. The settlement also requires J.C. Penney to implement an equal employment opportunity training and reporting program including posting of anti-discrimination notices.

The EEOC reports 4,901 pregnancy discrimination charges were filed in FY2006, up approximately 1,000 cases over FY 1997. However, there was a jump in cases beginning FY2007 that has remained high. In FY2011, 5,797 complaints were filed with the EEOC. Importantly, in FY 2011, employers paid out $17.2 million in monetary benefits, excluding amounts awarded in litigated cases, arising out of pregnancy discrimination claims. Such cases are costly not just in terms of cash outlay, but also in terms of employee morale, workplace environment and employer reputation.

Are you next? The PDA was passed in 1978 as an amendment to Title VII of the Civil Rights Act of 1964. Unfortunately, after such an extended period of time, employers become lured into a false sense of security that everyone understands what they can and cannot do in the workplace. That simply is not true and employers who want to avoid costly claims such as that experienced by J.C. Penney must be proactive.

Construction companies are not immune to PDA claims. There are ways for all employers to reduce the risks to such claims. If you do not have a plan in place to address discrimination in the workplace, contact an attorney experienced in employment law to assist you in developing a program.

NEW YEAR MEANS COMPANY REPORTS DUE AGAIN!

The new year brings with it annual reporting requirements for companies doing business in Mississippi. All corporations and limited liability companies formed in Mississippi or qualified to do business here are required to file with the Mississippi Secretary of State’s Office an annual report which must be completed online. The process is easy and takes only a few minutes of your time. However, failure to file your annual report may have serious consequences.

The reporting forms are available for completion on the Mississippi Secretary of State’s website. Take the time now to go complete your report so you won’t forget. You will be finished quickly and can mark that task off your "to-do" list until next year rolls around! It will be one less thing for you to worry about this year.

To file the annual report for a CORPORATION, click here.

To file the annual report for a LIMITED LIABILITY COMPANY OR LLC, click here.

Challenge to Arbitration Award Untimely

Once a party receives an arbitration award, it does not necessarily mean that it will voluntarily be paid. Frequently, the party receiving the arbitration award must have it confirmed by the court and converted into a judgment. However, the party against whom the award has been made may challenge the award and seek to have it vacated. If the dispute involves an agreement related to construction, the parties must follow the procedures set forth in the Construction Arbitration Act, Miss. Code Ann. §11-15-101, et seq. If the dispute is unrelated to construction, the parties must follow the procedures set forth in the Mississippi Arbitration Act ("MMA"), Miss. Code Ann. §11-15-1, et seq. In a recent decision, the Mississippi Court of Appeals found the party against whom an award had been granted failed not only to timely challenge the arbitration award but also failed to set forth sufficient grounds to justify vacating the arbitration award and reversed the trial court’s findings. [click here to view decision].

In reversing the trial court, the Court of Appeals first considered the timeliness requirements for vacating an arbitration award under both the MMA and the Federal Arbitration Act ("FAA"), 9 U.S.C. §§1, et seq. Under the FAA, a motion to vacate must be served within three months after the award is filed or delivered. 9 U.S.C.§12. However, under the MMA provides as follows:

An application to vacate or modify an award shall be made to the court at the term next after the making and publication of the award, upon at least five days’ notice, in writing, being given to the adverse party, if there be time for that purpose; and if there be not time, such court, or the judge thereof, may, upon good cause shown, order a stay of proceeding upon the award, either absolutely or upon such terms as shall appear just, until the next succeeding term of court.

 

Miss. Code Ann. §11-15-27.  Because the challenging party complied with neither of these provisions, the Court of Appeals found the trial court had erred when it concluded the challenger's motion for vacation was timely.

In addition, the challenger did not set forth any of the grounds that might justify the vacating of an arbitration award. These grounds are very limited and set forth in 9 U.S.C. §10(a) or under Miss. Code Ann. §11-15-23. Accordingly, the Court of Appeals reversed the trial court for finding otherwise.

Although this case dealt with the MMA, the Mississippi Construction Arbitration Act also has strict filing deadlines for challenging an arbitration award and extremely limited grounds for challenging an award. It is therefore imperative that upon receipt of the arbitration award contractors consult their lawyer or the Mississippi Construction Arbitration Act to determine the time limitations for modifying or vacating an arbitration award.

Fifth Circuit Affirms Jury Verdict Awarding Damages for Breach of "Exclusive Teaming Agreement" for USAF Procurement

The Fifth Circuit’s recent decision in X Technologies, Inc. v. Marvin Test Systems, Inc., 2013 U.S.App. LEXIS 11739 proves the power of a single-letter word. It also proves that even the most reasonable commercial expectations should not color one’s perception of what is actually written in a contract. This focuses on that portion of the X Technologies decision showing that "exclusive teaming" does not mean "mutually exclusive teaming". One partner may have to dance with the one that brung him, but the other partner does not!

The United States Air Force (USAF) sought to purchase a new testing system for its Paveway II Bombs, which are manufactured by Raytheon. The testing system sought by the USAF was the TS-217, which is manufactured by Geotest. However, the hardware and software for the TS-217 are owned by Raytheon. A successful bid for the new TS-217 testing system would require access to the hardware and software (and the right to modify it) for Raytheon’s Paveway II bombs.

The USAF solicitation was initially set-aside for small businesses. X Tech, a small business contractor, decided it would bid on the procurement and reverse-engineer the Raytheon data. X Tech contacted Geotest and negotiated a teaming agreement for the TS-217 hardware, software, and modification rights. X Tech confirmed its oral agreement with Geotest in writing. The portion of that agreement relevant to the litigation stated:

This is an exclusive agreement between X Tech and Geotest.  X Tech will submit Geotest’s workshare as part of X-Tech’s proposal as a response to this RFP. Geotest will not team up with any other company for solicitation FA8224-09-R-0104 except that Geotest may provide prices for the TS-217 only (without any software licenses, support or training) to other potential bidders.

X Tech then submitted 2 bids. One of its bids was on the specified equipment and used Geotest as a critical subcontractor. This "conforming bid" was for $3.2 million. X Tech’s second bid ("non-conforming bid") was based on test equipment other than the TS-217 specified in the Solicitation, and was substantially lower-priced than its confirming bid. X Tech was the only bidder.

The USAF rejected X Tech’s non-conforming bid and its conforming bid because the government cost estimate was substantially lower than $3.2 million. The solicitation was amended to open it up to "full and open" competition. In response to the "full and open" solicitation, X Tech submitted its teamed bid with Geotest. However, Geotest also submitted a bid separately from X Tech for $2.4 million. The USAF awarded to Geotest.

X Tech sued Geotest in Texas state court (it was subsequently removed to federal court on diversity grounds), claiming that Geotest breached the exclusive teaming agreement by teaming with Raytheon in a separate bid. Geotest argued it had not teamed with Raytheon and that it submitted its own, independent bid as merely a licensee of Raytheon data. Geotest also argued that when X Tech submitted its separate, non-conforming bid on the procurement when it was a set-aside for small business, that act constituted a prior material breach of the "exclusive teaming agreement". The jury’s verdict was for X Tech, and the district court entered a final judgment awarding X Tech $336,000 plus attorney’s fees.

One of Geotest’s issues on appeal was the district court’s determination that X Tech did not commit a prior material breach by submitting its separate bid using other than Geotest-manufactured equipment. X Tech argued that the unambiguous language of the teaming agreement only limited Geotest’s ability to team with another contractor and that it did not limit X Tech’s ability to submit a bid that did not include Geotest equipment.

Refusing to imply any mutuality of obligation, the Fifth Circuit sided with X Tech and upheld the verdict against Geotest, in part, on the express terms of the "exclusive teaming agreement", finding that explicitly restricting one party’s ability to team but remaining silent as to the other’s "suggests that the restriction is unilateral". Further, as the teaming agreement required that X Tech submit "a" response including Geotest as its teaming partner, X Tech was not restricted from submitting more than one response to the solicitation. Thus, X Tech’s submission of a competing bid that did not include Geotest did not constitute a "prior material breach" that would have freed Geotest to submit its own bid with Raytheon in response to the amended solicitation.

Can you Include a Right to Appeal an Arbitration Decision in your Arbitration Clause?

I recently came across a decision form the District Court for the Southern District of Mississippi that caught my attention. Although it was not construction related, it addressed a situation where the parties had included the right to appeal an arbitration award in their agreement to arbitrate. [click for decision] This would appear to be inconsistent with the concept of finality, which is one of the public policy reasons for arbitration. Further, under the Mississippi Arbitration Act, Miss. Code Ann. §§ 11-15-1, et seq. and the Mississippi Construction Arbitration Act, Miss. Code Ann. §§ 11-15-101, et seq. there are extremely limited grounds for having an arbitration award challenged.

Nonetheless, in this district court decision, the federal judge thought that even though there were no Mississippi court decisions addressing this issue, that if confronted with the question of whether parties could include a right to appeal an arbitration award for reasons stated in the arbitration clause, the Mississippi court would enforce the provision allowing an appeal. The district court, quoting the Fifth Circuit, stated that "when, as here, the parties agree contractually to subject an arbitration award to expand judicial review, federal arbitration policy demands that the court conduct its review according to the terms of the arbitration contract." (citation omitted)

There remain no Mississippi decisions adopting the position of the district court. However, this decision should highlight the need for contractors to carefully read arbitration clauses included in their contract. If you have concerns with any aspect of the arbitration clause, those concerns should be resolved before you sign the contract.

Can you Include a Right to Appeal an Arbitration Decision in your Arbitration Clause?

I recently came across a decision form the District Court for the Southern District of Mississippi that caught my attention. Although it was not construction related, it addressed a situation where the parties had included the right to appeal an arbitration award in their agreement to arbitrate. [click for decision] This would appear to be inconsistent with the concept of finality, which is one of the public policy reasons for arbitration. Further, under the Mississippi Arbitration Act, Miss. Code Ann. §§ 11-15-1, et seq. and the Mississippi Construction Arbitration Act, Miss. Code Ann. §§ 11-15-101, et seq. there are extremely limited grounds for having an arbitration award challenged.

Nonetheless, in this district court decision, the federal judge thought that even though there were no Mississippi court decisions addressing this issue, that if confronted with the question of whether parties could include a right to appeal an arbitration award for reasons stated in the arbitration clause, the Mississippi court would enforce the provision allowing an appeal. The district court, quoting the Fifth Circuit, stated that "when, as here, the parties agree contractually to subject an arbitration award to expand judicial review, federal arbitration policy demands that the court conduct its review according to the terms of the arbitration contract." (citation omitted)

There remain no Mississippi decisions adopting the position of the district court. However, this decision should highlight the need for contractors to carefully read arbitration clauses included in their contract. If you have concerns with any aspect of the arbitration clause, those concerns should be resolved before you sign the contract.

Definitive Responsibility Requirement in Solicitation Upheld by Mississippi Court of Appeals

The Mississippi Court of Appeals has recently recognized the validity and enforceability of a definitive responsibility requirement set forth in a solicitation for the construction of a prison. [click here for a copy of decision] The solicitation required that prospective bidders "[p]rovide [a] list of prior construction experience with references on successful correctional facilities projects within the last [five] years having a minimum construction contract amount of eight[-]million dollars…each for no less than two…separate projects…Failure to do so may be cause for rejection." Desoto County Board of Supervisors rejected the apparent low bidder and second low bidder who did not satisfy the solicitation’s requirement and awarded it to the third low bidder for a price premium of $283,100.00. The disappointed bidders challenged the decision to award the contract to the third low bidder but the Court affirmed the decision finding the definitive responsibility requirement to be reasonable and enforceable.

There are two lessons to be learned from this. The first lesson is to protest such a definitive responsibility requirement as unduly restrictive of competition and try to convince the procuring agency to eliminate or "loosen" the standard. The second lesson is to make sure you can satisfy the criteria set forth in the solicitation or face the prospect of having your bid rejected as non-responsive.

Beware of Tolling Agreements

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.

SBA PUBLISHES PROPOSED RULE TO INCREASE TWO SIZE STANDARDS IN HEAVY AND CIVIL ENGINEERING NAICS CODES

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.

Construction Industry Legislation for 2012

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.

Lynn Thompson Wins Two Bid Protests at GAO for BISC Client

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.

"Redesignated" HUBZones Expiring October 1, 2011 - May Affect Your HUBZone Eligibility

 

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.

Mississippi Department of Employment Security (MDES) offers E-Verify Assistance

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.

July 1, 2011 Deadline for ALL Employers to Comply with Mississippi Employment Protection Act

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 1st.

Only One Bite at This Apple: The Exclusive (Maybe) Remedy of Workers' Compensation

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.

SBA Finally Issues Final Rule Establishing Women-Owned Small Business Program

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."

Who's Fooling Who? General Accountability Office Recommends SBA to Monitor 8(a) Program Closer to Prevent Fraud.

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.

Governor Signs Amendment to Preference Statute

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.

American Arbitration Association Amends Construction Industry Arbitration Rules and Mediation Procedures

 

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.

New Document Formatting Standards Effective July 1, 2009 for Chancery Court Documents

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.

Mississippi Bureau of Building, Grounds and Real Property Management's New Standards for Disqualification of Bidder

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.

Mississippi Highway Contractors to Compete for Stimulus Funds

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 24th 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.

Bureau of Building, Grounds and Real Property Management Updating Construction Manual

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.