a:\newslw.96 [4]Alan Lee MitchellStephen De'ak201999-02-03T15:33:00Z2006-07-01T22:25:00Z2006-07-01T22:25:00Z111926796 5615797311.8026 FURRER & SCOTT LLCConsider . . .VOL. 8, ISSUE 1 January, 1999Law OfficesFURRER & SCOTT LLC9185 SW BURNHAM ST. POST OFFICE BOX 23414TIGARD, OR 97223 TIGARD, OR 97281(503) 620-4250 -- (800) 334-8986 -- FAX: (503) 620-4315PUBLIC WORKS BOND CLAIMSSubcontractors and suppliers often assume the existence of a performance/payment bond on a public works project. Then, if they are not paid, they assume they can just file a claim against the bond.Unfortunately, this assumption can be wrong. This means that subcontractors or suppliers have nothing against which to make a claim and the risk of nonpayment rests on their shoulders, not the shoulders of a bonding company.It is true that Oregon law normally requires that a bond be posted on Oregon public works projects. However, there are at least three situations where a bond may not be present on an Oregon public works project.(NOTE: Virtually all of the following discussion is dependent on the specific administrative rules adopted by each individual public agency. These rules should always be examined before providing any work or materials for a public works project.)First, projects under certain dollar limits may generally be exempt from the requirement that a bond be provided. While this dollar limit normally is $10,000, it can vary. For instance, the Port of Portland has adopted rules waiving the bond requirements for projects under $50,000.Second, certain classes of contracts may be exempted from the bonding requirements. An example of this is contracts for personal services.Third, if the public agency declares an “emergency” for a specific project, then that project may be exempt from the bonding requirements.The “bottom line” is that subcontractors and suppliers should never assume the existence of a bond to protect their payment rights.For subcontractors who provide bids on public works projects, you may want to consider making the bid conditional upon issuance of a good and sufficient payment bond.For suppliers to public works projects, you may want to consider actually obtaining a copy of the bond for that project before you sell any materials.Once you obtain a copy of a public works bond, you need to examine it carefully with two questions in mind:Am I a protected party under the bond?What are the requirements for giving notice of a claim under the bond?In sum, subcontractors and suppliers need to investigate early on whether there is a bond on a public works project. Unlike private projects, where lien rights are a function of law, subcontractors and suppliers cannot assume that their payment rights on public projects will be protected by a payment bond.LIMITATION ON CONTRACTORS’ RIGHTS?In the July 1998 edition of Consider…, we discussed a case entitled Blue Fox, Inc. v. Small Business Administration. In that case, the Ninth Circuit Court of Appeals held that a subcontractor could make an equitable claim against the government on a federal public works project even if no payment bond had been posted.The United State Supreme Court recently reversed that ruling in Department of the Army v. Blue Fox, Inc., 119 S.Ct. 687 (1999). While the Court’s discussion focused on whether the federal government had waived its sovereign immunity, the conclusion for contractors is a reinforcement that they should never assume that their payment rights on a public project will be protected by a payment bond.In other words, subcontractors and suppliers may want to investigate the existence of a payment bond before they begin providing labor and/or materials for any public works project.CONSTRUCTION DELAY CLAIMSHow many times have you been impacted by delays on a construction project? And, how many times have you had the owner tell you that it will not pay you the increased costs?Delays can cause impacts such as losing the opportunity to perform other work and increased labor or material costs. These impacts can affect both you and other contractors involved in the project.Owners often resist delay claims. They may feel that such impacts are up to the contractor to absorb, that the cause of the delay was not the owner’s responsibility, or that the amounts claimed were not caused by the delay.Delay impact claims by contractors are rarely successful absent sufficient documentation. Contractors experiencing such impacts need to consider the following issues.First, the contractor needs to carefully review the construction contract. Often times, contracts require the contractor to give written notice of a delay. This letter may be only a notice letter or it may turn out to be the claim itself.Second, the contractor needs to show that there truly was a delay. An important tool in establishing a delay claim is comparing various schedules on the project. These schedules can include the “as-bid” schedule, the “as-agreed” schedule and the “as-built” schedule.Third, the contractor needs to show that the owner bears responsibility for the delay. Thus, when delays occur, the contractor must keep sufficient records of what caused each delay.Here, the contractor must watch for concurrent delays. These are generally defined as delays that occur at the same time but may have different causes.Finally, the contractor needs to show that it experienced damage as a result of the delay. Again, whenever delays occur, contractors need to document what costs were incurred as a result of the delay.There are construction claims organization systems that contractors can use to assist in tracking the above information. This is very much a situation where keeping good records at the time events occur can pay off in the long run.CCB RULESLike all public agencies, the Oregon Construction Contractors Board (CCB) regularly adopts changes to its administrative rules. These changes can have significant impacts upon contractors.Unlike other public agencies that only adopt changes to their rules once a year or so, the CCB revises its rules several times a year. There is no schedule to these revisions; there can be two, three or four in a year and they may not be evenly spaced during the year.Copies of the most recent rules can be obtained by calling the CCB in Salem at (503) 378-4621. Smart contractors will make this call three or four times per year.ON THE WEBAs you may know, there is a wealth of information available on the Internet. Some of the sites that specifically relate to Oregon information are:www.ccb.state.or.us: This is the website of the Oregon Construction Contractors Board. It includes relevant statutes and administrative rules, information about registration with the CCB, copies of some of the CCB’s forms, and copies of relevant legislation that may be introduced during the upcoming legislative session.www.leg.state.or.us: This is the website for the Oregon Legislature. It includes access to past and present legislation, copies of the current Oregon Revised Statutes and contact links for members of the state and federal legislatures.FIRM NEWS:MARK YOUR CALENDARS for, April 7, 1999 when MICHAEL J. SCOTT, DOUGLAS R. HOOKLAND and ALAN L. MITCHELL, in connection with Lorman Seminars, will be conducting an all-day seminar on Oregon and Washington construction lien and bond claims. If you would like a brochure about the seminar, please contact Gayle L. Allen at Furrer & Scott LLCThis newsletter is published quarterly by the law firm of Furrer & Scott LLC for the benefit of its clients and friends and is intended to inform them about legal matters of interest. While this information is meant to be current, we do not promise or guarantee that the information is correct, complete or up-to-date. This information is not intended to be, and should not be considered to be, legal advice. No actions should be undertaken in reliance hereon without professional legal counsel. Alan L. Mitchell, Editor