LETTER TO STATE REPRESENTATIVE/SPEAKER OF THE HOUSE, ARMOND BUDISH

I have sent this letter to Armond Budish as Speaker of the House, my State Representative, Robin Belcher, Representative Josh Mandel, President of the Ohio Senate, Bill Harris, and Senator Thomas Patton. Please feel free to borrow from this letter to write to your own Representative TODAY, decisions will likely be made this week.

Dear Armond:

I appreciate your time and I understand the difficult task this budget presents.

I am following up on my original email to your office regarding Senate provisions that deal with Waiving the Obligation of Some Contractors to Post Payment and Performance Bonds. It is my understand that discussions are occurring on the issue.

Relying on my years of practicing construction law, I respectfully request that due to the complexity of this issue and the number of questions the construction community has, that this provision be pulled and addressed in a standalone setting. This process will guarantee that hearings and deliberate action can be properly dedicated to the bonding matter.

A possible suggestion is to address this in the construction reform panel debate if that occurs in the fall.

There are a multitude of questions I have heard regarding this provision some of which could possibly enhance the provision:

1) Why doesn’t the state back the bonds or public entities to ensure stability for all those involved on the job the way that the Federal Government does?
Without the backing of the public entity, the party taking the risk of dealing with the unbonded contractor are the subcontractors and suppliers who are providing the labor and materials in furtherance of the construction project. This will cause them to either increase their prices to the unbonded contractor to cover the additional risk, even worse, not bid to them at all. The result would be the exact opposite of the intent of the legislation.

2) Why is the retainage amount being set so high?
Retainage, if held at all (none is held on Federal Work), was originally designed to give the contractor the incentive to finish the project by withholding his or her profit, allowing enough to be paid to permit the contractor to pay itself and all of its laborers, subs and suppliers. Withholding any more will require the contractor to over withhold from those who should be paid, or not pay some less pressing accounts like contributions to unions on behalf of its employees or withholding taxes to be paid to the IRS. If the goal of the legislation is to permit financially disadvantaged minority contractors to successfully participate in more public work, retainage should be held to reasonable levels or completely eliminated, at least for these companies.

3) Could this provision include the public authority in the Notice of Furnishing and lien waiver process to assure that subcontractors and suppliers are being paid?
To assure that subcontractors and suppliers are being paid, the public authority can take an active role in the payment process. Under the current law, the public authority, unlike the private project owner, is not even given a copy of the Notice of Furnishing, because it has not interest in the payment process, unless a lien is filed. Changing the rule, at least for participation with an unbonded contractor, would permit the public authority the ability to know the identity of all of the subcontractors and suppliers working on the project and then obtain lien waivers from the subcontractors and suppliers so that the public authority actually knows that the tax dollars that it is spending for the improvement are being paid to the people and companies doing the work.




I believe everyone involved in this discussion is looking to produce a policy that enhances quality construction , keeps jobs in Ohio, and simply allows companies to be paid for their hard work. Hearings and public testimony will only help in this goal, anything less will likely result in severe, unintended consequences.


R. Russell O’Rourke

O’Rourke & Associates Co., LPA
President of American Subcontractors Association of Ohio, which has regional groups in Cleveland, Columbus, Cincinnati and Dayton.
General counsel of the Builders Exchange (Cleveland, Toledo, Dayton and Cincinnati)
Member of the Executive Committee of ASA (National)
Chair of the ASA Subcontractors’ Legal Defense Fund

2 Summit Park Drive, Suite 650
Independence, Ohio 44131
216/447-9500
RORourke@ORourke-Law.com