News Release
Contacts: Brian Pallasch (703) 684-3450, ext. 333
FOR IMMEDIATE RELEASE

Groups' Agreement on Payment Protections Bolsters Chances of Reform

WASHINGTON, D.C.-After nearly 65 years, laws relating to payment bonds on federal and federally funded construction projects are in store for a major overhaul. Key industry groups reached consensus on legislative changes that they will seek, and Rep. Carolyn Maloney, D-N.Y., announced that she is preparing to introduce reform legislation in Congress.

On March 3, the American Subcontractors Association (ASA) and the ASA-led Coalition to Modernize the Miller Act, the American Insurance Association (AIA), the Associated General Contractors of America (AGC), the National Association of Surety Bond Producers (NASBP), and the Surety Association of America (SAA) announced that they jointly support better payment protections for subcontractors on federal construction. A joint statement was made at the Surety Industry Legislative Conference in Washington, D.C.

Since 1997, ASA and the Coalition to Modernize the Miller Act have been asking federal legislators to "modernize" the law, which includes provisions that have not been modified since the law was originally enacted in 1935. For example, the law currently caps the total amount of the payment bond for subcontractors and suppliers at $2.5 million on federal and federally funded construction projects, no matter what the amount of contract is.

Consequently, subcontractors and suppliers have been left unpaid when a prime contractor has defaulted or when a payment bond has not been properly secured. Legislation introduced by Maloney in the 105th Congress contained many of the changes ASA and the coalition were seeking, but disagreement from other industry groups stalled the effort to pass the bill.

"This agreement is a major advance, and a positive sign of cooperation and communication in the construction industry," said ASA President Maynard Hulm, president, Hulm Construction Co., Parker, Colo. "Subcontractors who work on federal and federally funded projects will clearly be better protected if Congress and the President approve the changes supported by these groups."

The groups support specific changes to the law, including:

• Making the payment bond equal the price of the contract.
• Ensuring that subcontractors' Miller Act rights are not waived before commencement of work. At present, federal law permits agreements between prime contractors and subcontractors that require the subcontractor to waive its rights, even before work has begun.
• Allowing a subcontractor to notify a prime contractor that the subcontractor has initiated an action under provisions of the Miller Act, using means of notification such as Federal Express or United Parcel Service delivery, or even electronic delivery if it can be verified by a third party. The law currently restricts notification to registered mail delivery through the U.S. Postal Service.

Maloney said she would introduce Miller Act reform legislation in the 106th Congress that includes these changes. "I am committed to introducing a bill based on this agreed-upon legislative language," said Maloney.

"With broad industry support for Maloney's legislation, Congress should be able to finish the work it began last year," said ASA Government Relations Committee Chairman Robert Reick, president, Schoonover Electric Co., Mountainside, N.J.

On Sept. 11, 1998, three ASA members testified at a joint hearing of two House subcommittees in support of reform legislation Maloney introduced, H.R. 3032, the Construction Subcontractors Payment Protections Enhancement Act of 1998.

"The obstacles that prevented agreement last year have been overcome. The joint effort could lead to pruning the Miller Act of some of its most damaging provisions," said Reick.

The members of the Coalition to Modernize the Miller Act are:

• Air Conditioning Contractors of America
• American Fire Sprinkler Association
• American Subcontractors Association
• Architectural Woodwork Institute
• Association of the Wall and Ceiling Industries-International
• Automatic Fire Alarm Association Inc.
• Independent Electrical Contractors Inc.
• Mason Contractors Association of America
• Mechanical Contractors Association of America
• Mechanical/Electrical/Sheet Metal Alliance
• National Association of Credit Management
• National Association of Plumbing-Heating-Cooling Contractors
• National Electrical Contractors Association
• National Ground Water Association
• National Insulation Association
• Sheet Metal and Air Conditioning Contractors' National Association
• Painting and Decorating Contractors of America
• World Floor Covering Association

ASA is the only national trade association representing union and non-union construction subcontractors. Founded in 1966, ASA serves more than 6,000 member companies through a nationwide network of local and state chapters. These subcontractors work together to protect their rights as an integral part of the construction team.