Legislative Issues for 2007 80th Legislative Session   The Texas Legislature reconvened for a 140 day session on January 9, 2007. While new issues may arise, the issues listed below are the priority issues set by the Board of Directors for the Texas Construction Association. HIGH PRIORITY Limiting Use of Contingent Payment Clauses. Most contracts presented to subcontractors provide that the General Contractor does not have to pay the Subcontractor if the owner does not pay, even though the Subcontractor performs the work perfectly. A serious problem that must be corrected! A Subcontractor should be paid for properly performed work. Prohibiting Broad Form Indemnification Clauses. Another clause found in construction contracts provides that the Subcontractor indemnifies the general contractor or owner for its wrongdoing even though the Sub may have done nothing improper. These clauses should be made void. They are in direct conflict with the concept that a company should be responsible for its negligent acts. Additional Insurance/Waiver of Subrogation. Additional insured endorsements and waivers of subrogation should be restricted in their application. Additional insured endorsements should be used only to protect the additional insured for the subcontractor’s negligence; however, the additional insured has been using the subcontractor’s policy to cover its own negligence. Also, with these endorsements revamped markedly by the insurance carriers, Subcontractors face new exposures in their contracts. Similarly, waivers of subrogation on workers’ compensation policies shift the burden away from the responsible party in an accident. Retainage. If retainage will continue to be withheld for properly completed work, then interest should be paid. Contractors should no longer be bankers for construction projects in Texas. Consolidated Insurance Programs. Known as Owner Controlled or Contractor Controlled Insurance programs, the use of these “Wrap-Up” programs is increasing in Texas. While possibly a money saver for the Owner, the CIPs are plagued by poor administration, gaps in coverage or lack of coverage, insufficient limits, questionable safety and back to work programs, and auditing practices that cause subcontractor’s retainage to be withheld even longer. In many cases, the exposure a subcontractor faces working on a CIP is unknown. In the 2003 session, TCA helped defeat legislation that would have required the use of OCIP’s on every public project. Standards should be set for CIPs in Texas.   PRIORITY Limiting Use of Reverse Auctions. Reverse auctions are being used more often in construction contracts. Last Session a bill was considered to require reverse auctions to be used on at least 10% of Public Projects. Reverse auctions are a public bid shopping procedure that creates havoc in an already complicated bidding procedure. Reverse Auctions are not a good procurement method for construction projects. School Finance and Tax Reform. The Legislature enacted a revised business franchise tax for the 2007 tax year. As with any major legislation, the legislature will likely do some tweaking of the legislation to make certain it does what was intended. Worst case scenario, the legislature will look for additional funding to pay for the property tax reductions and educations costs. This could change the impact of State taxes on your business. Your interests must be protected. Workers’ Compensation Reform. Workers’ Compensation Insurance was drastically changed in the 2005 session. Tinkering with the changes will undoubtedly occur and TCA will be watchful of subcontractors’ interests during the review. Additionally, a solution to the sole remedy/statutory employer issue on construction projects needs to occur. 602 W. 13th Street ● Austin, Texas 78701 ● 512-473-3773 ● www.texcon.org 01/07   Send mail to Webmaster@texcon.org with questions or comments about this web site. Copyright © 1998-2007 Texas Construction Association, Inc