Louisiana Construction Industry Legislative Update - Regular Session 2010
The Louisiana Legislature recently closed its most recent session, and we have put together the following summary of new legislation that will impact the future of the construction industry for both public and private projects performed in Louisiana. Should you have any questions about these new provisions, please contact the editors or your Phelps Dunbar counsel.
BILLS RELEVANT TO PUBLIC PROJECTS
- House Bill No. 1292 (Act No. 945, enacting La. R.S. 38:2227) – Prohibits certain bidders from bidding on public projects – This legislation provides that each person or bidding entity on a public works project must attest that no individual partner, incorporator, director, manager, officer, organizer, or member who has a minimum of 10% ownership in the bidder has been convicted of, or pled guilty or nolo contendere to, the following crimes: (a) public bribery, (b) corrupt influencing, (c) extortion, (d) money laundering, (e) theft, (f) identity theft, (g) theft of a business record, (h) false accounting, (i) issuing worthless checks, (j) bank fraud, (k) forgery, (l) misapplication of payments, or (m) malfeasance in office. The Act only applies to convictions or pleas entered after the effective date of the Act.
The Act permanently bars any person or bidding entity from bidding on public projects if convicted or entered a plea to the crimes enumerated (a) – (d) above. The Act bars any person or bidding entity from bidding on public projects for a period of five years from the date of conviction or plea for the crimes enumerated (e) – (m) above. A person or bidding entity that submits a false attestation that requires the public entity to rebid the project or cancel the contract is responsible for the cost of rebidding, additional costs due to increased costs of bids, and any and all delay costs. Effective as of July 2, 2010.
- Senate Bill No. 71 (Act No. 868, amending R.S. 39:1767 and La. R.S. 48:251.8, and enacting La. R.S. 38:2196.1, La. R.S. 39:200(N), 1493.1, and La. R.S. 39:1758) – Requires contractors awarded public contracts without bid to disclose compensation – Provides that when any person or entity enters into any contract awarded without bidding with a public entity in which a commission, fee, or other consideration is paid to the contractor, then the full disposition, splitting, or sharing of such shall be disclosed to the public entity in writing by an affidavit of notice of fee disposition. If for any reason the information in the affidavit is found to be incorrect, then the contract is null and void and all payments shall be rebated to the public entity. Intentional misrepresentation of the facts of an affidavit subjects the party to penalties for filing or maintaining false public records. Effective as of July 2, 2010.
- Senate Bill No. 720 (Act No. 970, enacting La. R.S. 9:2716) – Certain contracts with political subdivisions null – Provides that any contract between a political subdivision and a person or entity entered into as a result of fraud, bribery, corruption, or other criminal acts for which a final conviction has been obtained shall be null, void, and unenforceable. Any person whose conviction causes the nullity of the contract shall be responsible for payment of all costs, attorney’s fees, and damages incurred in the rebidding of the contract. Effective as of August 15, 2010.
BILLS RELEVANT TO PRIVATE PROJECTS
- Senate Bill No. 218 (Act No. 638, enacting La. R.S. 9:4815) – Requires escrow accounts for retainage – Requires the establishment of an escrow fund for deposit of retainage amounts in certain private works contracts. This legislation applies to private works contracts in the amount of $50,000 or more that permit the owner to withhold retainage from periodic payments due the contractor. It does not apply to contracts for a single- or double-family residence or for construction or improvement of certain types of industrial facilities. The Act provides that an escrow agent shall be selected by mutual agreement of the owner and contractor.
Upon completion of the work, and if there are no existing claims by the owner, the entire amount of the funds (including interest) shall be paid to the contractor within three business days of receipt by the escrow agent of a written release signed by the owner and contractor. If there is a dispute between the owner and contractor, the undisputed amount shall be paid to the contractor within three business days of receipt by the escrow agent of a notarized request of the contractor. The amount determined to be owed to the contractor through a judicial proceeding or arbitration shall be paid within three business days of the receipt of the escrow agent of the final order of the court or arbitrator. Neither the escrow agent nor the financial institution in which the escrow account is maintained shall be liable to the owner, contractor, or any other person when complying with the Act. Effective as of August 15, 2010.
- Senate Bill No. 437 (Act No. 651, amending La. R.S. 9:2772(H)(2)) – Amends the five-year peremptive statute for actions involving deficiencies in surveying, design, supervision, or construction of immovables – This legislation provides that if fraud is alleged in non-residential contracts and the court determines that the allegation was brought in bad faith for the sole purpose of tolling the prescriptive period and no fraud is found, then the party alleging fraud shall be liable for court costs and attorney’s fees. If fraud is proven, then the party that committed fraud is liable for court costs and attorney’s fees. Effective as of August 15, 2010.
- Senate Bill No. 625 (Act. No. 492, enacting La. R.S. 9:2780.1) – Limits scope of contractual indemnity provisions – Provides that any provision, clause, covenant, or agreement contained in, collateral to, or affecting a construction contract that purports to indemnify, defend, or hold harmless the indemnitee from liability for loss or damage resulting from the indemnitee’s negligence or intentional acts is contrary to the public policy of the state and is null, voice, and unenforceable. This applies to the acts or omissions of the indemnitee, an agent or employee of the indemnitee, and a third party over which the indemnitor has no control.
This legislation also provides that the laws of the state of Louisiana apply to and govern any construction contract to be performed in the state. Any provision in such contracts that conflicts with the Act shall be null, void, and unenforceable. The Act does not apply to construction contracts entered into prior to January 1, 2011. Effective as of August 15, 2010.