National Electrical Contractors Association
Central Texas Chapter
City of Austin Building Department
City of Austin Building Inspection
Austin Energy Design Criteria
City of San Marcos Building Requirements
City of Waco Building Department
City of Killeen Building Department
City of Georgetown Permits and Inspections
City of Lakeway Building Code
Prohibiting Indemnification Clauses
Most construction contracts contain clauses providing that the subcontractor indemnify the general contractor and owner for their negligent wrongdoing even though the subcontractor may have done nothing improper. The clause also requires the subcontractor pay the entire cost of defending the claim regardless of the percentage of fault. Our liability system is based upon the principle of each person being responsible for his or her conduct. To allow a party to transfer its responsibility for its own conduct goes against this principle and reduces or removes incentive to maintain a safe workplace for the person shifting the risk. Studies have shown that shifting of risks increases the total cost of risk on a project and also hinders quality. Allowing contractual indemnity most often shifts the risk to another who is generally less able to absorb the risk.
Additional Insured Requirements
Most of the contracts containing indemnification clauses also contain clauses requiring the subcontractor to add the general contractor and owner as additional insureds to the subcontractor’s liability policy. Additional insured endorsements should be restricted in their application. Additional insured endorsements effectively give the owner the coverage of the subcontractor’s policy. These endorsements should be used only to protect the additional insured for the subcontractor’s negligence. Also, with these endorsements being revamped markedly by the insurance carriers, subcontractors face new exposure. It is becoming increasingly difficult for subcontractors to purchase additional insured coverage when the indemnified party is concurrently negligent. It is virtually impossible to purchase additional insured coverage when the indemnified party is solely negligent or when there is no negligence on the part of the subcontractor.
Owner Controlled Insurance Program
Known as Owner Controlled or Contractor Controlled Insurance programs, the use of these 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, 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 OCIPs on every public project. Standards should be set for CIPs in Texas.
Should subcontractors continue to be bankers? It is the rare banker that will lend money at no interest. Yet subcontractors do so when retainage is withheld from their progress payments. 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.
Lien Law Reform
The Texas mechanic’s and materialman’s lien law is full of potholes for the unwary. And the unwary is oftentimes the subcontractor. A complete revamping of the Texas lien law system is in order. If the legislature will not enact a broad reform, it should at least plug some of those potholes.
School Finance and Tax Reform
In 2006, the Legislature enacted a major revision to the business franchise tax and adopted what has been called the “margins tax”. 2007 was the year the tax was in effect and this tax was paid in the spring of 2008. The impact of the tax has been very uneven but most business entities saw their taxes increase – many saw substantial increases. Service oriented businesses in particular saw big increases. TCA is working with other associations to try to make changes to the tax to make it more equitable. There will likely be several bills making changes in the tax and TCA will be working with the sponsors in support of these bills.
In 2005, the Texas Legislature struck a blow to the doctrine of sovereign immunity for local governmental entities by virtually eliminating it as a defense in contractual matters. Since then, cases have moved through the courts and findings have been detrimental to public entities. The construction industry will need to guard against erosion or repeal of this important law. The right to resolve disputes and to have a remedy to enforce a contract with a state or municipality must be maintained. In addition, we anticipate legislation being filed this session which will limit the use of the doctrine of sovereign immunity by the state and TCA will be supporting that legislation.
Contingent Payment Clauses
TCA helped pass landmark legislation in 2007 limiting the use of contingent payment clauses. The law has been in effect since September 1, 2007. TCA will be monitoring all legislation filed and opposing any legislation which makes changes detrimental to the bill passed in 2007.
Workers' Compensation Reform
Many employers are applauding the recent changes made to the workers’ compensation statutes. While the full effect of these changes has not yet been felt, it is likely that some changes to the new law will be introduced. The construction industry should be watchful for changes that might erode positive reform in the workers’ compensation system.
Alternate Delivery Systems
Currently local governmental entities and state agencies use several alternatives to traditional low-bid delivery of construction projects. The statutes governing these procedures are located in several different statures and have limited uniformity. Legislation is being proposed that consolidates the alternate delivery systems used by various local governments and state agencies for their construction projects into a single chapter of the Government Code. This provides both a greater ease of locating the applicable law as well as standardizing the various alternatives used the different entities.
School Criminal History Background Checks
During the last Session legislation was passed requiring criminal history background checks of all school employees and personnel as well as contractors with the school district and their employees who contract with the school districts. This has been interpreted by the Texas Education Agency to include subcontractors and their employees working on construction projects. Legislation is expected to further clarify who must provide criminal history checks, simplifying the process of securing the criminal history checks and limiting the necessity of duplicate checks for each school district.