By CHARLES ASHBY
CHIEFTAIN DENVER BUREAU

DENVER – Sen. Abel Tapia wants to make sure contractors get paid in a timely manner so they continue to stay in business – and continue to employ workers in these troubled economic times.

That’s why the Pueblo Democrat has introduced a bill to require property owners to promptly pay contractors for projects they’ve completed that cost more than $100,000.

And now a new Colorado State University study argues that the measure, SB95, is not only a good idea, it’s necessary to help keep construction jobs in the state.

The study, “Getting Your Money’s Worth: The Importance of Prompt Payment for the Construction Industry,” show how some contractors are unable to continue to employ workers because they’re waiting for thousands of dollars in money owed them by local governments and other property owners.

“The delay in receiving payments negatively impacts contractors’ bonding capacity, and their ability to secure future work, jeopardizing not only the contractors’ future, but also the future of their employees and their employees’ families,” the study says. Tapia said he’s carrying the bill through the Senate first – it’s already cleared its first committee and awaits a hearing in another – because his House sponsor, Rep. Jim Riesberg, D-Greeley, has tried to get it through the House for the past two years with no success.

Tapia, who’s in the process of selling his own engineering firm to his son, said it’s not uncommon for governments to wait four months or longer for them to pay their construction bills, and even make that a stipulation in construction contracts.

But he said contractors’s banks won’t consider money owed to the business as

collateral in loan applications if it is more than 90 days old, causing

contractors to not get the credit they need to move on to new construction

projects.

“My point of view from a small contractor, a small firm, in this year, in this time frame right now, you are forcing contractors that absolutely need their jobs for survival into a financial situation that could lead them to bankruptcy,” Tapia said. “In this business environment, the typical argument that, ‘If you don’t want to wait that long, don’t sign the contract’ isn’t valid because you won’t get any work at all.”

Tapia’s bill calls for prompt payments with 75 days after a final inspection is approved. He said that should be sufficient for property owners to know if the work was done properly.

He said local governments routinely try to put off those payments because they accrue more interest in their accounts.

The measure is pending before the Senate Appropriations Committee, which Tapia chairs, because the Colorado Department of Transportation and the University of Colorado say they need to hire additional workers to comply with the measure.

Tapia, however, said he doesn’t believe that’s true partly because no other state agency has made that claim.

The original article can be found on the Pueblo Chieftain website.

By David Milstead, Rocky Mountain News

Why was David Morrill, of Aurora’s Concrete Frame Associates, testifying at the Capitol about “prompt pay” legislation for contractors?

Try $7.6 million in unpaid work, out of $27.7 million in annual revenue, at the end of his last fiscal year in September.
“The current system simply does not work,” he said. “It does not pay us on time.”

He was not alone: Gary Meggison, of construction giant Weitz, said his company had $23.4 million in receivables over 31 days past their due date at Feb. 2. The firm did $285 million in business in Colorado last year, he said.

Tales like that helped sway the Senate State, Veterans, & Military Affairs Committee to send a prompt-payment bill to Appropriations on a 3-2 vote (three Democrats, two Republicans) – albeit unenthusiastically.

In doing so, the committee backed a group of general contractors and building-trades groups over a stream of public and private-sector opponents. Representatives of the Colorado Municipal League, the state’s special districts, the city of Denver and Qwest all testified against the bill.

Their message: The bill interferes with private contracts, requires a rewrite of all their legal documents, imposes new mandates on the construction industry and removes important tools for ensuring that subcontractors’ work is properly done.

Yet, they did not deny that contractors and subcontractors have ballooning receivables. “The government entities came in with their white hats, but as the other side started testifying, the hats turned a shade of gray,” said Sen. Bob Bacon, D-Fort Collins.

Not testifying, however, was one of the groups the bill was supposed to benefit: The Colorado chapter of the American Subcontractors Association.

Executive Director Debra Miller said last week that her group is withholding support for the bill because it still allowed payment terms that were too lengthy and gave contractors too much power over “retainage,” a contract provision that holds payments back until the work is deemed satisfactory.

Said Bacon, before voting in favor: “I still need to investigate whether this is prompt pay for small contractors and subcontractors.”

WHAT’S NEXT

* After passage by the Senate State, Veterans, & Military Affairs Committee, SB 09-095 heads to the Senate Appropriations Committee.

This article can be found on the Rocky Mt. News here

By Michael Gifford, posted in the Denver Post (Op-Ed):

Jump-starting Colorado’s sluggish economy through a strong focus on long-overdue public infrastructure projects is a promising priority.

From President Obama, to Governor Ritter to Mayor Hickenlooper, leaders at every level are making public projects and the thousands of jobs they will create a pillar of economic recovery plans. We applaud these efforts.

But there is a warning sign for these leaders, and for taxpayers. Without basic reforms in how government and private-sector developers pay for construction services, the result will be lost jobs and higher project costs due to slow payment to the contractors who perform the work.

It’s a serious and lingering problem. In the late 1990’s and early in this decade, contractors enjoyed getting paid, on average, within 30 to 35 days. Today that number has soared to between 52 and 90 days, depending on the contractor.

Up until now, contractors have compensated for the slow payment by raising their prices, and borrowing from banks so they could pay their employees on time while waiting for the cash to come in. But in the current economic climate, many small businesses can no longer borrow.

The result is that as Colorado gets ready to accelerate building, there will be no money left in the till to pay employees. The much hoped for increase in jobs may not come to pass.

The Associated General Contractors of Colorado (AGC) recently met with state and local leaders to express our enthusiasm for including infrastructure projects in their economic recovery plans.

We also said that it’s vital to maximize the “bang for the buck” coming out of these projects, and, without a solid promise of prompt payment, a lot of the economic potential may never be realized.

The risks of maintaining the status quo are real and substantial – and not limited to higher costs. These projects need the broadest pool of available subcontractors to ensure quality, particularly when we’re talking about transportation and building projects large and small.

Plus, our economy counts on a strong and vibrant construction industry, since we employ about 9 percent of the total private-sector workforce, with over 160,000 jobs.

A recent economic impact study showed that the construction industry generates nearly $2.5 billion for Colorado’s economy, and a $1 billion increase in construction spending in Colorado will bring 24,000 high-paying jobs to the state.

The solution is not difficult. Our industry is seeking passage of a pro-jobs bill in the Legislature that will require prompt payment for construction services performed.

It’s a common-sense measure that demands nothing more from government and our other customers than any vendor requires from average Coloradans.

Follow the terms of the contracts they have signed and pay their bills on time within a basic, established framework.

We would prefer not to have to seek this help from the Legislature, but the lack of regulation we’re suffering from today is hurting our businesses and our workers.

Our political leaders are exactly right to focus on infrastructure projects as a central way to boost Colorado’s economy. Many business leaders recognize that we have built our way out of the last few recessions.

As they begin to move from a good idea to the itty-gritty details of implementation, ensuring prompt payment for the home-grown businesses that are eager to work on these projects must be a central priority.

We know that taxpayers and our economy can benefit from these projects, and to ensure that goal, contractors need a fair shake. Nothing more; nothing less.

_______________________________________________________________________________

Michael Gifford is executive director of AGC of Colorado, a trade association representing more than 300 contractors, subcontractors, suppliers and others that complete 70 percent of commercial building in the state. EDITOR’S NOTE: This is an online-only column and has not been edited.

Click here for the article on the Denver Post.

The following interview with Taryn Edwards was posted in the Denver Post.  Taryn is focused on the economy, how it’s affecting the construction and design industry, and what projects make sense to put in place.

Q: What is your focus as president of the Associated General Contractors of Colorado?

A: I’m focused on the economy and how it’s impacting the construction and design industry.

We are working with the city and the state on stimulus packages and determining which projects we should do and how fast they should go and what the infusion of those projects would mean.

I’m focused on where we are as an industry, what projects can be kicked off, how many jobs they will create and what the tax revenue is that would be delivered to the state.

The biggest thing we’re doing is collaborating with large institutions — the city, the state, educational institutions, as well as transit. We’re trying to figure out what makes sense to put in place.

Q: How can the state consider new projects when it’s cutting its budget?

A: Every $1 spent in construction turns five times. That’s quicker than any other industry. There’s money flowing through the economy quicker.

For every $1 billion you spend, you can expect 28,000 jobs and tax revenue close to $58 million. As you cut the budget, you also have to look at the jobs you’re cutting and the income to the state. It’s a balancing act.

If there’s one industry that understands the challenges of budgets and constraints, it’s the design-construction industry.

Q: Are there any projects that should be considered?

A: There are risks to be taken. The state has always been good at taking reasonable risks, and it’s always paid off.

We were in an economic downturn when we elected to put Denver International Airport on line. When you look at DIA, it’s positioned the city of Denver and the state in the global market.

DIA is on the threshold of needing its next expansion. Do we take a risk?

Q: Are there some sectors that are doing better than others?

A: Health care is doing really well. Projects associated with green energy will keep going.

Although the federal government has slowed, we anticipate there will still be a steady flow.

The military bases are helping keep federal dollars here.

Q: What is the AGC doing to help its members deal with the downturn?

A: We’re putting on more training and education classes for our midsize to smaller members we anticipate will have problems. We’re starting to see signs that the industry is getting stressed.

Q: How does Denver compare with the rest of the country?

A: We work across the United States. The construction market has been affected but not nearly what you see on the East or West coast.

That said, we (Hensel Phelps) play in the federal government market, and our East and West coast is doing better than this market.

But if you’re in the private market, across the United States it’s depressed. Denver is faring much better than most other markets.

Q: What does the future hold?

A: We are a prime candidate to be a leader in green energy. We need to capitalize on that market. We sit in the largest wind corridor in North America.

DIA is one of the economic engines of Colorado, and right now, it’s getting ready to go into phase-two expansion.

DIA is in a prime spot to take a huge leap forward. Competing airports are going to have to buy real estate or retrofit their airports. DIA has been planned for 12 runways.

If we take a leap, we’ll end up benefiting in the next six to eight years.

Edited for length and clarity by Margaret Jackson