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Contractors performing work in California are required to be licensed by the California State License Board (“CSLB”).  Cal. Bus. & Prof. Code §7065.  Except for sole proprietors, contractors are typically licensed through “qualifiers,” i.e., officers or employees who take a licensing exam and meet other requirements to become licensed on behalf of the contractor’s company.  Contractors who perform work in California without being properly licensed are subject to a world of hurt, including civil and criminal penalties (see, e.g., Cal. Bus. & Prof. Code §§ 7028, 7028.6, 7028.7, 7117, and Cal. Labor Code §§ 1020-1022), and the inability to maintain a lawsuit to recover compensation for their work.  Cal. Bus & Prof. Code § 7031(a); Hydra Tech Systems Ltd. v. Oasis Water Park, 52 Cal.3rd 988 (1991).
Continue Reading Landmark Contractor Licensing Case Limits Disgorgement Remedy in California

A recent California case may force engineering, procurement and construction companies doing business with foreign suppliers to reconsider—and maybe rewrite—their contracts. In Rockefeller Technology Investments (Asia) VII v. Changzhou SinoType Technology Co., Ltd., the California Court of Appeal held that parties may not contract around the formal service requirements of the Convention on the Service Abroad of Judicial and Extrajudicial Documents, commonly referred to as the Hague Service Convention. The decision could have profound implications for international business.
Continue Reading EPC Contractors Procuring from Foreign Companies need to Reconsider their Contracts

Contractors may benefit in making a small equity investment in the projects they construct. The financial benefit can arise from the investment itself and from improved understanding and communication with the owner during construction itself.

In the past, it was not unusual for construction companies to make small equity investments in the projects they worked on. For example, a construction company building a power plant would take a 5% equity interest in the project. By taking a financial stake in the project, contractors planned to protect their business interest in the project. That was the theory, anyway. Many of these investments did not provide the good returns; often-times the return was negative. While the construction company’s management was great at operating the construction business, it was not so great when it came to the financing business. So the idea went out of fashion.
Continue Reading Contractors May Benefit by Taking Equity in the Project They are Constructing

In 2009, the California legislature amended Section 143 of the Streets and Highways Code and greatly expanded availability of the public-private partnership (“P3”) as a mechanism to finance transportation infrastructure projects. In early 2010, under the authority of the newly amended Section 143, the California Department of Transportation (“CalTrans”) began to implement part of the Presidio Parkway Project (“Project”) as a P3.
Continue Reading Public Private Partnership Upheld For Construction of Presidio Parkway

By Edward B. Lozowicki and Bram Hanono

Dillingham-Ray Wilson v. City of Los Angeles, 182 Cal.App.4th 1396 (opinion modified by 106 Cal.Rptr.3d 691, (April 16, 2010, No. B192900))

In Dillingham-Ray Wilson v. City of Los Angeles, the California Court of Appeal signaled its holding in the first sentence of its opinion: "The City of Los Angeles (City) obtained millions of dollars worth of construction work that it does not want to pay for." The City argued it was absolved of any obligation to pay the contractor, Dillingham-Ray Wilson (DRW), pursuant to Public Contracts Code sections 7105 and 7107 and Amelco Electric v. City of Thousand Oaks (2002) 27 Cal.4th 228 on the theory that they dictate a method of proving contract damages, a method DRW said was impossible under the circumstances. The Court disagreed because "section 7107 [sic] and Amelco impact the measure of damages, not the method of proving them . . . ." The Court also held that the modified total cost method of proving damages is permissible in California.
 Continue Reading Modified Total Cost Method of Proving Damages: Approved For California Public Works

By Edward B. Lozowicki

As residential and commercial construction markets evaporate and contractors fight for survival, new opportunities are appearing in the form of public infrastructure projects. The federal government is pouring money into public infrastructure and construction projects, to the tune of about $143 billion in total. Of that total, about $14 billion is designated for the California market. In addition, the State continues to fund projects from Proposition 1B and 1C bonds, and gas tax revenues. Much of the money will fund infrastructure projects awarded by the state and local government agencies. These new opportunities, however, come with new risks. One such risk is a general contractor’s liability for its subcontractors’ unpaid or under-paid employees on public infrastructure projects.
 Continue Reading General Contractors’ Liability to Subcontractors’ Employees On Public Infrastructure Projects

By Edward B. Lozowicki

California has enacted a new law, Senate Bill 593, which prohibits CalTrans from withholding retention from progress payments to contractors on transportation projects. CalTrans has implemented this law by changing its Standard Specifications to delete the customary retention requirement. The official announcement from CalTrans states:Continue Reading New California Law Prohibits Retention on CalTrans Transportation Projects