March 2011: Legal Issues


Legal Issues

The Hidden and Not-So-Hidden Costs of Public Contracts

The current economic climate has been, to say the least, challenging for the construction industry. The number of new projects being awarded has decreased, and those projects that are being awarded come with new and sometimes unexpected costs for contractors. In an effort to overcome rising unemployment rates and budget deficits, it has become all too common for public contracts to come with “pay to play” price tags for mason contractors. Understanding some of these costs is key to maintaining a successful masonry business.

Some of the hidden costs included in public contracts are:

  1. Unexpected costs associated with supplying labor for the project
  2. Rental fees or taxes to maintain essential equipment at a construction site
  3. Time spent completing mandatory documentation to support that the contractor meets all of the special requirements required by the entity awarding the contract.

Chances are you have already had to address the following:

Project Labor Agreements. A Project Labor Agreement (PLA) is when the government awards a contract for public construction to a contractor who uses union labor. Federal law provides that contractors and their employees have the option of whether or not to unionize. For those contractors who choose not to unionize, a PLA can exponentially increase the cost for a mason contractor to bid on a public construction contract. Unless the contractor agrees in writing during the bidding process to include a collective bargaining agreement in the public construction contract and to unionize its operation, it is excluded from pursuing lucrative contracts.

Employment Agreement Programs. When bidding for municipal contracts, get familiar with any local programs designed to make a majority of your labor force for the contract consist of skilled labor in the local population. The programs ensure that qualified residents of a municipality are given primary consideration for new jobs created as a result of municipal financing and development projects.

For the mason contractor, obvious benefits and costs to bidding on a contract with an employment agreement program exist. Utilizing persons in the community where the project is to be completed means providing jobs to qualified residents and fostering good relations with the local community. The not-so-obvious costs include additional documentation required to defend compliance with the program and possible exposure to hefty monetary penalties in the event of noncompliance. Additionally, a contractor could be faced with the not-so-easy decision to suspend existing employees who may not reside in the municipality in favor of unknown persons who do reside in the community and who are direct beneficiaries of an employment agreement program.

Construction Material/Equipment Fees. A contractor cannot work on a project without using certain equipment and materials, and the costs associated with such use should be included in a bid. But what happens when the local or state government decides to impose a fee or a tax on the contractor for using the materials or equipment? It has become increasingly popular for local governments to introduce legislation that essentially charges a daily or weekly fee for contractors to have essential equipment at a construction site. Costs that were once covered under building permits are now parsed out, and contractors face weekly “rental fees” that can range in excess of hundreds – if not thousands – of dollars per week.

Get Answers. Depending upon the size of your business, the costs associated with bidding on public contracts can be overwhelming and may even be a deterrent to participating in the bidding process. If you find yourself in this position, it is worthwhile to consider becoming a member of an umbrella organization within the masonry industry. There are numerous associations throughout the United States that provide mason contractors with updates on legislative efforts that have a direct effect on contractors’ bottom lines. For example, the Mason Contractors Association of America lobbies for contractors to have successful businesses and to minimize those costs that can and do minimize your profits. If you are under deadlines to submit a bid, it is worthwhile to consult with an attorney familiar with the laws of the jurisdiction where you are attempting to do business.

Juanita Ferguson is an Associate with the law firm of Bean, Kinney & Korman in Arlington, Va. She can be reached by at or 703-525-4000.

This article is not intended to provide specific legal advice but, instead, as a general commentary regarding legal matters. You should consult with an attorney regarding your legal issues, as the advice will depend on your facts and the laws of your jurisdiction.

Related Posts

  • 41
    Construction Employment Up in 38 States and D.C. Year Over YearConstruction firms added jobs in 38 states and the District of Columbia between November 2013 and November 2014, while construction employment increased in 26 states and D.C. between October and November, according to an analysis of Labor Department data by the Associated General Contractors of…
    Tags: construction, labor, employment, contractors, associated
  • 38
    Put-in-Place Construction to Reach $1.04 Trillion in 2015 FMI, an organization offering management consulting, investment banking and people development services to the engineering and construction industry, released its 2015 U.S. Markets Construction Overview. FMI researchers predict 2014 will end with about 7 percent growth in construction put in place. This rate of growth is expected to continue…
    Tags: construction, industry, contractors, mason
  • 37
    Construction employers added 29,000 jobs in February and 321,000 over the past year, reaching the highest employment total in six years, as the sector's unemployment rate fell to an eight-year low of 10.6 percent, according to an analysis by the Associated General Contractors of America. Association officials cautioned, however, that construction jobs in the highway…
    Tags: construction, employment, contractors
  • 37
    Construction Spending Increases in OctoberConstruction spending increased in October, amid growing public-sector demand for construction and continued modest growth in residential, according to an analysis by the Associated General Contractors of America. Association officials said the new spending figures underscore the need for measures to increase the supply of qualified construction workers as firms worry…
    Tags: construction, labor, contractors, associated
  • 36
    Construction Employment Up in 37 States, D.C. in Last YearConstruction firms added jobs in 37 states and the District of Columbia between October 2013 and October 2014 while construction employment increased in 28 states and the District of Columbia between September and October, according to an analysis today of Labor Department data by the Associated…
    Tags: construction, employment, contractors, associated


Zachary Zuldema 1st Place (2nd Year) Winner Interview at the World of Concrete

Zachary Zuldema 1st Place (2nd Year) Winner Interview at the World of Concrete

Bill Dentinger 2015 Inductee MCAA Hall of Fame

Bill Dentinger 2015 Inductee MCAA Hall of Fame

John Smith, Jr.

John Smith, Jr. receives the 2015 MCAA C. DeWitt Brown Leadman Award

2015 MCAA Fastest Trowel On The Block Winner

2015 MCAA Fastest Trowel On The Block Winner

Daniel Furr 1st Place Winner

Daniel Furr 1st Place Winner (First Year), Masonry Skills Challenge

Synpro Products

Masonry Magazine Video News Interview: Michael Goyne

Hydro Mobile Inc

Interview with Kevin O'Shea of Hydro Mobile, Inc.

Interview with Mark Kemp – Chairman, MCAA

Interview with Masonry Contractors Association of America Chairman, Mark Kemp

Mortar Net Solutions

Interview with Steve Fechino from Mortar Net Solutions

Pullman Ermator

Interview with Lyndon Kelsey of Pullman Ermator

Keene Building Products

Interview with Jim O'Neill of Keene Building Products