In the News

April 15, 2021

 

NACM Members Testify Against Proposed
Mechanic’s Lien Changes in Texas

 

Bryan Mason, editorial associate

NACM Southwest members testified last week against proposed legislation that would change mechanic’s lien notice requirements and deadlines in Texas during a recent Business and Industry Committee hearing of the Texas House of Representatives.

Although HB2237, sponsored by Rep. Dustin Burrows and Rep. Joe Deshotel (D), aims to simplify and modernize lien procedures, material suppliers who spoke out against the bill argued some of the changes will negatively affect their efforts to get paid.

Of greatest concern is the section that eliminates the subcontractors’ and material suppliers’ second-month notice to the original contractor. The notice is currently due the 15th day of the second month that follows the month in which work was performed or material was furnished.

“We utilize that second notice as a lever, as a tool to be able to collect the funds that we need to help keep our cash flow,” said Jim Davis, director of SSC credit and collections at Lehigh Hanson. Davis said his company sends about 200 email reminders a month that let contractors know the company will be sending a second-month notice. The email reminders alone trigger about 75% of the outstanding funds being paid, he noted.

After the second notice is sent, Davis stated that the company receives 85% to 90% of total funds owed. Kim Lancaster, CCE, CICP and corporate credit manager of Standard Supply, shared similar experiences. In the past six months, Standard Supply has collected $1.4 million just by sending the notice, Lancaster said.

NACM Southwest members further testified that the second-month notice protects the flow of business.

“Our mechanism to help our company with our cash flow and to be able to sell some of these smaller, higher risk companies is our ability to be able to send that second-month notice,” said Heather Kimmel, financial services manager at WESCO Distribution.

Kimmel explained that WESCO supports many different segments of business and sells to all levels of contractual chains. So many companies rely on the security of that second notice, she said.

During the hearing, Burrows defended his bill and stated it was not his intent to take away the right of suppliers and others to send the second-month notice.

Randall Lindley, a partner with Bell Nunally, testified as counsel for NACM Southwest. Lindley acknowledged that the bill clears up some inconsistencies, but he reiterated that the second-month notice is a useful mechanism. In addition to supporting collection efforts, it “promotes construction in Texas” because suppliers know they can rely on the notice, which helps them in their credit worthiness decisions, Lindley added.

The second-month notice also provides creditors with “the authority of law,” he stated. If it were removed, users of the notice may run into tortious interference claims from general contractors, which would damage relationships throughout the entire chain.

Lindley also argued that a longer lull between notices would slowdown the time in which suppliers get paid and will inevitably result in more liens being filed.

Of the 17 attendees who spoke at the hearing, only three speakers spoke in favor of the bill. In their arguments, they claimed that this bill simplifies and modernizes current law to better support the construction industry.

As of Thursday morning, the bill is still in committee. See the April 1 eNews for more information on HB2237.

 

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Infrastructure and Buy American

 

Chris Kuehl, Ph.D., NACM economist

For the most obvious reasons, there is always an attempt to cram as much as possible into legislative and political initiatives. In the first place, there are not unlimited opportunities to bring these plans forth, but it is also important to load these efforts with what amount to negotiating chips—sections that can be jettisoned during the back and forth of politics.

President Joe Biden’s plan has about $621 billion for “traditional” infrastructures such as roads, bridges and airports. There is also $561 billion for “green” building and housing, $400 billion for elderly care, $480 for manufacturing and $200 billion to expand broadband. One aspect of the entire plan, however, is creating some consternation and confusion: the “Buy American” provision.

People are not opposed to the notion of buying American; it is just hard to determine what that actually means. Years ago, the United States signed onto an agreement called the GPA (Government Procurement Authority), and there are 20 nations that are part of this agreement. The GPA allows the United States to issue waivers to companies whose nations are signatories, which means these companies can engage with government procurement. However, several of the more left leaning U.S. senators want these waivers denied across the board, thereby forcing all procurement to go to U.S. companies.

While denying waivers would have some advantages for the Buy American effort, doing so would also guarantee that many of the procurements would be far more expensive. This would also create tension with U.S. trade partners. Most of these trade partners have signaled that they would quit the GPA system if the United States starts denying waivers, and that would mean U.S. companies would lose the opportunity to supply these nations. The bottom line is that the United States stands to lose far more than it would gain by abandoning this commitment.

 

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March Total Bankruptcy Filings Increase 39%
from Previous Month

 

American Bankruptcy Institute

The total 43,425 bankruptcy filings for March represented a 39% increase over the 31,221 filings during the previous month of February, according to data provided by Epiq. The 2,275 total commercial filings in March represented a 16% increase from the 1,965 total commercial filings during the previous month. Commercial Chapter 11 filings decreased 9% in March to 384 from the 420 commercial Chapter 11 filings in February.

President Joe Biden on March 27 signed the “COVID-19 Bankruptcy Relief Extension Act” into law to extend provisions providing financially distressed consumers and small businesses greater access to bankruptcy relief. The legislation will extend personal and small business bankruptcy-relief provisions that were part of last year's CARES Act through March 2022. Some of the key provisions of last year's relief packages were the increased debt limit to $7.5 million for small business debtors electing to file under Subchapter V and allowing individuals to seek COVID-19–related hardship modifications, among other changes.

Key bankruptcy provisions extended to 2022 by the COVID-19 Bankruptcy Relief Extension Act include:

  • The increased eligibility threshold of the Small Business Reorganization Act of 2019 (SBRA) for businesses filing under Subchapter V of Chapter 11 of the U.S. Bankruptcy Code from $2,725,625 of debt to $7,500,000.
  • Amending the definition of “income” in the Bankruptcy Code for chapters 7 and 13 to exclude coronavirus-related payments from the federal government from being treated as “income” for purposes of filing bankruptcy.
  • Clarifying that the calculation of disposable income for purposes of confirming a Chapter 13 plan shall not include coronavirus-related payments.
  • Explicitly permitting individuals and families currently in Chapter 13 to seek payment plan modifications if they are experiencing a material financial hardship due to the coronavirus pandemic, including extending their payments for up to seven years after their initial plan payment was due.

For the first calendar quarter of 2021 (Jan. 1-March 31), the 106,958 total bankruptcy filings represented a 40% decrease from the 177,246 total filings during the same period last year at the start of the pandemic (filings started showing their largest decreases due to the pandemic in the second calendar quarter of 2020). Total overall commercial bankruptcies decreased 36% in the first quarter of 2021, as the 6,289 filings were down from the 9,870 commercial filings during the first quarter of 2020. Total commercial Chapter 11 filings dipped 25% to 1,283 during the first calendar quarter of 2021 from the 1,709 total commercial Chapter 11s during the same period in 2020.

 

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The 5 Most Effective Tactics
for Building Cross-Functional Teams

 

Joel Garfinkle, Garfinkle Executive Coaching

 

“Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to attain uncommon results.” — Andrew Carnegie

David had realized that departments in his company functioned as silos. Information was getting trapped rather than shared; the way communication was supposed to flow was unclear. Building relationships across departments would be a great way to expand his influence, his mentor told him.

“Influence isn’t just about leveraging authority,” she said. “It’s about building relationships that make people want to listen to your ideas, and not just with people in your department. This means building cross-functional relationships with people working throughout the organization, in a range of departments and levels of hierarchy. You might not work with them closely, but you all depend on each other.”

Understand what they do.

Learn about the functions of other areas of your organization, and why they’re important. Have one-on-one conversations with key players in other organizational areas to ask them about what they do. Then, help them understand your own department’s focus in turn. This knowledge will position you to serve as a bridge between departments, conveying the responsibilities of other organizational areas to the people with whom you work closely. Understanding one another’s roles will build respect and encourage collaboration where appropriate. Plus, understanding the path of the workflow through the company will give you a bird’s eye view of its operations, preparing you to advance in the organizational hierarchy.

Learn about their goals and objectives.

A key component of building cross-functional teams is learning the goals and objectives of other organizational areas. Ask key players in other departments what they’re working toward. Share your own goals and objectives as well. When you understand what they wish to achieve, you’ll see how they fit into the company’s vision more clearly. You’ll also know how you can support each other in achieving your departmental goals.

Celebrate their accomplishments.

When you hear of another department’s success in an endeavor, congratulate the people with whom you’re cultivating relationships and share your appreciation. Make sure your own people know about the success as well. Send an email saying that your whole department is excited to hear about the success, or pick up the phone and make a quick call. Acknowledgement and gratitude play a huge role in building strong relationships.

Establish strong communication channels.

Work to pinpoint how communication could improve between departments or levels of hierarchy. Talk with the people you’re building relationships with to get their perspective. Improving your communication skills might mean making sure people in your department knows how it’s supposed to flow, or setting up new guidelines. Getting everyone on the same page about how to communicate will go a long way toward strengthening relationships.

Ask what they need.

Positioning yourself as someone who helps others get what they need to get the job done will make them see you as a leader. They’ll see you as the best person in your department to reach out to when they have something to discuss. Besides, in a world where people are used to others making demands of them, being asked about their own needs is a breath of fresh air. They’ll appreciate the sentiment greatly.

Working to build cross-functional working relationships will show you’re serious about leadership, as creating open communication channels is a vital part of active leadership. Plus, it will build your knowledge of the whole organization, priming you for advancement. David found himself gaining respect from higher level executives as he worked to build these relationships. Eventually, he was promoted to a higher level of management, and his strong knowledge of the different areas of the organization had positioned him to succeed in this role.

Joel Garfinkle works with companies throughout the U.S. and around the world as an executive coach and is a subject matter expert on leadership development.

 

 

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