Proponent Testimony - House Bill 68, Tom Shreves, National Electrical Contractors Association

Summary

Proponent testimony on House Bill 68 by Tom Shreves, Executive Director of the Greater Cleveland Chapter of the National Electrical Contractors Association (NECA), addressed to the House Commerce and Labor Committee. The testimony says HB 68 closes a gap in Ohio's prompt pay statutes by requiring prompt payment between private owners of construction projects and their general contractors. It says delays in payment put small and medium sized contractors at risk on payroll and materials. It also addresses retainage, saying retainage typically amounts to 8-10% of the total contract and that HB 68 does not address it.

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                             House Bill 68
                        Proponent Testimony
              National Electrical Contractors Association

Chairman Stein, Vice Chair Johnson, Ranking Member Lepore-Hagan
and members of the House Commerce and Labor Committee:

My name is Tom Shreves and I am Executive Director of the Greater
Cleveland Chapter of the National Electrical Contractors Association
(NECA). NECA represents closed-shop, union electrical contractors
throughout the country. Our members are subcontractors who
perform primarily commercial and industrial work. We are small
businessmen and women who install electrical systems in everything
from schools, to sports stadiums to the Statehouse. NECA is proud to
support HB 68 and thanks Representatives Cross and Sweeney for their
introduction of this important bill.

As was discussed extensively in sponsor testimony, HB 68 closes a gap
in Ohio’s prompt pay statutes to require prompt payment between
private owners of construction projects and their general contractors.
State law already addresses payments between general contractors,
their subcontractors and lower tier subcontractors on private work, and
already addresses payments at every level of public work. Thus,
arguments that this is somehow an intrusion of government into
private business ring hollow, as statutes already exist to address
prompt pay in other situations.

The need for this legislation is fairly self-evident. Contractors need to
be paid for the work they have completed. What might surprise you,
however, is to know what a low margin business construction is. Any
delay in payment puts most small and even medium sized contractors
at significant risk to meet basic business expenses like payroll and
materials. Perhaps equally significant is its impact on future jobs.
Estimating and bidding construction projects is a time consuming and
expensive proposition. With money being withheld for work that has
been completed, contractors find themselves with little resources to
pursue their next project. In that regard, HB 68 is really about
economic development, and keeping contractors bidding on new work,
and maintaining their workforce.

One final issue I would like to address in retainage, which came up
during questions and answers with the sponsors. First, to clarify,
retainage is a legally required withholding of a portion of a contractors
money by a higher tiered contractor. Typically, retainage amounts to 8-
10% of the total contract. Ostensibly, the money is held to assure that
a project, or part of a project, has been completed before being
released, although one could argue that bonding requirements and
insurance already offer these protections.

Retainage and prompt pay are very closely related, but are in fact,
separate issues. HB 68 does not address retainage although in the past
20 years several pieces of legislation have been debated in the
legislature that would. Abuses of retainage are every bit at frequent as
those being corrected in HB 68, perhaps even more frequent. As
discussed above 8-10% of a job represents multiple times what the
profit amounts to, so any delay in the release of retainage puts
contractors at significant risk and creates the same problems that HB
68 addresses. I would be happy to share more information with the
committee about how issues around retainage could be simply and
easily resolved.

Mr. Chairman this concludes my remarks. Thank you for the
opportunity to offer testimony on behalf of NECA.


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