Opponent Testimony - HB 68, Bricker & Eckler LLP (March 17, 2021)

Summary

Opponent testimony on House Bill 68 (HB 68) by Chris McCloskey, Partner, Bricker & Eckler LLP, before the House Commerce and Labor Committee, Representative Dick Stein, Chairman, dated March 17, 2021. McCloskey says the firm serves as counsel to the Ohio Hospital Association (OHA) and The Ohio Manufacturers’ Association (OMA). The testimony states that HB 68 would require owners of private construction projects to pay contractors within 30 days of a payment application, with late payments subject to an 18% interest rate plus potential attorneys’ fees and costs. It argues that private construction contracts are freely negotiated and that the bill rejects the concept of freedom of contract.

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BEFORE THE HOUSE COMMERCE AND LABOR COMMITTEE
      REPRESENTATIVE DICK STEIN, CHAIRMAN

                  TESTIMONY
                     OF
              CHRIS MCCLOSKEY
        PARTNER, BRICKER & ECKLER LLP

                MARCH 17, 2021
Mr. Chairman and members of the House Commerce and Labor Committee, my name
is Chris McCloskey. I practice with the law firm of Bricker &Eckler, where I chair the
firm’s Public Sector Industry Group and am a partner in its Construction Law Group as
well. Our firm works with and serves as counsel to both the Ohio Hospital Association
(OHA) and The Ohio Manufacturers’ Association (OMA).

Established in 1915, OHA is the nation’s first state-level hospital association. OHA
exists to collaborate with member hospitals and health systems to ensure a healthy
Ohio. OHA currently represents 240 hospitals and 14 health systems throughout Ohio.

The OMA was created in 1910 to advocate for Ohio’s manufacturers; today, it has
nearly 1,300 members. Its mission is to protect and grow Ohio manufacturing.

Thank you for the opportunity to provide opponent testimony on House Bill 68 (HB 68).
We also appreciate the conversations and discussions we have had over the past week
with both the sponsors and proponents of the legislation. It is our hope that a practical
solution to our concerns can be found.

HB 68 would require that the owners of private construction projects -- including
manufacturers and health care operators that are building, improving, or maintaining
facilities in Ohio -- to pay contractors within 30 days of receiving an application for
payment from the contractor or, if there is a process of certification of a payment
application by a design professional, within 30 days after the payment application has
been certified, whichever is later. HB 68 also contains provisions wherein late payments
would be subject to a punitive 18% interest rate plus potential attorneys’ fees and costs.

One of the pillars of a free-market economy is freedom of contract. Virtually every
private construction contract is a freely negotiated agreement that sets forth the
payment terms in detail and sets agreed upon consequences for late payment or failure
to pay, typically with reasonable interest rates and/or other penalties. We are not aware
of systemic late payments coming from manufacturing or health care projects, and thus
do not understand the conditions for this proposed legislation. Our members seek to
have their facilities up and running as soon as possible and cannot risk the delays that
come with late or missed payments to contractors. Furthermore, an owner who fails to
timely pay a prime contractor risks having subcontractors walk off the job because of
the inability of the prime contractor to pay them, and the prime contractor also has the
ability to file a mechanic’s lien against the property for failure to pay. Both of these
possibilities are strong incentives for an owner to timely pay a contractor according to
the terms of their negotiated agreement. To impose the onerous requirements set forth
in HB 68 on all owners because of anecdotal stories of late payments, with no



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substantial body of data to support a systemic payment problem, is an unnecessary
intrusion into private contracts between two sophisticated parties.

HB 68 allows the state to step in and set the terms of a contract with a potential windfall
to one of the parties at the expense of the other. The provisions contained in the bill are
far from industry standards negotiated today in both terms of time allowed to pay and
the amount of penalties.

The OMA’s and OHA’s members negotiate and engage in countless contracts every
year. They have embedded processes to comply with the terms of each contract
whether that is for the construction of a new facility, the purchase of life-saving medical
equipment, or supplying manufactured parts to an OEM. HB 68 rejects the concept of
freedom of contract which has governed the majority of private transactions in this state
and substitutes a state-sponsored version with terms and penalties much more punitive
– and we would argue unnecessarily so -- than what exists in the marketplace.

We appreciate the opportunity to share our concerns with the bill as drafted and look
forward to continuing our dialogue with the bill sponsors and the committee. Thank you.
I would be happy to try to answer any questions.




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