January 21, 2008

EDITOR'S NOTES

Factoring arrangements allow an under-capitalized contractor to improve its cash-flow and perform contracts that might otherwise be beyond its reach. The contractor sells its accounts receivable in the form of approved progress payment invoices to a finance company or "factor." The factor promptly pays the contractor a discounted amount for the receivable and the contractor assigns the full progress payment to the factor. Factoring agreements can be tricky, however. The factor relies on representations from the other party to the construction contract regarding the approved status of the progress payment invoice. What happens if a representation proves to be inaccurate? A federal appeals court was called upon to sort out the respective rights and responsibilities in this situation.

Also this week, the ASBCA instructs that a prime contractor cannot adopt a subcontractor’s certification by reference. All paperwork must be in order when the contractor submits the sub’s claim. And, a federal appeals court distinguishes between a construction change directive and a claim.

Finally, John Livengood presents the fourth article in his series on the AACEI’s recently released Recommended Practice 29R-03 – Forensic Schedule Analysis. This article addresses some of the more controversial topics in forensic schedule analysis.

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