Owners and developers building in California must be aware of a new statute, CA Civil Code § 8850, which takes effect for contracts entered into, on, and after January 1, 2026. The statute will likely apply to most private construction projects; however, a carve-out exists for residential projects that are not mixed use and are four stories or less.

When a contractor—or, with proper authorization, a subcontractor—submits a claim related to payment, time extensions, damages, or change orders (encompassing the majority of construction disputes), the owner must provide a written response within 30 days. This response must clearly state which portions of the claim are disputed and which are not. The owner has 60 days from the date of its response to issue payment for those undisputed amounts. Late payments will accrue interest at a rate of two percent per month.

Should a dispute remain after the initial response—or if the owner does not provide a response within the 30-day period—the contractor can request an informal “meet and confer” to attempt to settle the issue. The owner must schedule this conference within 30 days of the request. If the dispute continues to be unresolved after the conference, the owner must deliver another written statement within 10 business days identifying the disputed and undisputed issues. From there, any outstanding disputes must be submitted to nonbinding mediation, with both parties splitting the cost. If the parties cannot agree on a mediator within 10 business days, the contractor may independently choose the mediator. If mediation fails, the remaining disputes follow the dispute resolution procedures outlined in the contract.

Most owner-friendly construction agreements include language that requires a contractor to continue to work throughout the dispute resolution process. Under this new law, contractors and subcontractors may suspend work after following proper notice procedures, if payment is not received as required under the law.

Unlike some construction statutes which allow parties to waive their substantive rights by contract, such leeway is not allowed in California. Any attempt to waive these statutory rights and responsibilities is considered void and against public policy. While the parties can agree on alternative claim and dispute resolution procedures, such arrangements cannot undermine the minimum standards and deadlines mandated by the statute.

In summary, § 8850 requires private construction project owners in California to respond quickly and transparently to contractor claims, process undisputed payments without delay, and participate in a clearly structured dispute resolution process. Multi-state owners and developers building in California in 2026 should adjust their form construction contracts accordingly.

Lump sum construction agreements are the most basic of the different design-bid-build options: the contractor agrees to complete the entire scope of work for a fixed price, and assumes most of the quantity and cost risks. If the contractor’s actual costs exceed its estimates, the contractor absorbs the loss. Adding a clause into the construction agreement that allows unit quantities to increase or decrease based on actual job quantities creates a mechanism that can reduce the risk of estimating, but it is a clause that should be carefully drafted and closely guarded.

There are times when it makes sense for parties to deviate from their lump sum agreement and allow for greater flexibility: when there are uncertainties in site conditions or scope, and/or to reduce disputes over changed conditions. The parties can introduce elements of unit-price contracts into the lump sum framework, either choosing to shift the risk entirely to one party or the other, or sharing the risk, e.g., by including an equitable adjustment clause that allows for a price adjustment if the variation exceeds a certain threshold. Even with that balance, incorporating opportunities for adjustments can favor more than just the contractor: it creates a disincentive for the contractor to inflate unit prices to hedge against quantity risks.

Like with any other construction contract, though, if certain items are not thoroughly addressed, it can raise doubts about the resultant risk allocation, breeding an environment ripe for dispute – especially when the quantity differential adds up. This was the case in the conflict giving rise to the action, Providence Construction Corp. v. Silverite Construction Company Inc. et al, 239 A.D.3d 551 (1st Dep’t June 24, 2025).

Plaintiff Providence Construction Corp. subcontracted with defendant Silverite, a general contractor, to perform masonry work on the construction of the Mother Clara Hale Bus Depot, a public infrastructure project for The Metropolitan Transit Authority, acting by The New York City Transit Authority. Providence’s subcontract specified a lump sum payment for furnishing and installing concrete blocks, i.e., concrete masonry units a/k/a “CMU”s, subject to adjustments based on actual job quantities.

During the project’s progression, the parties entered into a change order increasing the quantity of blocks and adjusting the lump sum price to $7,108,873.80. Silverite later noticed, however, discrepancies in its records of the CMUs installed versus those records of Providence. Silverlite paid $5,968,592.01 towards the lump sum price, and withheld payment of $1,140,281.79 on the final three applications.

Providence sued for the difference, and Silverite counterclaimed for $500,000 in damages, alleging overbilling, defective work, delays, and failure to pay vendors. Silverite also filed a third-party complaint against the surety from which Providence procured payment and performance bonds.

Providence moved for summary judgment on liability on its breach of contract claim, to dismiss Silverlite’s counterclaim and to dismiss Silverlite’s third-party complaint. The Supreme Court denied summary judgment in its entirety, and Providence appealed.

The Appellate Division affirmed those portions of the Supreme Court’s decision that denied Providence summary judgment on liability and to dismiss Silverlite’s counterclaim. The Court appreciated that “a fair reading of the subcontract terms as a whole provide for a lump sum payment based upon an estimate of the total number of concrete blocks ‘to be installed’ by plaintiff, and to the extent the actual number installed by plaintiff varied from the ‘estimates,’ the lump sum payment would be adjusted accordingly.” The Court identified issues of fact regarding the actual number of blocks installed and the value of the lump sum price, finding that although Providence had satisfied its burden as a movant by submitting documentary proof in the form of the subcontract and its riders, written correspondences, deposition testimony, and daily business records, Silverite produced credible controverting evidence with its own affidavits and documentary evidence. Most notably, Silverite submitted its expert’s opinion accompanied by architectural drawings, photographs, records kept as to the progress of installation, and the expert’s proprietary 3–D imaging technology showing a different quantity of CMUs that Providence installed. Responding to Providence’s protestations, the Appellate Division stated: “Plaintiff’s arguments that the expert’s methods of computing the number of CMUs laid differed from its own and failed to adequately take into account openings in the building’s interior walls go to the weight and not the admissibility of the expert’s opinion.”

The Court reversed, however, that part of the Supreme Court’s decision that declined to dismiss Silverite’s third-party complaint against Providence’s surety. The Court found that Silverite did not have an interest as a claimant or obligee under the payment and performance bonds because Silverite could not show that it had satisfied the bonds’ default and notice conditions so as to trigger an expectation of coverage.

The Providence decision is an unusual and remarkable public source of constructive takeaways from a construction contract dispute. Putting aside the separate lesson about whether and when a general contractor has a viable claim against a subcontractor’s bond and how to make a proper claim, the decision reflects not only the role of modern technology in fact-dispute resolution, but also how the parties’ subcontract could have been drafted better to avoid their conflict.

From the beginning, the parties agreed that it was uncertain how many concrete blocks would be needed to construct the bus depot. Rather than unfairly place the entire risk on the subcontractor, the parties allowed for a deviation from the then-estimate (of 191,477 total square feet of glazed and regular CMUs combined) and to compensate the subcontractor accordingly. It seems, however, that the subcontract may have lacked a clear mechanism for verifying the final quantities needed from which the subcontractor’s payments would be adjusted. That these parties appeared to use entirely separate verification methods is unfortunate: their agreement could have required the subcontractor to maintain and submit detailed daily logs, installation records, and supporting documentation with each payment application. Their agreement also could have specified acceptable methods of verification, whether the advanced 3D imaging used by the general contractor, or basic field measurements and sampling. Further, their agreement could have included a clause requiring joint measurement or third-party verification of installed quantities at the time of different sections’ completion and prior to finalizing progress payment applications, as well as a clear process for resolving disagreements over quantities or payment, including timelines and escalation procedures.

In sum, on any subject important to a construction contract and particularly one necessary to trigger payment, it is better to include as much specificity as possible and offer parties a path forward in the event of uncertainty – rather than a fertile battlefield that ultimately is favorable to neither.

Last week, as a result of the federal government shutdown, news outlets reported on a pause in processing project reimbursements for the massive bi-state Hudson Tunnel Gateway Program and New York City’s Second Avenue Subway line. Beyond the political finger-pointing and investigation into the pause’s impact (the billions of dollars already appropriated remain untouched) is the federal Department of Transportation’s publication, also last week, of its interim final rule (“IFR”) Docket No. DOT–OST–2025–0897. Effective October 3, 2025, this IFR removes from its regulations at 49 C.F.R. Parts 23 and 26 race and gender-based presumptions of social and economic disadvantage from DOT’s regulations governing its Disadvantaged Business Enterprise (DBE) and Airport Concession Disadvantaged Business Enterprise (ACDBE) programs. In doing so, it replaces terms like “race-neutral/race-conscious” with “DBE-neutral/DBE-conscious” frameworks, and adds new sections (§§ 23.81 and 26.111) that require each Unified Certification Program (UCP), i.e., each state’s agency that sets the criteria for firms seeking DBE/ACDBE certification, to reevaluate any currently certified DBE, to recertify any DBE that meets the new certification standards, and to decertify any DBE that does not meet the new certification standards or fails to provide additional information required for submission under the new certification standards.

There have been strong reactions to not just the substance of DOT’s rule, but to the agency’s issuance of a rule without first seeking public comment. Although the federal Administrative Procedure Act does generally require agencies to provide the public with notice of proposed rulemaking and an opportunity to comment prior to publication of a substantive rule, it contains exceptions. For example, 5 U.S.C. § 553(b)(B) authorizes agencies to publish a final rule without first seeking public comment on a proposed rule “when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”

In its IFR, DOT explains that it was constrained to determine that race- and sex-based presumptions of the DBE and ACDBE programs violate the U.S. Constitution in light of:

  • The September 23, 2024, decision of the U.S. District Court for the Eastern District of Kentucky (Mid-America Milling Co., LLC v. U.S. Department of Transportation, et al., No. 3:23-cv-72-GFVT, previously discussed) determining that the DBE program’s statutory race- and sex-based presumptions likely do not comply with the Constitution’s promise of equal protection under the law, and issuing a preliminary injunction that prohibits DOT from mandating the use of presumptions with respect to its contracts; 
  • The President’s three Executive Orders: Executive Order 14151, Ending Radical and Wasteful Government DEI Programs and Preferencing, January 20, 2025; Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity, January 21, 2025; and Executive Order 14219, Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative, February 19, 2025; and 
  • The U.S. Attorney General’s March 21, 2025, memorandum directing all Federal agencies to implement these Executive Orders. 

Without this IFR, DOT explained, its own regulations would continue to require funding recipients to apply those very same presumptions, thus rendering “impracticable and contrary to the public interest a confusing and contradictory situation to continue during a notice-and-comment process.” Further, DOT added, notice-and-comment is unnecessary where a regulatory action is required as a matter of law to ensure consistency with rulings of the United States Supreme Court, which in this instance include Students for Fair Admissions, Inc. v. Harvard, 600 U.S. 181 (2023) (previously discussed).

As for eliminating the presumption that individuals from certain racial or gender groups are “socially disadvantaged,” DOT explained that its small business initiatives were always “intended to level the playing field for businesses seeking to participate in federally assisted contracts and in airport concessions,” and yet:

Although the Programs aim to assist small businesses owned and controlled by “socially and economically disadvantaged individuals,” Congress has mandated by statute that DOT treat certain individuals—women and members of certain racial and ethnic groups—as “presumed” to be disadvantaged. Other individuals do not benefit from that statutory presumption. This means that two similarly situated small business owners may face different standards for entering the program, based solely on their race, ethnicity, or sex.

* * *

[T]here is not a strong basis in evidence that the race- and sex-based presumptions used by the DBE and ACDBE programs are necessary to support a compelling governmental interest, and the presumptions are not narrowly tailored (both of which are necessary to comply with the Constitution). The government has no compelling justification for engaging in overt race or sex discrimination in the awarding of contracts in the absence of clear and individualized evidence that the award is needed to redress the economic effects of actual previous discrimination suffered by the awardee.

Thus, through the IFR, DOT is implementing amendments that “center the DBE program’s purpose of leveling the playing field for businesses owned and controlled by socially and economically disadvantaged individuals while providing excellent service to the American people.”

DOT’s new standard for qualifying as a DBE or ACDBE will be determined on a case-by-case basis: in addition to the already-required personal net worth statement, applicants (and existing certified firms) must now submit a Personal Narrative (PN) that details specific instances of hardship, systemic barriers, or denied opportunities, and explain how those impediments caused economic harm relative to similarly situated non-disadvantaged individuals. The states’ UCPs shall use this standard in reevaluating all currently certified DBE/ACDBE firms and must suspend goals and “counting” DBE/ACDBE participation toward overall goals until re-certification is complete.

There are number of practical consequences not addressed by the IFR. In the midst of the frenzy of currently qualifying firms assembling supporting evidence to accompany their PNs, states’ UCPs will need, first, an objective set of criteria by which to determine “socially and economically disadvantaged,” and second, the staffing to sort through the submissions in what will necessarily be a more rigorous review. Government agencies using DOT funds may be halted in their public procurement pending their establishment of new goals and certification of qualifying firms. General contractors completing projects using DOT funds and dependent on currently qualifying subcontractors to meet their DBE/ACDBE goals may be unable to close out that portion of their compliance, slowing down payment. And it is almost a foregone conclusion that the pending uncertainty will engender a wave of bid protests and appeals regarding DOT-funded projects that, it seems, presently cannot be resolved.

The IFR does acknowledge that “[s]everal provisions may lead to increased or decreased burdens for applicants, certifying agencies, and recipients related to transitional documentation requirements, the degree of technical rigor in disparity studies, and changes in program reporting.” It does not deny that there will be quantified costs as well, projected to be $95 million, although noting they will be “transitional and one-time, … with recurring annualized burdens of about $1.8 million.”

The UCPs, directly affected firms, and prospective new applicants will likely need DOT to offer guidance, training, and resources for administering the new rules and attainment of the new evidentiary standard. This is a big ask even in times where there is no government shutdown. In the meantime, small firms should consider specific historic, personal examples of disadvantageous environments and perceived deprivation of opportunities when formulating their PNs. The burden of proof may not ultimately be that high, especially where there are UCPs inclined to award certifications. Plus, there may be more open doors to newly qualifying firms, creating more options for general contractors in their bidding and project progression, perhaps lowering overall bids, with reverberating benefits to the general public.

Claims against design professionals often pose unique challenges when such claims are dually rooted in both tort and contract theories, and therefore subject to competing time limitations. To reconcile these differences, Massachusetts courts have historically looked to the “gist” of a given claim, rather than the label, to assess the appropriate limitations. A determination that the “gist” of a claim lies in tort will subject that claim to a shorter statute of limitations, as well as the statute of repose, which bars tort claims arising out of construction projects brought more than six years after the project is either completed or open for use.

The Massachusetts Supreme Judicial Court (SJC) recently addressed the statute of repose in this context in Trustees of Boston University v. Clough Harbour & Associates LLP. Docket No. SJC-13685 (Mass. Apr. 16, 2025). There, the SJC held that the six-year time limitation set forth in the tort statute of repose, Mass. Gen. Laws c. 260, § 2B, did not apply to bar a contractual indemnification claim for damages allegedly caused by an architect’s negligence. The decision arose out of a dispute concerning alleged defects in the design and construction of a brand-new synthetic turf athletic field on Boston University’s campus. In 2012, the university entered into a contract with the architect for design and construction administration services, which included an indemnification provision, providing that the architect would indemnify the university for any and all expenses caused by the architect’s negligence. The work was completed, and the field opened for use in the summer of 2013.

After experiencing numerous problems with the field after opening, the university demanded indemnification from the architect for costs spent remedying the issues pursuant to the parties’ contract. The architect refused, and well over six years after the field opened, the university sued for contractual indemnification. The architect was ultimately granted summary judgment by the Superior Court, which reasoned that because the indemnification obligation was contingent on the architect’s negligence, the gist of the claim was actually rooted in tort and therefore time barred by the statute of repose. The university appealed, arguing that its indemnification claim was based on distinct, express contractual obligations specifically negotiated and agreed to by the parties, and therefore did not fall under the ambit of the statute of repose.

The SJC agreed with the university. In resolving the question, the SJC noted that a key distinction between actions of contract versus those of tort is that contract actions are based on express promises set by the parties, as opposed to tort standards imposed by law. Thus, notwithstanding the parties’ decision to incorporate the negligence standard into the indemnity provision, the indemnification obligation still represented a distinct contractual promise, the breach of which requires a different showing than for negligence. With its findings, the SJC reversed the lower court and restored the contractual indemnification claim thus underscoring the importance of contractual indemnification clauses in managing project risk.

Although the SJC’s decision is generally consistent with a “gist of the claim” evaluation, it nevertheless suggests a departure from prior applications that may pose far-reaching effects for the construction industry moving forward. Though the Court found that the university’s indemnification claim was not barred by the statute of repose, it also confirmed that, for an owner to prevail on its claim, it must show, amongst other things, the occurrence of an event triggering the duty to indemnify. Assuming that a finding of negligence against the architect is the necessary trigger for purposes of the university’s claim, it seems that a paradoxical procedure has been created, wherein the university, to prove an element of its viable indemnification claim, will first need to prove a time-barred negligence claim. The impact of such a paradox remains to be seen.

Amidst the flurry of tariff threats swirling around the world, the Federal Highway Administration (FHWA) is terminating the waiver known as the Manufactured Products General Waiver from the Buy America requirements found in 23 U.S.C.A § 313. The Buy America regulation requires all federal-aid projects to use only steel, iron, and manufactured products that are produced in the United States. Since 1983, these requirements have been waived for manufactured products that were permanently incorporated into federal-aid projects by not requiring such products to be produced domestically, apart from predominantly iron or steel components of manufactured products. This waiver is being phased out  in 23 C.F.R. 635.410, an amendment to the Buy America regulation which establishes new standards that will apply to manufactured products on federal-aid projects. The final rule was published in the Federal Register on January 14, 2025 (Vol. 90, No. 8, pp. 2932-58).

The new rule, 23 C.F.R. 635.410, defines “manufactured products” as “articles, materials, or supplies that have been processed into a specific form and shape, or combined with other articles, materials, or supplies to create a product with different properties than the individual articles, materials, or supplies.” A manufactured product does not include an article, material, or supply if it is “classified as an iron or steel product, an excluded material, or another product category as specified by law or in 2 C.F.R. part 184” or “mixtures of excluded materials delivered to a work site without final form for incorporation into a project.” However, “an article, material, or supply classified as a manufactured product may include components that are iron or steel products, excluded materials, or other product categories as specified by law or in 2 C.F.R. part 184.”

Manufactured products must be manufactured in the United States effective for federal-aid projects obligated on or after October 1, 2025. The Manufactured Products General Waiver will remain in place until then. The additional requirement to have greater than 55% of the manufactured product’s components, by cost, be mined, produced, or manufactured in the United States becomes effective for federal-aid projects obligated on or after October 1, 2026. For all federal-aid projects obligated on or after October 1, 2026, all manufactured products permanently incorporated into the project must both be manufactured in the United States and have the cost of the components of the manufactured product that are mined, produced, or manufactured in the United States be greater than 55% of the total cost of all components of the manufactured product.

Under the new rule, an article, material, or supply is generally only subject to one set of requirements. The classification of an article, material, or supply is made based on its status at the time it is brought to the work site for incorporation into an infrastructure project. The work site is the location of the infrastructure project at which the iron or steel product or manufactured product will be incorporated. The new rule also provides additional clarifications for precast concrete products and enclosures of electronic hardware systems classified as manufactured products, as well as, how to determine whether the cost of components for manufactured products is greater than 55% of the total cost of all components.

In Iberdrola Energy Projects v. Oaktree Capital Management L.P., 231 A.D.3d 33, 216 N.Y.S.3d 124, the Appellate Division for the First Department ruled that a nonrecourse provision in a contract barred a plaintiff’s causes of action for tortious interference with contract, unjust enrichment, and statutory violations of a trade practices statute, but not for fraud.

This case arose from a contract related to the construction of a power plant in Salem, Massachusetts. A choice-of-law provision dictated that the contract was governed by and construed in accordance with New York law. Defendants created a special-purpose entity (SPE) to serve as the company charged with constructing the new plant. Defendants owned, controlled, and managed the SPE and were the SPE’s majority and controlling equity holders. The majority of the SPE’s board of directors and officers were also defendants’ employees. The SPE retained plaintiff to be the project’s engineering, procurement, and construction contractor.

The contract permitted the SPE to terminate the contract for convenience or for a material breach by the contractor. In the event of termination for cause, the owner would incur substantial payment obligations; a termination for convenience would not. The contract required the contractor to post a standby letter of credit in the amount of approximately $140 million as security for the contractor’s performance. The owner was permitted to draw on the letter of credit only “upon any Contractor’s breach or failure to perform, when and as required, any of its material obligations under the Contract.” The contract contained a nonrecourse provision that provided that,

[Owner’s] obligations hereunder are intended to be the obligations of Owner and of the corporation which is the sole general partner of Owner only and no recourse for any obligation of Owner hereunder, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director or Affiliate, as such, past, present or future of such corporate general partner or any other subsidiary or Affiliate of any such direct or indirect parent corporation or any incorporator, shareholder, officer or director, as such, past, present or future, of any such parent or other subsidiary or Affiliate.

The project was plagued with delays and cost overruns. When the project was 98% complete, the SPE terminated for cause. The SPE drew the $140 million afforded by the letter of credit, retained a replacement contractor, and completed the remaining work. The original contractor filed for arbitration against the SPE, claiming that the SPE breached the contract, engaged in tortious conduct, violated the Massachusetts Unfair Trade Practice Act, and sought $700 million in damages. The SPE appeared in the arbitration proceeding and asserted counterclaims.

The arbitration panel determined, among other things, that the SPE lacked cause to terminate the contract and that it terminated the contract as a pretense to draw on the letter of credit and issued a final award in the contractor’s favor for $236,404,377. That award was confirmed in New York, and the SPE filed for bankruptcy. The original contractor filed a civil action in New York, bringing the same claims against the defendants, but all counts except for fraud were dismissed based on the nonrecourse provision.

The New York lower court enforced the plain meaning of the nonrecourse provision, which sophisticated commercial parties negotiated. The nonrecourse provision is a contractual limitation on liability, which, like other exculpatory clauses, is generally enforceable provided it does not violate a statute or run afoul of public policy. The court determined the provision to be “as broad as it is clear: no liability could be imposed upon various individuals and entities for “any claim based on the contract or otherwise in respect thereof.” Plaintiff’s causes of action for tortious interference with contract, unjust enrichment, and violations of Massachusetts’s deceptive trade practices statute were all hinged or predicated on conduct taken under or in contravention of the contract. Since these causes of action were all related to or connected with the contract, they were all barred by the nonrecourse provision. The court showed no sympathy for the plaintiff contractor and its likely inability to recover any part of the judgment it was holding. The plaintiff knew it was entering a very large contract with an SPE and should have known of the breadth of the nonrecourse provision. The takeaway appears to be: Beware of nonrecourse provisions with SPEs.

This post was co-authored by Government Enforcement + White Collar Defense Team lawyer David Carney, Capital Markets + Securities Group lawyer Tiange (Tim) Chen, and Antitrust + Regulation team co-chair Jennifer Driscoll.

Executive Order Directing Deregulation and Termination of Certain Regulatory Enforcement Actions

On February 19, 2025, in an executive order titled Ensuring Lawful Governance and Implementing the President’s “Department of Government Efficiency” Deregulatory Initiative, President Trump expressed a policy to “deconstruct[] … the overbearing and burdensome administrative state.” Specifically, President Trump directed each agency head (subject to limited exemptions) to classify all regulations subject to the agency’s sole or shared jurisdiction into one of seven categories. These categories include, for example, “unconstitutional regulations and regulations that raise serious constitutional difficulties,” “regulations that implicate matters of social, political, or economic significance that are not authorized by clear statutory authority,” “regulations that impose significant costs upon private parties that are not outweighed by public benefits,” “regulations that harm the national interest,” and “regulations that impose undue burdens on small business and impede private enterprise and entrepreneurship.” There is no category for a regulation that the agency head finds lawful and appropriate. Each agency head is to provide the Administrator of the Office of Information and Regulatory Affairs (OIRA) the list of those “unconstitutional regulations and regulations that raise serious constitutional difficulties.” The Administrator of OIRA, then, is tasked with developing an agenda to “rescind or modify these regulations.”

In addition, the executive order directs each agency head to assess whether ongoing enforcement of any regulation identified in the above classification process complies with law and the policies of the Trump administration. On a case-by-case basis and consistent with applicable law, the agency head is to “terminat[e] … all such enforcement proceedings that do not comply” with the executive order’s directive. (D. Carney)

Executive Order Affecting Independent Agency Power

On February 18, 2025, in an executive order titled Ensuring Accountability for All Agencies, President Trump amended Executive Order (EO) 12866 to require administrative rulemaking by independent regulatory agencies (such as the Securities and Exchange Commission, the Federal Trade Commission, the National Labor Relations Board, and the banking regulatory agencies (Federal Reserve Board, Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency)), which are previously exempted by EO 12866, to go through the regulatory review process promulgated by EO 12866, including submission of any proposed or final rules to the White House’s Office of Management and Budget (OMB) for review before publication.

The executive order further:

  • Directs the OMB Director to:
    • Adopt performance standards and management objectives for heads of independent agencies;
    • Conduct performance reviews over independent agency heads and report to the President; and
    • Review financial obligations and consult agency heads to adjust budget allocations.
  • Requires heads of independent agencies to
    • Consult the OMB and other White House offices on policies and priorities;
    • Establish a White House liaison position in each agency; and
    • Submit agency strategic plans to OMB for preclearance before publication.
  • Prohibits government agencies to advance interpretation of laws in rulemaking or litigations inconsistent with the positions taken by the Attorney General. (T. Chen)

Executive Order Reducing the Size and Composition of the Federal Government

On February 19, 2025, in an executive order titled Commencing the Reduction of the Federal Bureaucracy, President Trump directed several actions to reduce the size of the federal government. First, the executive order eliminates, to the maximum extent of the law, the non-statutory components and functions of (i) the Presidio Trust, (ii) the Inter-American Foundation, (iii) the United States African Development Foundation, and (iv) the United States Institute of Peace. The head of each of these entities must submit a report to the OMB Director that (i) states the extent to which it and its components and functions are statutorily mandated and (ii) affirms compliance with the executive order. The OMB Director will terminate or reject funding requests for components or functions that are not statutorily mandated. Second, the Director of the Office of Personnel Management will take steps to eliminate the four Federal Executive Boards and the Presidential Management Fellows Program. Third, the heads of the departments and agencies identified below have been instructed to terminate the following committees and councils:

  • The Advisory Committee on Voluntary Foreign Aid (U.S. Agency for International Development),
  • The Academic Research Council and the Credit Union Advisory Council (Consumer Financial Protection Bureau),
  • The Community Bank Advisory Council (Federal Deposit Insurance Corporation),
  • The Secretary’s Advisory Committee on Long COVID (Department of Health and Human Services), and
  • The Health Equity Advisory Committee (Centers for Medicare and Medicaid Services).

Fourth, within 30 days, the Assistant to the President for National Security Affairs, the Assistant to the President for Economic Policy, and the Assistant to the President for Domestic Policy are to recommend additional entities and Federal Advisory Committees to be terminated. (J. Driscoll)

Presidential Memorandum on Disclosure of Terminated Programs, Contracts, and Grants

On February 18, 2025, in a memorandum titled Radical Transparency about Wasteful Spending, President Trump directed the heads of executive departments and agencies to take all appropriate actions to the maximum extent permitted by law to make public the “complete details of terminated programs, cancelled contracts, terminated grants, and any other discontinued obligation of Federal funds.” (J. Driscoll)

Many out-of-state professional engineering companies practice engineering in Connecticut and may not be aware of all the requirements to do so. Connecticut has certain requirements for corporations and limited liability companies (LLCs) engaging in the practice of engineering. The applicable law, General Statutes §§ 20-306a and 20-306b, requires that (1) the personnel who act as engineers on behalf of the company must be either licensed in Connecticut or exempt from Connecticut’s license requirements, and (2) the company must have been issued a certificate of registration by the State Board of Examiners for Professional Engineers and Land Surveyors (State Board). Professional engineering firms must be registered with the Secretary of State as a domestic or foreign firm prior to applying for registration from the State Board. In addition, no less than two-thirds of the individual members of an LLC or owners of a professional corporation must be individually licensed as professional engineers in Connecticut. The Connecticut Department of Consumer Protection maintains a list of all professional engineers licensed in Connecticut and all State Board registrations.

Caselaw interpreting these requirements is sparse. Strict compliance with the State Board registration requirement is not always required. In Rowley Engineering & Associates, P.C. v. Cuomo, 1991 WL 27286 (Conn. Super. Jan. 2, 1991), the defendant alleged that the plaintiff professional corporation was not entitled to its design fees because it had not been issued a certificate of registration and thus did not comply with Conn. Gen. Stat. § 20-306a. The Rowley Court rejected this argument, reasoning that the statute was established for administrative purposes to allow professional engineers to practice in a corporate form and not safeguarding life, health, or property. The Court found substantial compliance with the statute, reasoning that all of the design professionals in Rowley were, in fact, licensed to practice in Connecticut. Thus, the purpose of licensure—to protect the public—was essentially satisfied. However, strict compliance with Connecticut’s professional engineer license requirement is required. In Anmahian Winton Architects v. J. Elliot Smith Holdings, LLC, 2010 WL 1544418 (Conn. Super. Mar. 16, 2010), the Court confirmed that a professional engineer or architect license in Connecticut is required to practice in Connecticut and it does not matter that such professional is licensed in any other state. The failure to be licensed in Connecticut precludes professional engineers from enforcing their right to payment for work performed.

Professional engineering companies practicing in Connecticut should be familiar with all state requirements. The failure to do so could result in being terminated from a project and not getting paid for work otherwise properly performed. Even if the company substantially complies with the State Board registration requirement, it could be difficult to explain this to an inquiring owner.

This post was authored by International team lawyer Kathleen Porter.

Executive Order Adjusting Imports of Aluminum into The United States

On February 11, 2025, in an executive order titled Adjusting Imports of Aluminum into the United States, President Trump increased, from 10% to 25%, the ad valorem tariff rate on imports of aluminum and aluminum-derivative articles from most countries. The tariff rate on imports of aluminum from Russia will be 200%. President Trump cited national security grounds as the reason for the tariff increases.

The executive order also ended previous exemptions on these imports for allies such as Argentina, Australia, Mexico, Canada, the EU, and the UK.

The tariffs begin on March 12, 2025.

The President stated that these actions aim “to protect America’s steel and aluminum industries, which have been harmed by unfair trade practices and global excess capacity.”

Executive Order Adjusting Imports of Steel into The United States

On February 10, 2025, in an executive order titled Adjusting Imports of Steel into the United States, President Trump increased, from 10% to 25%, the ad valorem tariff rate on imports of steel and steel-derivative articles from most countries. President Trump cited national security grounds as the reason for the tariff increases.  

The executive order also ended previous exemptions on these imports from Argentina, Australia, Brazil, Canada, the EU, Japan, Mexico, South Korea, and Ukraine.

The tariffs begin on March 12, 2025.

The President stated that these actions aim “to protect America’s steel and aluminum industries, which have been harmed by unfair trade practices and global excess capacity.”

In Admiral Insurance Co. v. Tocci Building Corp., 120 F.4th 933 (1st Cir. 2024), the federal Court of Appeals ruled that, under current Massachusetts law, a general contractor’s Commercial General Liability (CGL) policy does not cover damage to non-defective work resulting from defective work by subcontractors.

The defendant contractor was retained as a construction manager for an entire residential construction project. After several work quality issues and delays on the project, the contractor was terminated before the project’s completion. The owner of the project filed suit against the contractor for breach of contract and related claims but did not allege negligence by the contractor. The complaint included allegations of defective work by the contractor’s subcontractors leading to various instances of damage to non-defective work on the project including: (1) damage to sheetrock resulting from faulty roof work; (2) mold formation resulting from inadequate sheathing and water getting into the building; and (3) damage to a concrete slab, wood framing, and underground pipes resulting from soil settlement due to improper backfill and soil compaction. The contractor’s request for defense and indemnification coverage under its CGL policy was denied by its insurer. The insurer filed suit seeking a declaratory judgment confirming it had no obligation to defend or indemnify the contractor. The district court granted summary judgment in favor of the insurer and the contractor appealed.

The Court examined the “Damage to Property” exclusion outlined in subsection (I)(2)(j) of the CGL policy, which provides that there is no coverage for “property damage” to “(6) [t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.” The CGL policy defines “your work,” in relevant part, as “work or operations performed by you or on your behalf.” Since the complaint alleged damage resulting from the contractor’s “incorrectly performed” work on the entire project, the Court interpreted the (j)(6) exclusion as applying to the entirety of the project where the contractor was the construction manager charged with supervising and managing the whole project, the Court enforced the exclusion against coverage for the contractor.

The Court also examined the exception to the exclusion in (j)(6), which provides that the exclusion does not apply to “‘property damage’ included in the ‘products-completed operations hazard.’” The “products-completed operations hazard,” in turn, “includes all ‘bodily injury’ and ‘property damage’ occurring away from premises you own or rent and arising out of ‘your product’ or ‘your work’ except … (2) work that has not yet been completed or abandoned.” Since the contractor was terminated and did not complete or abandon the project prior to damage, the court of appeals concluded that the coverage exclusion in (j)(6) still applied.

In closing, the court of appeals left the door open for potential coverage for damage to non-defective, work arising from a subcontractor’s defective work even with the (j)(6) exclusion. Since the Massachusetts Supreme Judicial Court has yet to rule on the issue, it could interpret “property damage” caused by an “occurrence” to encompass this type of damage, which could allow a general contractor to potentially receive coverage if the work is completed or abandoned, as the exception to the exclusion would then apply.