Justin Carley | Snell & Wilmer | July 9, 2019
As the 80th Session of the Nevada Legislature comes to an end, so too do the days of broad and sometimes confusing restraints against multiple general contractors working together on complex construction projects. Under NRS 624.215, the “contracting business” is divided into three categories — general engineering contracting, general building contracting and specialty contracting. NRS 624.215 defines each of these categories and the definition of “general building contractor” includes a requirement that it is the prime contractor. Relatedly, under NRS 624.6086, a “prime contractor” is defined as one that contracts directly with the owner of a project to provide work, materials or equipment for a work of improvement. In some minds, this created confusion about whether a general engineering contractor or a specialty contractor could be used as a prime contractor or if only a general building contractor could be used as a prime contractor. Moreover, a general building contractor could arguably not hire another to assist with management of a project. While this may have had a less significant effect during times of economic downturn, recent trends in Nevada have increased the demand for large-scale projects. Stadiums, infrastructure, cutting-edge hotels and casinos and other sizeable and high-tech projects could benefit from having multiple general contractors working together.
Assembly Bill 29 tries to provide some flexibility in this setting by adding its own definition of prime contractor to NRS 624.215(10) that allows all three categories — general engineering contractors, general building contractors and specialty contractors — to serve as prime contractors, in certain circumstances, while leaving the general definition of prime contractor in NRS 624.6086 intact. But, every eligible project must have one and only one prime contractor, whether it be a general engineering, general building or specialty contractor.
The bill also permits agreements between multiple general contractors. For example, if a general engineering contractor is hired as the prime contractor, it may hire one general building contractor to provide work, materials or equipment. Further, a general building contractor may contract to provide management and counseling services for a project. If so, it may also hire a general building contractor to provide work, materials or equipment. So, the statute now expressly allows two general contractors to enter into an agreement to work with each other on a single construction project.
But with this new ability, owners, general contractors and subcontractors should be cognizant of the risks. For example, all should be aware that this change could impact an already highly technical mechanic’s lien process, especially if different general contractors are hiring different subcontractors. Although Assembly Bill 29 will likely have a positive impact in providing more flexibility, it is unclear exactly what other risks this amendment might create. Owners and contractors of all types should approach these relationships with caution and consult with counsel to ensure compliance with all statutory, regulatory and contractual requirements on a case-by-case basis.