Not all is grim in the picture painted by attorneys interviewed for this article, part of California Construction�s fourth annual focus on legal firms.

Several lawyers say the sharp increase in mechanic�s liens and stop orders appears to be tapering off , and, while financing for private construction has declined, the tap is still flowing for public-sector projects such as healthcare construction and federal contracts.

Unfortunately, the lien and-stop-order plateau may have less to do with economic recovery than the lack of new building.

BUDDIE

�Within three months of work being complete, you�re going to know if you have stop issues,� says Ray Buddie, cochair of the construction law group at Allen Matkins Leck Gamble Mallory & Natsis LLP in San Francisco. �Because so little new construction has started, anythingthat was going to wash out probably happened in the last year or so. Most of the fallout from the financial meltdown almost 18 months ago hit close to a year or nine months ago. So we�re really not seeing that much of it anymore.�

Lozowicki and others also say that the siren�s call of public-sector contracts has lured many inexperienced contractors over their heads.

�Public works is pretty much the only game in town for many commercial contractors,� Lozowicki adds. �These contractors are now competing with traditional public-works contractors. Of course, there�s a big risk there because some of these commercial contractors aren�t familiar with the nuances of public building. They never had to make sure their contractors were following the wage guidelines of state and federal agencies.

�Some aren�t aware that general contractors incur any liability of their subcontractors for failing to comply with prevailing wage guidelines. They may not realize they have to police their subs.�

Freshman public-sector contractors may also be unfamiliar with strict government procedures for change-order requests or the issue of enhanced project inspections, particularly when dealing with hospital projects.

�There�s a large chunk of American Recovery and Reinvestment Act money flowing into California both directly through federal procurement agencies and indirectly through state and local procurement agencies,� Lozowicki says.

�That federal legislation has a number of requirements in it with which contractors may not be familiar. One is the �Buy America� requirement, which, even if a project is funded only in part by ARRA money, puts restrictions on the source of manufactured goods that you install on a project.

�That can be a trap. There are regulations that involve the executive Office of Management and Budget and apply to stimulus funds that flow down by the way of grants to state and local agencies. Figuring all these regulations out is tricky.�