Las Vegas Public Project Attorney
If you are a contractor, subcontractor or material supplier on a public construction project there are very specific rules that must be adhered to by the public body and the private contractors who perform the work. The progress payment and release of retainage differ significantly from the processes associated with private construction projects. One of the more glaring differences is that the prime contractor is not required to pay its subcontractors or material suppliers until the prime contractor receives payment from the public body. This is commonly referred to as “Pay When Paid” and can be a significant burden on smaller subcontractors that are unfamiliar with public works contracts. An experienced attorney can be a valuable ally to a contractor working on a public construction project.
Payments made by Public Body to Prime Contractor
Payments due to a prime contractor must be paid within 30 days after the date the public body receives the progress bill from the contractor, unless a shorter period of time is provided for in the contract. However, not more than 90 percent of any progress payment may be made until 50 percent of the work required by the contract has been performed. After 50 percent of the required work has been performed the public body may pay the prime contractor the remaining progress payments without withholding retainage. If satisfactory progress is being made, the public body may also release the amount of previously withheld retainage.
Who determines “Satisfactory Progress”?
Satisfactory progress is determined by the public body when a subcontractor has completed a portion of the work in compliance with all applicable plans and specifications. The subcontractor must submit a release for the portion of the work as well as releases from each of the subcontractor’s lower-tiered subcontractors and suppliers who performed work or supplied materials for the portion of the work that the retainage is applicable to. If the public body determines that retention should be withheld after 50 percent of the work is done, the amount of retainage cannot exceed 5 percent.
Payment for materials: The public body must, within 30 days, pay the actual cost of the supplies, materials and equipment that are identified in the contract and have been delivered and stored for the project if they are in short supply or were made for the project.
Occupancy or Notice of Completion: If a public body or a person acting with the authority of the public body occupies or begins use of a public work or a portion of public work or if a Notice of Completion for a public work or portion of work has been recorded, or if the work is partially occupied, the public body shall pay the contractor any outstanding payment due, including retainage and any interest accrued within 30 days. The amount paid must be in proportion to the value of the portion of the public work being used or occupied.
Nonconforming work: If a contractor has failed to comply with provisions of the contract or applicable building codes the public body may withhold an amount sufficient to pay the expenses the public body reasonable expects to incur as a result of the failure of the contractor. If the public body determines that it is going to withhold payment for nonconforming work, the public body must give the prime contractor 20 days written notice stating the amount that will be withheld. The public body must also provide a detailed explanation of the reason the public body will withhold that amount and include a specific reference to the provision or section of the contract or applicable building code, law or regulation with which the prime contractor has failed to comply. If the prime contractor provides a written notice of correction and the public body confirms that the corrections have been made, the public body must pay the amount withheld within 30 days after the public body receives the next progress billing.
Interest on amounts improperly withheld: If the public body fails to give a contractor written notice of any withholding and does not pay the contractor within 30 days after receiving a progress bill or retainage bill or written notice of correction the public body is required to pay interest from the 30th day on the amount delayed until the payment is made.
Subcontractors and Suppliers can request notice of progress payments: If a subcontractor makes a written request to the public body, the public body must, within 5 working days, notify the subcontractor or supplier in writing of the date the public body made a specified progress payment or retainage payment to the prime contractor. The public body must inform the requesting subcontractor or supplier whether the public body has paid the entire amount of a specified progress payment or retainage payment and the amount withheld from a specified progress payment or retainage payment to the prime contractor.
Payments made by Contractor to Subcontractors
(PAY WHEN PAID)
Each prime contractor shall disburse money paid to the prime contractor, including any interest which the prime contractor receives, to its subcontractors and suppliers within 10 days after the prime contractor receives the money from the public body. The payments must be in direct proportion to the subcontractors’ and suppliers’ basis in the progress bill or retainage bill and any accrued interest thereon.
Payment for materials and supplies: The prime contractor is also required to make payments to its subcontractors or suppliers in an amount equal to that subcontractor’s or supplier’s basis in the payments paid by the public body to the prime contractor for supplies, material and equipment identified in the contract between the contractor and the public body, or between the subcontractor or supplier and the contractor within 10 days after the contractor receives payment from the public body for those supplies, materials or equipment.
Release of Retainage by Prime Contractor: After 50 percent of the work is satisfactorily performed, the prime contractor is required to release retainage previously withheld. The payment of retainage must be equal to that paid by the public body to the prime contractor for the work performed by the subcontractor.
Retainage held by Contractor: Like the public body, the prime contractor may withhold as retainage not more than 5 percent from the amount of any progress payment due under a subcontract which is made before 50 percent of the work is completed under the subcontract. After 50 percent of the work has been performed, the prime contractor is required to pay any additional progress payments without withholding any additional retainage so long as satisfactory progress is being made in the work under the subcontract. The payment made to the subcontractor must be equal to the amount paid by the public body to the prime contractor for the work performed by the subcontractor.
Nonconforming work of subcontractor: As with the public body, the prime contractor may withhold an amount sufficient to pay the expenses the prime contractor reasonably expects to incur as a result of the failure of its subcontractor or supplier to comply with the subcontract or applicable building code, law or regulation. The prime contractor may also withhold the amount withheld by the public body for a claim for wages against the subcontractor.
If the contractor receives a progress payment or retainage payment from the public body that is less than the amount set forth in the progress or retainage billing the prime contractor is required to give a written notice to its subcontractor or supplier of any amount that will be withheld. The written notice must identify the amount of the payment that will be withheld and provide a detailed explanation of the reason the prime contractor will withhold that amount.
Subcontractor’s Notice of Correction: Within 10 days after the prime contractor receives a written notice of correction from the subcontractor or supplier or payment from the public body for any amount withheld from the prime contractor, whichever occurs later, the prime contractor must pay its subcontractor or supplier.
As with higher-tiered subcontractors, lower-tiered Subcontractors and Suppliers can request notice of progress payments from the prime contractor. Within 5 working days after a prime contractor receives a written request from a lower-tiered subcontractor or supplier with respect to a contract that has not been fully performed, the prime contractor shall notify the lower-tiered subcontractor or supplier in writing of the date the contractor made a specified progress payment or retainage payment to a subcontractor. The prime contractor is also required to advise the lower-tiered subcontractor or supplier whether the prime contractor has paid the entire amount of a specified progress payment or retainage payment and the amount withheld from a specified progress payment or retainage payment to the subcontractor.
Payments made by Subcontractors to Lower-Tiered Subs
Each subcontractor is required to disburse money paid to him by the prime contractor to his or her lower-tiered subcontractors and suppliers within 10 days after the subcontractor receives the money from the prime contractor. The payments to lower-tiered subcontractors must be in direct proportion to the lower-tiered subcontractors’ and suppliers’ basis in the progress billing and any accrued interest thereon.
Interet on Retention
On public construction projects Interest is required to be paid on retainage. The interest accrues from the date the retainage is withheld until the date the retainage is paid to the person from whom the retainage was withheld.
Remedies for Non-Payment
Actions by Contractor against public body: A contractor who believes that the public body has failed to make a payment when due, provide written notice of any withholding, or provide information upon request relating to any payment with respect to a contract which has not been fully performed may timely apply to the district court in the county where the public work is located for an alternate writ of mandamus to require the public body to perform the duty required.
Action by subcontractor or supplier to remedy unjustified or excessive withholding: A subcontractor or supplier who believes that the amount withheld by the prime contractor or a higher-tiered subcontractor is not justified or is excessive may apply to the district court where the project is located for an order directing the prime contractor or subcontractor to appear before the court and show cause why the court should not grant the relief requested by the subcontractor or supplier. The court will conduct a hearing not less than 10 days and not more than 20 days after the court issues the order for the hearing.
There are specific requirements that must be met when filing a writ or motion with the court. If you are a prime contractor or subcontractor that has not been paid, it is highly recommended that you get the assistance of an experienced Las Vegas Attorney to help you prepare and file the necessary documents. In some instances a payment dispute can be resolved without the necessity of filing motions with the court.
Award of Reasonable Costs and fees to Prevailing Party
Unlike typical contract disputes where the parties bear their own costs and attorney’s fees, if the contractor, subcontractor or supplier is the prevailing party in a civil action or arbitration proceeding, the court or arbitrator is required to award to the prevailing party an amount that was required to be paid for his or her reasonable costs and attorney’s fees.
The payment process on public construction projects differs significantly from that of private construction projects. Having a thorough knowledge of the process is very important and can save you a substantial amount of frustration. It is very important that you retain a highly qualified attorney with experience in public construction projects. The Wright Law Group, P.C. has more than 20 years experience in public construction law and is well equipped to assist you in handling your case. Please call us at 702-405-0001 to schedule a consultation.