Article Date: 05/03/2013


Will Many More Subcontractors Soon Garner Payment Assurances on P3 Projects?


By Steve Rizer

 

Construction subcontractors have a new tool for trying to secure payment assurances on projects financed by public-private partnerships (P3), but how successful will the tool prove to be? On one hand, the tool has the American Subcontractors Association Inc.’s (ASA) handiwork behind it; on the other hand, the tool’s success to a large extent will rely upon the support of state legislators, and although a quick Internet search of the success rate for state legislation across the United States turned up nothing, it should be noted that only about four percent of all bills at the federal level become law.

 

But an ASA spokesperson informed ConstructionPro Week that several states already have enacted legislation to the organization’s liking on this front, and other states are considering similar measures. States that have enacted ASA-endorsed subcontractor payment language for P3s include Maine, Oklahoma, Texas, Virginia, North Carolina (for a single project), and Maryland, where Gov. Martin O’Malley (D) signed H.B. 560 into law April 9, ASA Chief Advocacy Officer E. Colette Nelson said. State legislatures currently considering comparable bills include Arizona, Arkansas, Florida, and North Carolina (for Onslow County).

 

ASA is hoping that the tool, which the organization has dubbed a “P3 legislative work kit,” will add more states to this list. The kit supplies subcontractors with guidance and model provisions to extend the protections of states’ “Little Miller” acts, which compel prime contractors to post bonds to guarantee the performance of their contractual duties and/or the payment of their subcontractors and materials suppliers, to construction contracts that P3s award.

 

Optimal use of the new tool “means forcefully advocating for such a provision when the state legislature is initially shaping its legislation [to create] authority for P3s generally or a P3 for a specific project,” the kit’s documentation states. “It also means seeking the opportunity to amend an existing law that lacks payment protections for subcontractors or suppliers or affords inadequate payment protections.”

 

The kit also includes a model provision that subcontractors can seek to have included in bid documents on P3 projects to secure payment assurances when a statutory solution is not possible. The kit is available to ASA members in the Government Advocacy section under the “ASA Chapter Toolbox” on the organization’s website (www.asaonline.com).

 

As P3 projects have become more popular, state legislatures have enacted legislation giving states and localities increasing latitude to negotiate P3 agreements, including more “vertical” construction projects, ASA reported. “Unfortunately for subcontractors, often neither the P3 agreements nor existing law provides adequate payment assurances to subcontractors.”

 

According to the kit, “Deprived of the clear payment bond protections of [each] state’s ‘Little Miller Act,’ a subcontractor or supplier working on a P3 project is unlikely to have any payment protections unless those protections are specified in the authorizing legislation relating to P3s or a provision in the solicitation and award documents relating to a specific P3 project. Lien laws available for payment protection on private construction will be foreclosed, given that the public work being furnished by the P3 is for current public use, if not ultimately public property.”

 



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