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Continuing the state’s long-standing focus on infrastructure spending focused on environmental well-being, Louisiana Governor John Bel Edwards announced in April 2022 that the state would be allocating $150 million in surplus state funding towards coastal restoration and protection projects.
A major focal point of the Biden administration, public construction spending has over a trillion dollars at the federal level heading its way in the next decade, with much of that to be distributed at the state level. With this much focus on infrastructure, contractors nationwide should be ready to take advantage of the opportunity to work on big government projects.
That said, though public works construction can provide major gains for contractors, they certainly aren’t exempt from the challenges that private projects often see. Contractors deal with payment issues on these projects just as much — if not more — as they deal with them on private ones, and protecting your payment rights is just as imperative as on any private project.
Payment protection on Louisiana public projects
Even when the work done is similar, payment protection is very different between private and public work.
Generally, contractors on public projects aren’t able to file mechanics liens. The federal government — along with many states — prohibits private entities from claiming an interest in public property, making it necessary for public construction projects to secure a payment bond prior to work beginning. In the event of payment problems, contractors file claims against the bond rather than the property itself.
The Miller Act provides directly for this payment protection at the federal level, and most states have their own version of it — laws often referred to as “Little Miller Acts.” Louisiana has its own Little Miller Act, which requires that any contract over $25,000 have a payment bond.
However, it’s not as straightforward in Louisiana as in some other states, as projects concerning roads, bridges, and ferries are governed differently than other public contracts — with the Louisiana Department of Transportation handling the former and the state handling the latter.
These payment protections aren’t universal, but they’re certainly far-reaching. In Louisiana, Little Miller Act protection extends to subcontractors, equipment lessors, material suppliers (including those that simply focus on material delivery and/or transport), engineers, and architects.
Even those who provide oil, gas, or electricity to machinery used to improve a property can make a bond claim. Given that these protections aren’t universal, though, some are squeezed out — suppliers to suppliers likely cannot make a claim against the bond.
Louisiana prompt payment laws
Luckily, Louisiana’s approach to prompt payment on public works projects is fairly straightforward and is much less dependent on the jurisdiction of the governing body. Both state and LDOT projects have to abide by the same basic rules:
- Once a prime contractor has submitted a request for payment in accordance with the terms of its contract, the public entity must make payment within 45 days of receipt. Final payments to the prime contractor fall under a 45-day payment deadline from the formal, final acceptance of the project.
- Payments to first and second-tier subcontractors and suppliers must be made within 14 consecutive days of the contractor or sub receiving payment.
- All late or wrongfully withheld payments accrue 0.5% interest per day, with the overall interest rate being capped at 15% of the unpaid balance on the project.
Not every public project will have a state or LDOT jurisdiction, however. Federal construction projects that take place in Louisiana are not subject to the state’s prompt payment laws and are instead governed by the US Federal Prompt Payment Act.
Louisiana bond claim law
As mentioned before, a number of different parties have the right to make a claim against a payment bond in the event of payment delays on a public works project. Subcontractors, equipment lessors, material suppliers and transporters, design professionals, and power suppliers (those working in oil, gas, or electricity) all have rights to make a bond claim; the main exclusion from this group is suppliers to suppliers.
For a claim to be valid, claimants need to file their bond claim after the claim’s maturity but within 45 days of either notice of acceptance of the work done or the filing of a notice of default by the contractor or subcontractor.
However, a good rule of thumb is to file a claim early — once notice of a claim is received by a public entity, they’re required to withhold the claimed amount from the prime contractor, putting more pressure on them to resolve the payment dispute.
A lawsuit to enforce a payment bond claim must be initiated within one year from the recording of the notice of acceptance of the work or the notice of the contractor’s default. Additionally, it can’t be filed until at least 45 days of completion of the project.
Louisiana is typically a state that doesn’t require traditional preliminary notice requirements, but there are certain situations where this is integral. Before making a claim, equipment lessors need to furnish a “Notice of Lease” to the project’s public entity and prime contractor within 10 days of first furnishing the equipment.
Similarly, material suppliers must furnish a “Notice of Non-Payment” within seventy-five days of the last day of the month when they last furnished materials to the project.
How to file a bond claim in Louisiana
To file a successful payment claim in Louisiana, certain steps need to be followed:
- The claim needs to include a detailed overview of the work done, including information about the claimant, public entity, surety, prime contractor, hiring party, claimed amount, property description, and labor and/or materials furnished on the project.
- For public projects, the claim needs to be delivered to the project’s governing public entity, the Recorder of Mortgages for the applicable parish, and — if the claimant was hired by a subcontractor — to the prime contractor.
- For LDOT projects, the claim needs to be delivered to the department, the Recorder of Mortgages, and — if the claimant was hired by a sub — to the prime and the surety.
- The separated nature of Louisiana bond claim law comes into play here: Road, bridge, and ferry projects must provide both the general contractor and the surety with a copy of the bond claim. Failing to deliver it to a required party can kill the claimant’s rights.
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Protect your payment rights on every public project
Though there are a number of guidelines that absolutely need to be followed in order to secure payment rights on public projects, going the extra mile can ensure that you’re completely protected from nonpayment on public projects.
Louisiana is a non-notice state, meaning that it isn’t required for all contractors to send a preliminary notice for a bond claim on public works projects (unless you’re a materials supplier or equipment lessor) — however, choosing the option to send a notice is a great way for contractors to increase visibility and communication on projects and encourage faster payment.
Rather than going through the difficulty of filing a lawsuit to enforce a claim, sending a preliminary notice has a good chance of nudging contractors into payment.
Additionally, proper document retention and management creates a beneficial situation for contractors — even when it isn’t required. Especially when sending notices and maintaining the proper documents needed for claims, it can be incredibly beneficial for you to have an organized policy for document retention.