The federal government is allocating over a trillion dollars in funding for public infrastructure construction projects over the course of the next decade — and a whole lot of that funding is going to go directly to individual states. Washington State is often at the forefront of infrastructure work with its commitment to improving public transit and affordable housing.
With this much focus on public works construction, contractors nationwide should be ready to take advantage of the opportunity to work on big government projects at both the federal and state level — as well as be completely prepared to protect their payment rights while doing so.
Public works projects are a major source of benefit for contractors, but the popular thinking that these projects run into fewer payment problems than private ones do is a misconception. Protecting your payment rights on public works projects is crucial, as contractors deal with payment issues on these projects just as much as on private ones.
Payment protection on Washington public projects
Even when payment challenges are similar, payment protection is very different between private and public work. Contractors on public projects aren’t allowed to file mechanics liens when payment problems arise, as both the federal and state governments explicitly prohibit private entities from claiming an interest in public property. Due to this, general contractors on public construction projects have to secure a payment bond prior to the start of work. In the event of a payment dispute, contractors file claims against the payment bond instead of against 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 with laws usually called “Little Miller Acts.” Washington State indeed has its own Little Miller Act, which has wide-ranging protections for contractors — as long as they act early on in order to protect their right to file a bond claim.
Washington State bond claim laws
Washington’s public payment bond claim laws cover all public works projects commissioned by a state or local government entity that have a contract value of at least $150,000 — and it’s additionally possible to make a lien claim against unpaid retainage funds on certain public projects.
The protection under these laws goes far — subcontractors, sub-subcontractors, material suppliers, equipment lessors, and laborers of any tier are allowed to make a claim against a public payment bond; material suppliers to suppliers are excluded from this coverage (as are, of course, general contractors, who can’t make a claim against their own bond).
However, contractors have to follow certain steps in order to keep their payment rights secure on public works projects. Making a successful bond claim includes several requirements, such as submitting preliminary notice prior to making the bond claim itself (or the claim enforcement, if necessary); additionally, there are steps that are not required but are still recommended, such as sending a Notice of Intent to Make a Bond Claim.
In order to secure the right to make a bond claim, a contractor needs to send a preliminary notice (known in Washington State as a Notice to Contractor). This is a crucial part of the process, as failure to send this notice is fatal to bond claim rights.
A Notice to Contractor should be sent by registered or certified mail to the prime contractor no later than 10 days after the claimant’s first furnishing of labor and materials to the project, and should include a description of labor and materials to be provided, the hiring party’s contact information, and statement declaring that the payment bond will be liable for any payment problems. There is also a preliminary notice required for securing the right to file a lien on retainage, but this is usually included in the Notice to Contractor.
Download a Washington State Notice to Contractor form.
Though it isn’t directly part of Washington notice requirements, contractors can send a Notice of Intent to Make a Bond Claim as another effective way to incentivize payment as a “final warning” of sorts.
If payment isn’t received, the next step is the bond claim itself. This must be delivered to and filed with the project’s public entity within 30 days from the completion of the contract and acceptance of the project as a whole. For material suppliers and equipment lessors, the best practice is to send a bond claim within 30 days after the delivery of material has been completed.
Similarly, for a Lien on Retainage Funds claim, notice must be given to the contracting public agency no later than 45 days after completion of the work. Generally, the best practice is to consolidate both the bond claim and Lien on Retainage Funda claim into one filing, and observing one deadline.
A Washington payment bond claim only needs to be sent to the contracting public entity — but with that said, it can still be useful to send a copy of the claim to other parties up the contracting chain. The claim itself should include:
- Public entity’s name & address
- Claim amount
- Description of labor and/or materials provided
- If the claim includes unpaid retainage, a statement that the claim is additionally being made against the retainage funds
The deadline to enforce a claim on the payment bond in Washington leaves a lot of room for contractors, as the enforcement action only needs to be commenced within six years of making the bond claim. However, the terms of the payment bond may specify a shorter period of time for the action to be filed, making it imperative to keep an eye on the details of the bond itself.
Enforcing a claim on retainage funds isn’t as open, unfortunately. If needed, a suit to enforce the lien on funds for retainage has to be initiated within 4 months of the filing of the claim — which reinforces the best practice of filing both a bond claim and lien on retainage funds at the same time.
Washington State retainage laws
Retainage is an amount of money that’s held back from a contractor during a construction project, meant to give an extra incentive for the contractor to complete the project and provide the project owner with a level of protection against issues on the project. Washington’s retainage laws only apply to public works projects.
Learn more: The Ultimate Guide to Retainage in the Construction Industry
The maximum amount of retainage allowed to be withheld on a public project is 5% of the contract amount. This standard applies to contracts between the public entity and the prime contractor and any other subcontract under the same project. In these cases, the public entity needs to release the retainage funds within 60 days of project completion.
There’s an important exception to this that can change multiple details of a project. If the contract is for $150,000 or less, the retainage rate that is withheld can be higher; the public entity and contractor can agree to forgo the project’s bond requirements and instead substitute a 10% maximum retainage rate. If the project works under these requirements, then retainage funds should be released within 30 days of completion.
Washington State prompt payment laws
Washington’s prompt payment statutes include specific timeframes for when general contractors, subcontractors, and suppliers contracting with a public construction project need to get paid. The state’s prompt payment laws apply to all state and municipal public works projects, with the only exceptions being certain contracts that fall under the purview of the Washington State Public Stadium Authority.
- Payments from the project’s public entity to the general contractor need to be made either according to the payment schedule provided in the contract or within 30 days after receipt of an invoice/ receipt of the contract’s goods or services (whichever is later).
- If the project is funded through a grant or federal money, then the public entity needs to make payment either within 30 days of receiving a payment request or 30 days from when the public entity receives the grant or federal money (whichever is later).
- Payments from the project’s general contractor to other contractors down the payment chain are governed slightly differently. After initial payment has been received from a higher-tiered party, payments to any subcontractors or suppliers have to be made within 10 days.
Of course, this doesn’t guarantee that payment is going to arrive inside these deadlines. Washington allows payment to be withheld longer than the required prompt payment deadlines in the event of a dispute over the amount owed, unsatisfactory performance, or payment requests that aren’t in compliance with the contract’s requirements.
If a payment request is incomplete or payment is being withheld, the project’s public entity should send a written notice of noncompliance within 8 working days of receiving the payment request. This notice should specifically state the reasons that payment is being withheld and what needs to be remedied to receive payment. Once the issues with the payment request or disputed work have been resolved, payment must be made within 30 days.
However, late payment has its consequences for those who are withholding improperly. For late payments from the public entity to the prime contractor, interest accrues at a rate of either 1% per month or $1 per month (whichever is greater). For payments to subcontractors, interest accrues at a rate set monthly by the state treasurer, which is posted on the website of the Washington Code Reviser. Any legal action where funds are found to be wrongfully withheld can be costly, as the prevailing party is responsible for attorney’s fees and other court costs on top of interest payments.
Learn more: Washington Prompt Pay Act – Payment Help for WA Contractors
Washington State prevailing wage laws
Prevailing wage laws set a standard for how workers should be paid on public construction projects, setting a level that the majority of a project’s workers should be paid no less than the local prevailing wage.
Washington’s prevailing wage laws require local government contractors and subcontractors to pay prevailing wages to workers on all public works contracts regardless of the project’s contract value. These requirements impact not only standard public construction projects, but also building service maintenance, repairs, and off-site fabrication of items for a project.
Companies can face legitimate penalties for failing to follow these rules. Being found in violation of state prevailing wage laws can result in a $5,000 fine or an amount equal to 50% of the total wage violation in the contract (whichever is greater). Companies can also be assessed interest at 1% per month for each occurrence — all of which happens in addition to having to pay the already-owed wages.
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 in Washington, going the extra mile to protect your payment rights can make sure that you’ll receive the right payment for your work in any situation.
Even though preliminary notices are required on public projects in Washington, it’s important to file them as early as possible in order to ensure that bond rights are maintained. Even beyond maintaining these rights, sending a preliminary notice maintains a line of communication throughout the chain on a construction project, giving all contractors involved the opportunity to make sure that payment disputes are taken care of earlier on in the process rather than later.
Washington’s bond claim laws allow contractors to take care of disputes efficiently, as well. Even though the deadline to enforce a bond claim in the state is six years, you don’t have to wait that long — in fact, if filing a lien on funds in addition to a bond claim, you can even file them together within the lien on funds’ four-month deadline.
When a company is dealing with documentation like what is needed for preliminary notices and bond claims, proper document retention and management is an absolute necessity when it comes to protecting your payment rights. Especially when sending notices and maintaining the proper documents needed for claims, it can be enormously beneficial for you to have an organized policy for document retention.