Every state has some sort of Prompt Payment Act which statutorily requires “prompt payment” to contractors, subcontractors, and suppliers. However, not all of these laws have been applied to design professionals such as architects. Arizona Governor recently signed into law the “Arizona Design Professional Prompt Payment Act” or House Bill 2336. This new law took effect July 3, 2015 and is a step in the right direction in providing design professionals prompt payment protection – provided the design professionals worked on a public work project.
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The Arizona Design Professional Prompt Payment Act is really just an amendment of A.R.S. §§ 28-411, 34-211, and 41-2577. Each provision originally required prompt payment protection for contractors, subcontractors, and suppliers in public works projects. The sections have been revised to include prompt payment protection for design professionals, but there is a bit of a catch.
A.R.S. § 34-221 applies to construction contracts with cities, towns and other public entities that are not the State or the Arizona Department of Transportation (ADOT). This provision has been revised to extend contractor’s prompt payment obligations to design professionals. Basically, design professional are not statutorily required to receive payment within seven days of receipt of payment by the contractor or subcontractor. Late payment accrues an interest of one percent per month. Unfortunately, these revisions do not mention contracts between a public entity and its design professional.
Prompt payment for contracts with the State fall under A.R.S. § 41-2577. The section was revised similarly to include design professionals that have contracted with a contractor or subcontractor. The difference is subsection A does address direct payment between the State and a contractor, but design professionals are still left out.
The last provision revised was A.R.S. § 28-411 concerning payment from the ADOT. The amendment now requires the ADOT to pay a design professional
the agreed or reasonable value of all labor, materials, work or services furnished, installed or performed by a contractor or consultant pursuant to an advance notice to proceed or other oral or written direction or request from the Department’s authorized agent before the execution of a contract or contract modification applicable to the labor, materials, work or services.
The revision is not exactly an extension of prompt payment protection, but it is a step in the right direction. Statutorily required notices can help save time and money with unnecessary disputes.
Design Professionals Have Options
These amendments and revisions are a good step in giving design professional prompt payment protection, but even when not written in a statute design professionals can be afforded prompt payment protection by contract. Arizona courts enforce prompt pay clauses contained within contracts as a matter of course. Since design professionals in Arizona are not statutorily provided prompt payment protection in the private sector unless they are considered contractors, pursuant to RSP Architects, Ltd. v. Five Star Development Resort Communities, LLC, 2013 WL 3874276, the inclusion of prompt payment protection in the contract can be a significant benefit. There is no case law or statutory language provided forbidding contractual language that extends prompt payment protection to design professional.
Arizona Legislature still has some issues to address concerning prompt payment protection for design professionals, one of which is likely revision of the Private Prompt Pay Act (A.R.S. § 32-1129) to include design professionals, as well. The current amendment extending prompt pay benefits on public projects, House Bill 2336, is a step in the right direction, but there is still work to be done. For more information about Arizona Prompt Payment Laws, check out levelset’s resources here.