P3 projects are a hot topic in the construction industry, and more states seem to be adopting some form of P3 legislation at every turn. Due to the unique format of P3s, however, there can be a lack of protection for parties working on these projects. That’s why we’ve had to post articles such as Public Private Partnerships – What’s The Protection? and Does the Davis-Bacon Act Apply to P3 Projects? Last month, Kansas made things a little more clear – Kansas P3 Projects will be afforded protection in the form of surety bonds beginning July 1, 2017.
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New Legislation Protecting Kansas P3 Projects
On April 7, Kansas Governor Sam Brownback approved Senate Bill No. 55 which will provide protection for those working on P3 Projects. The bill closes legislative gaps on dealing with P3 projects. On a basic level, P3 projects created a grey area between public and private projects. On private projects, mechanics liens are available to laborers and materialmen. If these parties go unpaid, they have legal recourse to seek out any unpaid sums. On public projects, the Miller Act and Little Miller Acts require contractors to provide security in the form of surety bonds. If a down the chain party on a public project goes unpaid, bond claims are available to recover payments. However, because P3 projects incorporate underlying property that is public, private, or some combination of the two, it can be unclear at times what a party should do after going unpaid on a P3. Through Senate Bill No. 55, Kansas P3 projects are now clearly protected by legislation similar to the Kansas Little Miller Act.
Under the new legislation, Kansas P3 projects that exceed $100,000 in value will require payment and performance bonds. The contractor must furnish a bond from a “good and sufficient” surety, and the payment bond must be equal to the full contract amount. For these bonds, provisions must be included stating that the prevailing party in any action on the bond is allowed to recover attorney fees and expenses as part of a judgment, should the court award them. The bill also goes on to define “public-private agreement” and a few other terms, which should help clear up any confusion as to the projects covered by the bill.
The bill will be “a part of and supplemental to” the Kansas Little Miller Act. While this may seem like semantics, it’s an important distinction. The basics of the bonding requirements are the same (both pieces of legislation require payment and performance bonds on projects exceeding $100,000), but there are some differences. Notably, for public projects the prevailing party “shall” be awarded attorney fees and costs while on P3 projects, a court “may” award fees and expenses. The difference in discretion sounds minimal but costs can add up quickly when attorney fees get involved. The Kansas Little Miller Act also goes into great detail in areas such as retainage, suspension of performance, and waiver of rights. Because we know that the new legislation is meant to be read as a part of the whole system of laws binding public construction projects, we know that aspects of the state’s Little Miller Act that are not in conflict with those of the new legislation for Kansas P3 projects can probably be applied.
The stakes are high when payments are on the line, and the construction industry is already prone to payment problems without the grey areas introduced by the advent of P3 projects. As P3s continue to evolve across the country, courts and legislators must work to stay in front of the issues presented by their non-traditional structures. The clarity this act provides for Kansas P3 projects is something other states should look at working into their Little Miller Acts.
For a one-stop shop for all of your Kansas payment questions, head over to our Kansas Construction Payment Resources. We’ve also got you covered on Public-Private Partnerships with the P3 tag on the blog.