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How do I force payment from an Arkansas municipality that's late paying due to waiting on federal grant money to pay me?

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I have a contract with an Arkansas municipality...City of Texarkana, AR for a road reconstruction project. The value of the contract is approximately $700,000, and we are bonded with payment and performance bonds. The project is funded through a federal grant. Our first payment application was submitted on 08/15/2019 for $151,261.85. The second payment application was submitted on 09/13/2019 for $75,089.86. To date, we have received no payments. City representatives indicate that they are waiting on grant funds, that they have no way to know when those will be received and that they have no way to pay until received. What options do I have to force payment? How do I protect myself against complete non-payment should these funds never become available? Otherwise, is it possible that interest is due for these late payments?

1 reply

Oct 4, 2019
It can be hard to compel a public entity to make payment. Unlike private projects, mechanics lien rights won't be available to enforce payment. And, while some subcontractors and suppliers may be entitled to claims against the project's bond, a contractor isn't afforded that same protection. For state-owned construction projects (except for the State Highway Commission and the Arkansas Department of Transportation), Arkansas does have prompt payment laws that protect contractors. But, as set out by Arkansas Code 19-4-404(b), these laws don't apply to city, town, county, or school district projects in Arkansas. How can an Arkansas contractor recover payment on a local public works project? For one, discussing the issue with the public agency and trying to come to some sort of interim payment agreement might be helpful. If they fully understand how their failure to pay is affecting their contractor, they may be willing to make some sort of payment arrangement. If that's ineffective, escalating matters with a payment demand letter might be helpful. Threatening to take legal action in order to obtain payment will often help in negotiating payment. More on that here: Finally, if push comes to shove, pursuing legal action against a non-paying public agency can be an effective recovery route, albeit a relatively undesirable one. But if a public agency hasn't made payment as agreed upon in the contract, then they might be liable and something like a breach of contract action may be on the table. Ultimately, though, what recovery options may be available will likely come down to the terms of the contract, itself. So, consulting with a local construction attorney and having them review the situation and any relevant documentation can help to identify what options may be available, and your attorney will be able to advise on how best to proceed.
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