My payment is way past due. Subcontractor says they have not been paid yet. How do I have to wait to be paid?
1 reply
Feb 28, 2019
Waiting a long time for payment can be stressful, and put business in a financial bind with respect to their cash-flow and operations. I'm sorry that you have found yourself in this position.
Federal projects have a few mechanisms to ensure payment, and to attempt to move payment along in a time manner.
The federal Prompt Payment Act is codified by 31 U.S.C. §§ 3901-3905. This legislation was enacted specifically in an attempt to guard against slow payment on federal contracts. According to the act, the government must pay proper invoices within a certain time or pay interest and possible penalties. Likewise, these timing protections also apply diwn-the-chain to GCs and subs packing payment to sub-tier participants. If payment is too slow, a claim can be made against the nonpaying party pursuant to the act.
Additionally, federal projects are governed by the Miller Act. The Miller Act generally requires a payment bond on federal projects for the purpose of protecting sub-tier project participants from nonpayment. In the event a first or second-tier subcontractor or supplier is unpaid, that party may make a claim against the bond for payment. Second-tier subs or suppliers must provide a formal "notice of claim" within 90 days of last furnishing labor or materials to the project. First-tier subs and suppliers can proceed directly with filing suit against the bond - but it's always best practice to provide a notice first. All parties must initiate their suit within 1 year from last furnishing labor and/or materials to the project.
Informing the nonpaying party of the ability to initiate a Miller Act bond claim, and/or file suit for breach of contract, unjust enrichment, or pursuant to the Prompt Payment Act are all avenues that may be useful to kick-start payment.