Ohio Prompt Payment Guide and FAQs

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Ohio Prompt Payment Overview

Ohio Prompt Payment Requirements


  • Private Jobs
  • Public Jobs
NO
DAYS
Prime Contractors

Ohio does not specify a timeframe for payments from the property owner to general contractor.


10
DAYS
Subcontractors

According to Ohio's Prompt Payment laws, subcontractor payments are due within 10 days after their hiring party receives payment on private construction projects.


10
DAYS
Suppliers

Ohio's Prompt Payment laws require payments to material suppliers within 10 days after their hiring party receives payment.


18%
/ YEAR
Interest & Fees

Late payments to prime contractors are subject to Ohio's general interest statute at the "federal short-term"
rate. Late payments to subcontractors and suppliers accrue interest at 18% year. The state may also award attorney fees prevailing party in a prompt payment claim.

30
DAYS
Prime Contractors

Ohio requires prompt payment to Prime Contractors within 30 days of invoice on a public project. This timeframe may be modified by contract.


10
DAYS
Subcontractors

According to Ohio's Prompt Pay laws for public construction projects, subcontractors must receive payment within 10 days after their hiring party receives payment.


10
DAYS
Suppliers

On public construction projects in Ohio, material suppliers must receive payment within 10 days after their hiring party receives payment.


18%
/ YEAR
Interest & Fees

Prime contractors are entitled to the statutory interest rate for late payments on public construction projects. Subcontractors are entitled to a prompt payment interest rate of 18% per year.

Prompt payment laws are a set of rules that regulate the acceptable amount of time in which payments must be made to contractors and subs. This is to ensure that everyone on a construction project is paid in a timely fashion. These statutes provide a framework for the timing of payments to ensure cash flow and working capital.

Projects Covered by Ohio’s Prompt Pay Laws

The state of Ohio’s prompt payment provisions are split into two sections, covering both private and public projects. These statutes govern the timing of all payments on construction projects, and impose penalties for late payment in the form of interest.

Private Projects

Payments for Ohio private construction projects are regulated by Ohio Rev. Code §4113.61: Time limitations for payments to subcontractors and materialmen.

Payment Deadlines for Private Projects

The Ohio prompt payment provisions on private projects do not govern payments from the property owner to the prime contractor. However, as of May 2020 the Ohio Legislature is considering an amendment that would set a 35-day deadline for payments from owner to prime. Currently, these payments should be made according to the terms of the contract between the parties.

However, once the prime has received payment from the owner, they must pass payment down to their subcontractors and suppliers within 10 days of payment. The same 10-day turnaround period applies to payments from 2nd-tier parties to other lower-tiered project participants.

Penalties for Late Payment on Private Projects

If payments to subcontractors or other lower-tiered project participants is either late or wrongfully withheld, interest penalties will accrue at a rate of 18% per year (1.5% per month). Additionally, Ohio courts may award attorney fees if they deem them “equitable.”

Public Projects

All payments on public construction projects in Ohio are regulated by Ohio. Rev. Code §126.30: Interest on late payments for goods & services.

Payment Deadlines for Public Projects

Once the public entity has received a proper request for payment from the prime contractor, Ohio’s prompt pay law requires payment within 30 days of receipt, unless the contract states otherwise. As far as all other payments on public works projects the same deadlines as private projects applies. Payments must be made within 10 days of the higher-tiered party’s receipt of payment.

Penalties for Late Payment on Public Projects

Any late or wrongfully withheld payments will be subject to interest penalties on the unpaid balance. Late payments to the prime contractor will accrue interest at the “federal short-term rate,” unless the contract states otherwise. The interest rate for late payments to all other payments will be the same as private projects, 18% per year (1.5% per month).

Ohio quick guide to prompt payment in construction

Ohio Prompt Payment FAQs

Frequently asked questions about Ohio's prompt payment laws, timing, and requirements. With answers written by construction attorneys and payment experts in Ohio.

Ohio Prompt Payment Private Projects FAQs

What types of private projects are subject to Ohio’s prompt payment laws?

Ohio’s prompt payment laws cover most private construction projects, except the construction or improvement of any single, two, or three-family detached dwellings.

Payments on such residential projects and any penalties for late payments will be determined by the provisions of the contract.

When do payments become due under Ohio’s prompt payment laws?

A general contractor must typically provide the property owner with a complete, detailed, and accurate estimate of the labor and/or materials furnished since the prior estimate for approval by the owner.

As far as subcontractors and suppliers are concerned, they will not be entitled to payment unless thy submit a proper invoice in enough time to allow the contractor to include the invoice in the pay application submitted to the property owner.

Read our contractor’s guide to Ohio’s prompt pay laws, deadlines, and penalties.

When is the deadline for payments to be made under Ohio’s prompt payment laws?

The timing of payments to prime contractors is not regulated by statute. Therefore, payments must be made according to the deadlines set forth in the contract between the contractor and the property owner.

Once a contractor receives payment, payments to their subs and suppliers must be made within 10 days of receipt. The same deadline applies to all other payments made down the contracting chain.

Are there reasons for which payment may be withheld past the general deadline?

A prime contractor or other contractor/subcontractor making payments may withhold amounts necessary to resolve “disputed liens or claims involving the work or labor performed or materials furnished by the subcontractor.”

The courts in Maisongale Electrical Mechanical, Inc. v. Construction One, Inc have held that this is not carte blanche to withhold payments for any disputes. The amounts withheld myst be direct, tangible amounts relating to disputes involving faulty labor, work, or materials furnished. Disputes regarding lien waiver provisions or forum selection clauses do not fall under the reasons payment can be withheld.

If I am paid late according to the prompt payment statutes, can I obtain interest or other penalties?

Late payments from the owner to the GC, although not regulated by the prompt payment statutes, are still subject to Ohio’s “general interest statutes” under ORC §1343.03(A). This statute proceeds that any payments that become due and payable are subject to interest at the “federal short-term rate,” unless the contract specifies a different rate.

Payments to subs and suppliers that aren’t made in accordance with Ohio’s prompt payment statutes are subject to interest at a rate of 18% per year (1.5% per month) starting on the 11th day until payment is made.

Furthermore, attorney fees and court costs may be available if the court determines that the award is “equitable.” The factors that the court will consider is:

  • The absence or presence of good faith allegations or defenses asserted by the parties;
  • The proportion of the amount of recovery as it relates to the amount demanded; &
  • The nature of the services rendered and the time expended in rendering the services.

Can I include prompt payment fees in my Ohio mechanics lien claim?

No, prompt payment fees may not be included in an Ohio mechanics lien amount. Lien amounts are limited to the value of labor and/or materials furnished minus any set-offs.

What is the best practice for making a demand to a non-paying party to get prompt payment fees?

Sending a Notice of Intent to Lien along with a Prompt Payment demand letter is generally the best method for encouraging parties to pay.

For subcontractors and other lower-tiered participants, if payment isn’t made within 30 days after payment should be made, they may file a civil action to recover the amount, plus any interest due.

Does Ohio's Prompt Payment law apply if my contract has a pay-if-paid clause?

Ohio’s prompt payment statute does not allow any contract clause, including a pay-if-paid clause, to supersede a construction party’s right to collect interest if payment is late.

Pay-if-paid clauses are only partially effective in Ohio; they cannot prevent a party from filing a mechanics lien, either.

Ohio Prompt Payment Public Projects FAQs

What types of public projects are subject to Ohio’s prompt payment laws?

The Ohio public prompt payment provisions apply to all public works projects within the state, with the exception of OH Department of Transportation projects, which have their own provisions regarding payments to prime contractors.

When do payments become due under Ohio’s prompt payment laws?

Payments become due for prime contractors on public works projects pursuant to the pay schedule set forth in the contract between the contractor and the public entity.

Subcontractors and suppliers, must submit a proper invoice in time for the prime contractor to include the invoice in their pay application to the public entity.

When is the deadline for payments to be made under Ohio’s prompt payment laws?

Payments to prime contractors must be made within 30 days of the public entity’s approval of the payment applications.

Once payment is received, subs and suppliers must be paid within 10 days of receipt of payment from the public entity or higher-tiered project participant (where applicable).

Dive deeper: How does a subcontractor know when a prime contractor gets payment (based on Ohio’s public prompt payment laws)?

Are there reasons for which payment may be withheld past the general deadline?

A prime contractor or other contractor/subcontractor making payments may withhold amounts necessary to resolve “disputed liens or claims involving the work or labor performed or materials furnished by the subcontractor.”

The courts in Maisongale Electrical Mechanical, Inc. v. Construction One, Inc have held that this is not carte blanche to withhold payments for any disputes. The amounts withheld myst be direct, tangible amounts relating to disputes involving faulty labor, work, or materials furnished. Disputes regarding lien waiver provisions or forum selection clauses do not fall under the reasons payment can be withheld.

If I am paid late according to the prompt payment statutes, can I obtain interest or other penalties?

Late payments to prime contractors will accrue interest at a the “prime rate” set by the commercial banks in the city closest to the construction project with a population over 100,000; which (as of 2020) include Columbus, Cleveland, Cincinnati, Toledo, Akron, & Dayton.

Interest on late payments to subs and suppliers will accrue at a rate of 18% per year (1.5% per month) starting on the 11th day payment is late.

Also, attorney fees and court costs may be available if the court determines that the award is “equitable.” The factors that the court will consider is:

  • The absence or presence of good faith allegations or defenses asserted by the parties;
  • The proportion of the amount of recovery as it relates to the amount demanded; &
  • The nature of the services rendered and the time expended in rendering the services.

Can I include prompt payment fees in my Ohio payment bond claim?

No, the amount that can be included in an Ohio public payment bond claim is limited to the amount due and unpaid for work or materials furnished, after deducting any setoffs or credits. Interest accrued may not be included.

What is the best practice for making a demand to a non-paying party to get prompt payment fees?

Sending a Notice of Intent to Make a Bond Claim along with a Prompt Payment demand letter is generally the best method for encouraging parties to pay.

For subcontractors and other lower-tiered participants, if payment isn’t made within 30 days after payment should be made, they may file a civil action to recover the amount, plus any interest due.

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Ohio Prompt Payment Statutes

Prompt Payment Statute on Private Projects

§ 4113.61. Time limitations for payments to subcontractors and materialmen

(A)

(1) If a subcontractor or material supplier submits an application or request for payment or an invoice for materials to a contractor in sufficient time to allow the contractor to include the application, request, or invoice in the contractor’s own pay request submitted to an owner, the contractor, within ten calendar days after receipt of payment from the owner for improvements to property, shall pay to the:

(a) Subcontractor, an amount that is equal to the percentage of completion of the subcontractor’s contract allowed by the owner for the amount of labor or work performed;

(b) Material supplier, an amount that is equal to all or that portion of the invoice for materials which represents the materials furnished by the material supplier.

The contractor may reduce the amount paid by any retainage provision contained in the contract, invoice, or purchase order between the contractor and the subcontractor or material supplier, and may withhold amounts that may be necessary to resolve disputed liens or claims involving the work or labor performed or material furnished by the subcontractor or material supplier.

If the contractor fails to comply with division (A)(1) of this section, the contractor shall pay the subcontractor or material supplier, in addition to the payment due, interest in the amount of eighteen per cent per annum of the payment due, beginning on the eleventh day following the receipt of payment from the owner and ending on the date of full payment of the payment due plus interest to the subcontractor or material supplier.

(2) If a lower tier subcontractor or lower tier material supplier submits an application or request for payment or an invoice for materials to a subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier in sufficient time to allow the subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier to include the application, request, or invoice in the subcontractor’s, material supplier’s, or other lower tier subcontractor’s or lower tier material supplier’s own pay request submitted to a contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier, the subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier, within ten calendar days after receipt of payment from the contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier for improvements to property, shall pay to the:

(a) Lower tier subcontractor, an amount that is equal to the percentage of completion of the lower tier subcontractor’s contract allowed by the owner for the amount of labor or work performed;

(b) Lower tier material supplier, an amount that is equal to all or that portion of the invoice for materials which represents the materials furnished by the lower tier material supplier.

The subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier may reduce the amount paid by any retainage provision contained in the contract, invoice, or purchase order between the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and the lower tier subcontractor or lower tier material supplier, and may withhold amounts that may be necessary to resolve disputed liens or claims involving the work or labor performed or material furnished by the lower tier subcontractor or lower tier material supplier.

If the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier fails to comply with division (A)(2) of this section, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay the lower tier subcontractor or lower tier material supplier, in addition to the payment due, interest in the amount of eighteen per cent per annum of the payment due, beginning on the eleventh day following the receipt of payment from the contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and ending on the date of full payment of the payment due plus interest to the lower tier subcontractor or lower tier material supplier.

(3) If a contractor receives any final retainage from the owner for improvements to property, the contractor shall pay from that retainage each subcontractor and material supplier the subcontractor’s or material supplier’s proportion of the retainage, within ten calendar days after receipt of the retainage from the owner, or within the time period provided in a contract, invoice, or purchase order between the contractor and the subcontractor or material supplier, whichever time period is shorter, provided that the contractor has determined that the subcontractor’s or material supplier’s work, labor, and materials have been satisfactorily performed or furnished and that the owner has approved the subcontractor’s or material supplier’s work, labor, and materials.

If the contractor fails to pay a subcontractor or material supplier within the appropriate time period, the contractor shall pay the subcontractor or material supplier, in addition to the retainage due, interest in the amount of eighteen per cent per annum of the retainage due, beginning on the eleventh day following the receipt of the retainage from the owner and ending on the date of full payment of the retainage due plus interest to the subcontractor or material supplier.

(4) If a subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier receives any final retainage from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier for improvements to property, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay from that retainage each lower tier subcontractor or lower tier the lower tier subcontractor’s or lower tier material supplier’s proportion of the retainage, within ten calendar days after receipt of payment from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier, or within the time period provided in a contract, invoice, or purchase order between the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and the lower tier subcontractor or lower tier material supplier, whichever time period is shorter, provided that the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has determined that the lower tier subcontractor’s or lower tier material supplier’s work, labor, and materials have been satisfactorily performed or furnished and that the owner has approved the lower tier subcontractor’s or lower tier material supplier’s work, labor, and materials.

If the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier fails to pay the lower tier subcontractor or lower tier material supplier within the appropriate time period, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay the lower tier subcontractor or lower tier material supplier, in addition to the retainage due, interest in the amount of eighteen per cent per annum of the retainage due, beginning on the eleventh day following the receipt of the retainage from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier and ending on the date of full payment of the retainage due plus interest to the lower tier subcontractor or lower tier material supplier.

(5) A contractor, subcontractor, or lower tier subcontractor shall pay a laborer wages due within ten days of payment of any application or request for payment or the receipt of any retainage from an owner, contractor, subcontractor, or lower tier subcontractor.

If the contractor, subcontractor, or lower tier subcontractor fails to pay the laborer wages due within the appropriate time period, the contractor, subcontractor, or lower tier subcontractor shall pay the laborer, in addition to the wages due, interest in the amount of eighteen per cent per annum of the wages due, beginning on the eleventh day following the receipt of payment from the owner, contractor, subcontractor, or lower tier subcontractor and ending on the date of full payment of the wages due plus interest to the laborer.

(B)

(1) If a contractor, subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has not made payment in compliance with division (A)(1), (2), (3), (4), or (5) of this section within thirty days after payment is due, a subcontractor, material supplier, lower tier subcontractor, lower tier material supplier, or laborer may file a civil action to recover the amount due plus the interest provided in those divisions. If the court finds in the civil action that a contractor, subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has not made payment in compliance with those divisions, the court shall award the interest specified in those divisions, in addition to the amount due. Except as provided in division (B)(3) of this section, the court shall award the prevailing party reasonable attorney fees and court costs.

(2) In making a determination to award attorney fees under division (B)(1) of this section, the court shall consider all relevant factors, including but not limited to the following:

(a) The presence or absence of good faith allegations or defenses asserted by the parties;

(b) The proportion of the amount of recovery as it relates to the amount demanded;

(c) The nature of the services rendered and the time expended in rendering the services.

(3) The court shall not award attorney fees under division (B)(1) of this section if the court determines, following a hearing on the payment of attorney fees, that the payment of attorney fees to the prevailing party would be inequitable.

(C) This section does not apply to any construction or improvement of any single-, two-, or three-family detached dwelling houses.

(D)

(1) No provision of this section regarding entitlement to interest, attorney fees, or court costs may be waived by agreement and any such term in any contract or agreement is void and unenforceable as against public policy.

(2) This section shall not be construed as impairing or affecting, in any way, the terms and conditions of any contract, invoice, purchase order, or any other agreement between a contractor and a subcontractor or a material supplier or between a subcontractor and another subcontractor, a material supplier, a lower tier subcontractor, or a lower tier material supplier, except that if such terms and conditions contain time periods which are longer than any of the time periods specified in divisions (A)(1), (2), (3), (4), and (5) of this section or interest at a percentage less than the interest stated in those divisions, then the provisions of this section shall prevail over such terms and conditions.

(E) Notwithstanding the definition of lower tier material supplier in this section, a person is not a lower tier material supplier unless the materials supplied by the person are:

(1) Furnished with the intent, as evidenced by the contract of sale, the delivery order, delivery to the site, or by other evidence that the materials are to be used on a particular structure or improvement;

(2) Incorporated in the improvement or consumed as normal wastage in the course of the improvement; or

(3) Specifically fabricated for incorporation in the improvement and not readily resalable in the ordinary course of the fabricator’s business even if not actually incorporated in the improvement.

(F) As used in this section:

(1) “Contractor” means any person who undertakes to construct, alter, erect, improve, repair, demolish, remove, dig, or drill any part of a structure or improvement under a contract with an owner, a “construction manager” or “construction manager at risk” as those terms are defined in section 9.33 of the Revised Code, or a “design-build firm” as that term is defined in section 153.65 of the Revised Code.

(2) “Laborer,” “material supplier,” “subcontractor,” and “wages” have the same meanings as in section 1311.01 of the Revised Code.

(3) “Lower tier subcontractor” means a subcontractor who is not in privity of contract with a contractor but is in privity of contract with another subcontractor.

(4) “Lower tier material supplier” means a material supplier who is not in privity of contract with a contractor but is in privity of contract with another subcontractor or a material supplier.

(5) “Wages due” means the wages due to a laborer as of the date a contractor or subcontractor receives payment for any application or request for payment or retainage from any owner, contractor, or subcontractor.

(6) “Owner” includes the state, and a county, township, municipal corporation, school district, or other political subdivision of the state, and any public agency, authority, board, commission, instrumentality, or special district of or in the state or a county, township, municipal corporation, school district, or other political subdivision of the state, and any officer or agent thereof and relates to all the interests either legal or equitable, which a person may have in the real estate upon which improvements are made, including interests held by any person under contracts of purchase, whether in writing or otherwise.

Prompt Payment Statute on Public Projects

§ 153.12. Awarding and executing contract

(A) With respect to award of any contract for the construction, reconstruction, improvement, enlargement, alteration, repair, painting, or decoration of a public improvement made by the state, or any county, township, municipal corporation, school district, or other political subdivision, or any public board, commission, authority, instrumentality, or special purpose district of or in the state or a political subdivision or that is authorized by state law, the award, and execution of the contract, shall be made within sixty days after the date on which the bids are opened. The failure to award and execute the contract within sixty days invalidates the entire bid proceedings and all bids submitted, unless the time for awarding and executing the contract is extended by mutual consent of the owner or its representatives and the bidder whose bid the owner accepts and with respect to whom the owner subsequently awards and executes a contract. The public owners referred to in this section shall include, in the plans and specifications for the project for which bids are solicited, the estimate of cost. The bid for which the award is to be made shall be opened at the time and place named in the advertisement for bids, unless extended by the owner or its representative or unless, within seventy-two hours prior to the published time for the opening of bids, excluding Saturdays, Sundays, and legal holidays, any modification of the plans or specifications and estimates of cost for the project for which bids are solicited is issued and mailed or otherwise furnished to persons who have obtained plans or specifications for the project, for which the time for opening of bids shall be extended one week, with no further advertising of bids required. The contractor, upon request, is entitled to a notice to proceed with the work by the owner or its representative upon execution of the contract. No contract to which this section applies shall be entered into if the price of the contract, or, if the project involves multiple contracts where the total price of all contracts for the project, is in excess of ten per cent above the entire estimate thereof, nor shall the entire cost of the construction, reconstruction, repair, painting, decorating, improvement, alteration, addition, or installation, including changes and estimates of expenses for architects or engineers, exceed in the aggregate the amount authorized by law.

The unit or lump sum price stated in the contract shall be used in determining the amount to be paid and shall constitute full and final compensation for all the work.

Partial payment to the contractor for work performed under the lump sum price shall be based on a schedule prepared by the contractor and approved by the architect or engineer who shall apportion the lump sum price to the major components entering into or forming a part of the work under the lump sum price.

Partial payments to the contractor for labor performed under either a unit or lump sum price contract shall be made at the rate of ninety-two per cent of the estimates prepared by the contractor and approved by the architect or engineer. All labor performed after the job is fifty per cent completed shall be paid for at the rate of one hundred per cent of the estimates submitted by the contractor and approved by the architect or engineer.

The amounts and time of payments of any public improvements contract made by the state or any county, township, municipal corporation, school district, or other political subdivision, or any public board, commission, authority, instrumentality, or special purpose district of or in the state or a political subdivision or that is authorized by state law, except as provided in section 5525.19 of the Revised Code, shall be governed by this section and sections 153.13 and 153.14 of the Revised Code. If the time for awarding the contract is extended by mutual consent, or if the owner or its representative fails to issue a timely notice to proceed as required by this section, the owner or its representative shall issue a change order authorizing delay costs to the contractor, which does not invalidate the contract. The amount of such a change order to the owner shall be determined in accordance with the provisions of the contract for change orders or force accounts or, if no such provision is set forth in the contract, the cost to the owner shall be the contractor’s actual costs including wages, labor costs other than wages, wage taxes, materials, equipment costs and rentals, insurance, and subcontracts attributable to the delay, plus a reasonable sum for overhead. In the event of a dispute between the owner and the contractor concerning such change order, procedures shall be commenced under the applicable terms of the contract, or, if the contract contains no provision for resolving the dispute, it shall be resolved pursuant to the procedures for arbitration in Chapter 2711. of the Revised Code, except as provided in division (B) of this section. Nothing in this division shall be construed as a limitation upon the authority of the director of transportation granted in Chapter 5525. of the Revised Code.

(B) If a dispute arises between the state and a contractor concerning the terms of a public improvement contract let by the state or concerning a breach of the contract, and after administrative remedies provided for in such contract and any alternative dispute resolution procedures provided in accordance with guidelines established by the executive director of the Ohio facilities construction commission are exhausted, the contractor may bring an action to the court of claims in accordance with Chapter 2743. of the Revised Code. The state or the contractor may request the chief justice of the supreme court to appoint a referee or panel of referees in accordance with division (C)(3) of section 2743.03 of the Revised Code. As used in this division, “dispute” means a disagreement between the state and the contractor concerning a public improvement contract let by the state.

§ 153.13. Estimates of labor and materials - funds in escrow account

At the time named in the contract for payment to the person with whom it is made, the owner referred to in section 153.01 or 153.12 of the Revised Code shall approve a full, accurate, and detailed estimate of the various kinds of labor performed and material furnished under the contract, with the amount due for each kind of labor and material and the materials and amount due in the aggregate, which estimate shall be based upon actual measurement of such labor and materials, and shall give the amounts of the preceding estimate, and the amount of labor performed and materials furnished since the last estimate. From the date the contract is fifty per cent complete, as evidenced by payments in the amount of at least fifty per cent of the contract to the person with whom the owner has contracted, except in the case of contracts the total cost of which is less than fifteen thousand dollars, all funds retained pursuant to sections 153.12 and 153.14 of the Revised Code for the faithful performance of work shall be deposited in the escrow account designated in section 153.63 of the Revised Code. After the contract is fifty per cent complete, no further funds shall be retained. When the major portion of the project is substantially completed and occupied, or in use, or otherwise accepted, and there exists no other reason to withhold retainage, the retained percentages held in connection with such portion shall be released from escrow and paid to the contractor, withholding only that amount necessary to assure completion. Funds in the escrow account not heretofore paid, with accumulated interest, shall be paid to the person with whom the owner has contracted thirty days from the date of completion or either acceptance or occupancy by the owner. Such payments shall be in accordance with division (A)(2) of section 153.63 of the Revised Code. Nothing in this section shall be construed as a limitation upon the authority of the director of transportation granted in Chapter 5525. of the Revised Code.

§ 153.14. Estimates to be filed with the executive director - payment on materials delivered - payment procedure

For the construction of those projects, improvements, and public buildings over which the Ohio facilities construction commission has general supervision pursuant to section 123.21 of the Revised Code, the estimates referred to in section 153.13 of the Revised Code shall be filed with the executive director by the owner referred to in section 153.01 or 153.12 of the Revised Code. Upon completion of a project referred to in section 153.13 of the Revised Code or any divisible part thereof, the maintenance and repair of such project or divisible part shall be assumed by the owner referred to in section 153.01 or 153.12 of the Revised Code.

In addition to all other payments on account of work performed, there shall be allowed by the owner referred to in section 153.01 or 153.12 of the Revised Code and paid to the contractor a sum at the rate of ninety-two per cent of the invoice costs, not to exceed the bid price in a unit price contract, of material delivered on the site of the work, or a railroad station, siding, or other point in the vicinity of the work, or other approved storage site, provided such materials have been inspected and found to meet the specifications. The balance of such invoiced value shall be paid when such material is incorporated into and becomes a part of such building, construction, addition, improvement, alteration, or installation. When an estimate is allowed on account of material delivered on the site of the work or in the vicinity thereof or under the possession and control of the contractor but not yet incorporated therein, such material shall become the property of the owner under the contract, but if such material is stolen, destroyed, or damaged by casualty before being used, the contractor shall be required to replace it at the contractor’s own expense.

When the rate of work and amounts involved are so large that it is considered advisable by the owner or contractor, estimates and payments shall be made twice each month.

Payment on approved estimates filed with the owner or its representative shall be made within thirty days. Upon the failure of the owner or its representative to make such payments within thirty days, or upon an unauthorized withholding of retainage, there shall be allowed to the contractor, in addition to any other remedies allowed by law, interest on such moneys not paid within thirty days. Interest on the unauthorized withholding of retainage shall be in addition to any interest earned in the escrow account set forth in section 153.13 of the Revised Code. The rate of such interest shall be the average of the prime rate established at the commercial banks in the city of over one hundred thousand population that is nearest the construction project. Nothing in this section shall be construed as a limitation upon the authority of the director of transportation granted in Chapter 5525. of the Revised Code.

§ 153.63. Agreement for escrow account for contractor

(A) Any money which is due from the public owner referred to in section 153.12 of the Revised Code under a contract entered into under this chapter or entered into under other applicable sections of the Revised Code for the construction, reconstruction, improvement, enlargement, alteration, repair, painting, or decoration of a public improvement shall, on the day it is due, be paid to the contractor or deposited in an escrow account, whichever is applicable, with one or more banks or building and loan associations in the state selected by mutual agreement between the contractor and the public owner. The agreement shall contain the following provisions:

(1) The money shall be deposited in a savings account or the escrow agent shall promptly invest all of the escrowed principal in obligations selected by the escrow agent, as stipulated in the agreement.

(2) The escrow agent shall hold the escrowed principal and income until receipt of notice from the public owner and the contractor, or until receipt of an arbitration order or an order of the court of claims specifying the amount of the escrowed principal to be released and the person to whom it is to be released. Upon receipt of the notice or order, the agent shall promptly pay such amount of principal and a proportionate amount of the escrowed income to the person indicated.

(3) The escrow agent shall be compensated for its services as agreed to by the public owner and the contractor from the income from the escrow account.

The agreement may include other provisions not inconsistent with this section, including, but not limited to granting authority for the escrow agent to commingle the escrowed funds with funds held pursuant to other escrow agreements and limiting the liability of the escrow agent.

(B) When the public owner, as defined in division (B) of section 2743.01 of the Revised Code, and the contractor disagree as to the conditions under which money is to be paid under this section, the parties shall apply for a decision by arbitration under the procedures of Chapter 2711. of the Revised Code. When an application is made, neither party shall initiate, and no court shall permit the maintenance of, an action in court for decision of the same issues sought to be determined in the arbitration application. The award made by the arbitrator may include the costs of arbitration. The arbitration shall be binding on all parties.

(C) When the public owner, as defined in division (A) of section 2743.01 of the Revised Code, and the contractor disagree as to the conditions under which money is to be paid under this section the contractor shall file an action in the court of claims.

(D) If the money required to be paid or deposited under division (A) of this section is not paid or deposited, the governmental entity shall pay to the contractor an amount equal to eight per cent annual interest compounded daily.

§ 4113.61. Time limitations for payments to subcontractors and materialmen

(A)

(1) If a subcontractor or material supplier submits an application or request for payment or an invoice for materials to a contractor in sufficient time to allow the contractor to include the application, request, or invoice in the contractor’s own pay request submitted to an owner, the contractor, within ten calendar days after receipt of payment from the owner for improvements to property, shall pay to the:

(a) Subcontractor, an amount that is equal to the percentage of completion of the subcontractor’s contract allowed by the owner for the amount of labor or work performed;

(b) Material supplier, an amount that is equal to all or that portion of the invoice for materials which represents the materials furnished by the material supplier.

The contractor may reduce the amount paid by any retainage provision contained in the contract, invoice, or purchase order between the contractor and the subcontractor or material supplier, and may withhold amounts that may be necessary to resolve disputed liens or claims involving the work or labor performed or material furnished by the subcontractor or material supplier.

If the contractor fails to comply with division (A)(1) of this section, the contractor shall pay the subcontractor or material supplier, in addition to the payment due, interest in the amount of eighteen per cent per annum of the payment due, beginning on the eleventh day following the receipt of payment from the owner and ending on the date of full payment of the payment due plus interest to the subcontractor or material supplier.

(2) If a lower tier subcontractor or lower tier material supplier submits an application or request for payment or an invoice for materials to a subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier in sufficient time to allow the subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier to include the application, request, or invoice in the subcontractor’s, material supplier’s, or other lower tier subcontractor’s or lower tier material supplier’s own pay request submitted to a contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier, the subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier, within ten calendar days after receipt of payment from the contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier for improvements to property, shall pay to the:

(a) Lower tier subcontractor, an amount that is equal to the percentage of completion of the lower tier subcontractor’s contract allowed by the owner for the amount of labor or work performed;

(b) Lower tier material supplier, an amount that is equal to all or that portion of the invoice for materials which represents the materials furnished by the lower tier material supplier.

The subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier may reduce the amount paid by any retainage provision contained in the contract, invoice, or purchase order between the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and the lower tier subcontractor or lower tier material supplier, and may withhold amounts that may be necessary to resolve disputed liens or claims involving the work or labor performed or material furnished by the lower tier subcontractor or lower tier material supplier.

If the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier fails to comply with division (A)(2) of this section, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay the lower tier subcontractor or lower tier material supplier, in addition to the payment due, interest in the amount of eighteen per cent per annum of the payment due, beginning on the eleventh day following the receipt of payment from the contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and ending on the date of full payment of the payment due plus interest to the lower tier subcontractor or lower tier material supplier.

(3) If a contractor receives any final retainage from the owner for improvements to property, the contractor shall pay from that retainage each subcontractor and material supplier the subcontractor’s or material supplier’s proportion of the retainage, within ten calendar days after receipt of the retainage from the owner, or within the time period provided in a contract, invoice, or purchase order between the contractor and the subcontractor or material supplier, whichever time period is shorter, provided that the contractor has determined that the subcontractor’s or material supplier’s work, labor, and materials have been satisfactorily performed or furnished and that the owner has approved the subcontractor’s or material supplier’s work, labor, and materials.

If the contractor fails to pay a subcontractor or material supplier within the appropriate time period, the contractor shall pay the subcontractor or material supplier, in addition to the retainage due, interest in the amount of eighteen per cent per annum of the retainage due, beginning on the eleventh day following the receipt of the retainage from the owner and ending on the date of full payment of the retainage due plus interest to the subcontractor or material supplier.

(4) If a subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier receives any final retainage from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier for improvements to property, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay from that retainage each lower tier subcontractor or lower tier the lower tier subcontractor’s or lower tier material supplier’s proportion of the retainage, within ten calendar days after receipt of payment from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier, or within the time period provided in a contract, invoice, or purchase order between the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and the lower tier subcontractor or lower tier material supplier, whichever time period is shorter, provided that the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has determined that the lower tier subcontractor’s or lower tier material supplier’s work, labor, and materials have been satisfactorily performed or furnished and that the owner has approved the lower tier subcontractor’s or lower tier material supplier’s work, labor, and materials.

If the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier fails to pay the lower tier subcontractor or lower tier material supplier within the appropriate time period, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay the lower tier subcontractor or lower tier material supplier, in addition to the retainage due, interest in the amount of eighteen per cent per annum of the retainage due, beginning on the eleventh day following the receipt of the retainage from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier and ending on the date of full payment of the retainage due plus interest to the lower tier subcontractor or lower tier material supplier.

(5) A contractor, subcontractor, or lower tier subcontractor shall pay a laborer wages due within ten days of payment of any application or request for payment or the receipt of any retainage from an owner, contractor, subcontractor, or lower tier subcontractor.

If the contractor, subcontractor, or lower tier subcontractor fails to pay the laborer wages due within the appropriate time period, the contractor, subcontractor, or lower tier subcontractor shall pay the laborer, in addition to the wages due, interest in the amount of eighteen per cent per annum of the wages due, beginning on the eleventh day following the receipt of payment from the owner, contractor, subcontractor, or lower tier subcontractor and ending on the date of full payment of the wages due plus interest to the laborer.

(B)

(1) If a contractor, subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has not made payment in compliance with division (A)(1), (2), (3), (4), or (5) of this section within thirty days after payment is due, a subcontractor, material supplier, lower tier subcontractor, lower tier material supplier, or laborer may file a civil action to recover the amount due plus the interest provided in those divisions. If the court finds in the civil action that a contractor, subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has not made payment in compliance with those divisions, the court shall award the interest specified in those divisions, in addition to the amount due. Except as provided in division (B)(3) of this section, the court shall award the prevailing party reasonable attorney fees and court costs.

(2) In making a determination to award attorney fees under division (B)(1) of this section, the court shall consider all relevant factors, including but not limited to the following:

(a) The presence or absence of good faith allegations or defenses asserted by the parties;

(b) The proportion of the amount of recovery as it relates to the amount demanded;

(c) The nature of the services rendered and the time expended in rendering the services.

(3) The court shall not award attorney fees under division (B)(1) of this section if the court determines, following a hearing on the payment of attorney fees, that the payment of attorney fees to the prevailing party would be inequitable.

(C) This section does not apply to any construction or improvement of any single-, two-, or three-family detached dwelling houses.

(D)

(1) No provision of this section regarding entitlement to interest, attorney fees, or court costs may be waived by agreement and any such term in any contract or agreement is void and unenforceable as against public policy.

(2) This section shall not be construed as impairing or affecting, in any way, the terms and conditions of any contract, invoice, purchase order, or any other agreement between a contractor and a subcontractor or a material supplier or between a subcontractor and another subcontractor, a material supplier, a lower tier subcontractor, or a lower tier material supplier, except that if such terms and conditions contain time periods which are longer than any of the time periods specified in divisions (A)(1), (2), (3), (4), and (5) of this section or interest at a percentage less than the interest stated in those divisions, then the provisions of this section shall prevail over such terms and conditions.

(E) Notwithstanding the definition of lower tier material supplier in this section, a person is not a lower tier material supplier unless the materials supplied by the person are:

(1) Furnished with the intent, as evidenced by the contract of sale, the delivery order, delivery to the site, or by other evidence that the materials are to be used on a particular structure or improvement;

(2) Incorporated in the improvement or consumed as normal wastage in the course of the improvement; or

(3) Specifically fabricated for incorporation in the improvement and not readily resalable in the ordinary course of the fabricator’s business even if not actually incorporated in the improvement.

(F) As used in this section:

(1) “Contractor” means any person who undertakes to construct, alter, erect, improve, repair, demolish, remove, dig, or drill any part of a structure or improvement under a contract with an owner, a “construction manager” or “construction manager at risk” as those terms are defined in section 9.33 of the Revised Code, or a “design-build firm” as that term is defined in section 153.65 of the Revised Code.

(2) “Laborer,” “material supplier,” “subcontractor,” and “wages” have the same meanings as in section 1311.01 of the Revised Code.

(3) “Lower tier subcontractor” means a subcontractor who is not in privity of contract with a contractor but is in privity of contract with another subcontractor.

(4) “Lower tier material supplier” means a material supplier who is not in privity of contract with a contractor but is in privity of contract with another subcontractor or a material supplier.

(5) “Wages due” means the wages due to a laborer as of the date a contractor or subcontractor receives payment for any application or request for payment or retainage from any owner, contractor, or subcontractor.

(6) “Owner” includes the state, and a county, township, municipal corporation, school district, or other political subdivision of the state, and any public agency, authority, board, commission, instrumentality, or special district of or in the state or a county, township, municipal corporation, school district, or other political subdivision of the state, and any officer or agent thereof and relates to all the interests either legal or equitable, which a person may have in the real estate upon which improvements are made, including interests held by any person under contracts of purchase, whether in writing or otherwise.

§ 5525.19. Advertisement for bids - awarding of contracts - ODOT letting fund

Before entering into a contract, the director of transportation shall advertise for bids for two consecutive weeks in one newspaper of general circulation published in the county in which the improvement or part thereof is located, but if there is no such newspaper then in one newspaper having general circulation in an adjacent county. In the alternative, the director may advertise for bids as provided in section 7.16 of the Revised Code. The director may advertise for bids in such other publications as the director considers advisable. Such notices shall state that plans and specifications for the improvement are on file in the office of the director and the district deputy director of the district in which the improvement or part thereof is located and the time within which bids therefor will be received.

Each bidder shall be required to file with the bidder’s bid a bid guaranty in the form of a certified check, a cashier’s check, or an electronic funds transfer to the treasurer of state that is evidenced by a receipt or by a certification to the director of transportation in a form prescribed by the director that an electronic funds transfer has been made to the treasurer of state, for an amount equal to five per cent of the bidder’s bid, but in no event more than fifty thousand dollars, or a bid bond for ten per cent of the bidder’s bid, payable to the director, which check, transferred sum, or bond shall be forthwith returned to the bidder in case the contract is awarded to another bidder, or, in case of a successful bidder, when the bidder has entered into a contract and furnished the bonds required by section 5525.16 of the Revised Code. In the event the contract is awarded to a bidder, and the bidder fails or refuses to furnish the bonds as required by section 5525.16 of the Revised Code, the check, transferred sum, or bid bond filed with the bidder’s bid shall be forfeited as liquidated damages. No bidder shall be required either to file a signed contract with the bidder’s bid, to enter into a contract, or to furnish the contract performance bond and the payment bond required by that section until the bids have been opened and the bidder has been notified by the director that the bidder is awarded the contract.

The director shall permit a bidder to withdraw the bidder’s bid from consideration, without forfeiture of the check, transferred sum, or bid bond filed with the bid, providing a written request together with a sworn statement of the grounds for such withdrawal is delivered within forty-eight hours after the time established for the receipt of bids, and if the price bid was substantially lower than the other bids, providing the bid was submitted in good faith, and the reason for the price bid being substantially lower was a clerical mistake evident on the face of the bid, as opposed to a judgment mistake, and was actually due to an unintentional and substantial arithmetic error or an unintentional omission of a substantial quantity of work, labor, or material made directly in the compilation of the bid. In the event the director decides the conditions for withdrawal have not been met, the director may award the contract to such bidder. If such bidder does not then enter into a contract and furnish the contract bond as required by law, the director may declare forfeited the check, transferred sum, or bid bond as liquidated damages and award the contract to the next higher bidder or reject the remaining bids and readvertise the project for bids. Such bidder , within thirty days, may appeal the decision of the director to the court of common pleas of Franklin county and the court may affirm or reverse the decision of the director and may order the director to refund the amount of the forfeiture. At the hearing before the common pleas court evidence may be introduced for and against the decision of the director. The decision of the common pleas court may be appealed as in other cases.

There is hereby created the ODOT letting fund, which shall be in the custody of the treasurer of state but shall not be part of the state treasury. All certified checks and cashiers’ checks received with bidders’ bids, and all sums transferred to the treasurer of state by electronic funds transfer in connection with bidders’ bids, under this section shall be credited to the fund. All such bid guaranties shall be held in the fund until a determination is made as to the final disposition of the money. If the department determines that any such bid guaranty is no longer required to be held, the amount of the bid guaranty shall be returned to the appropriate bidder. If the department determines that a bid guaranty under this section shall be forfeited, the amount of the bid guaranty shall be transferred or, in the case of money paid on a forfeited bond, deposited into the state treasury, to the credit of the highway operating fund. Any investment earnings of the ODOT letting fund shall be distributed as the treasurer of state considers appropriate.

The director shall require all bidders to furnish the director, upon such forms as the director may prescribe, detailed information with respect to all pending work of the bidder, whether with the department of transportation or otherwise, together with such other information as the director considers necessary.

In the event a bidder fails to submit anything required to be submitted with the bid and then fails or refuses to so submit such at the request of the director, the failure or refusal constitutes grounds for the director, in the director’s discretion, to declare as forfeited the bid guaranty submitted with the bid.

The director may reject any or all bids. Except in regard to contracts for environmental remediation and specialty work for which there are no classes of work set out in the rules adopted by the director, if the director awards the contract, the director shall award it to the lowest competent and responsible bidder as defined by rules adopted by the director under section 5525.05 of the Revised Code, who is qualified to bid under sections 5525.02 to 5525.09 of the Revised Code. In regard to contracts for environmental remediation and specialty work for which there are no classes of work set out in the rules adopted by the director, the director shall competitively bid the projects in accordance with this chapter and shall award the contracts to the lowest and best bidder.

The award for all projects competitively let by the director under this section shall be made within ten days after the date on which the bids are opened, and the successful bidder shall enter into a contract and furnish a contract performance bond and a payment bond, as provided for in section 5525.16 of the Revised Code, within ten days after the bidder is notified that the bidder has been awarded the contract.

The director may insert in any contract awarded under this chapter a clause providing for value engineering change proposals, under which a contractor who has been awarded a contract may propose a change in the plans and specifications of the project that saves the department time or money on the project without impairing any of the essential functions and characteristics of the project such as service life, reliability, economy of operation, ease of maintenance, safety, and necessary standardized features. If the director adopts the value engineering proposal, the savings from the proposal shall be divided between the department and the contractor according to guidelines established by the director, provided that the contractor shall receive at least fifty per cent of the savings from the proposal. The adoption of a value engineering proposal does not invalidate the award of the contract or require the director to rebid the project.

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