Payment issues dominate the world of the public works contractor in Pennsylvania. When must progress payments be made? When can the government withhold payment? Is interest due on late payments? When is final payment due? How much retainage can be withheld and when must retainage be reduced and fully released?
Generally, payment obligations on public works contracts are set forth in Part II, Chapter 39, of the Pa. Procurement Code, 62 Pa.C.S. § 3901, et seq. These provisions control the public owner’s payment obligations, as well as contractors’ obligations for payment to its subcontractors.
This post is the first in a planned series on the payment requirements for public works contracts in Pennsylvania. Under the Commonwealth Procurement Code, 62 Pa.C.S. § 3941, the public owner’s obligations for final payment are strict.
When retainage is withheld, the public contract must require the architect or engineer to make final inspection within 30 days of receipt of the contractor’s request for final inspection and final payment. If the work is substantially completed, then
the architect or engineer shall issue a certificate of completion and a final certificate for payment, and the government agency shall make payment in full within 45 days except as provided in section 3921, less only one and one-half times the amount required to complete any then-remaining uncompleted minor items, which amount shall be certified by the architect or engineer and, upon receipt by the government agency of any guarantee bonds which may be required, in accordance with the contract, to insure proper workmanship for a designated period of time. [Emphasis added]
Under the terms of the section 3941, once the punch list items are completed, the public owner must make final payment of the amount that was withheld for completion of the punch list .
What does all of this mean in plain English?
Once “substantial completion” is achieved, (1) an inspection must be performed within 30 days after a contractor’s request, (2) the architect must issue a certificate of completion and for payment, (3) the architect must prepare a punch list and assign a value for the punch list items, and (4) payment, less one and a half times the punch list value, must be made to the contractor within 45 days. Final payment must then be made once all of the punch list items are completed.
If you are public works contractor, it is imperative that you request a final inspection after substantial completion. This request triggers the final payment obligations of the public owner. This request also triggers the public owner’s obligation to release retainage. Contrary to popular practice, a public owner is not permitted to hold 5% retainage (or more) until the literal final completion of the work.
If you need assistance on a public works payment issue, call or email me for a no-cost consultation. I’ll be happy to assist in anyway possible.
Christopher I. McCabe, Esq.
