By Paul E. Davis
Special to North Carolina Construction News
Last summer, Gov. Roy Cooper signed into law the first significant changes to the State’s “Verified Claims” process in over 30 years.
Senate Bill 255 (ratified as S.L. 2019-39) amended N.C. Gen. Stat. §143-135.3. The legislation was titled “An act providing the time period in which the Director of the Office of State Construction shall issue a final order allowing or denying a contractor’s verified written claim.”
As the title of the legislation states, the General Assembly added specific deadlines for the Director of the Office of State Construction to issue decisions on Verified Claims submitted to his office. This is a significant change to existing law as it effects virtually all claims bought by contractors on state construction projects. Claims on North Carolina Department of Transportation (NCDOT) projects are not, however, affected by this legislation. Claims on NCDOT projects are subject to a separate Verified Claims process under N.C. Gen. Stat. §136-26.
The significance of the amendment to §143-135.3 is greater than just the breadth of claims affected. There are now clearly stated deadlines for the director to issue final decisions on Verified Claims.
Prior to this amendment, the only deadline in §143-135.3 was that “(t)he Director shall investigate a submitted claim within 90 days of receiving the claim, or within any longer time period upon which the Director and the contractor agree.” That was the extent of any express deadline for the director to act.
The Office of State Construction has for many years taken the position that the 90-day deadline was a deadline to begin the investigation and nothing more; that there was nothing in this statute or in any other statute or regulation that set a deadline for issuance of the director’s decision on the claim.
Senate Bill 255 deleted that sentence and added three specific deadlines for the director’s decision depending on the amount of the claim.
- For claims of less than $100,000, the director “shall investigate and issue a final written decision” within 120 days of receipt of the contractor’s Verified Claim;
- For claims of at least $100,000 but less than $5,000,000, the director shall investigate and issue a final written decision within 180 days of receipt of the contractor’s Verified Claim; and
- For claims of $5,000,000 or more, the director shall investigate and issue a final written decision within 270 days of receipt of the contractor’s Verified Claim.
The General Assembly also added a “deemed denied” provision to the statute. If the Director does not issue a final written decision within the applicable time period (or at the expiration of any mutually agreed-upon extended time period) the Verified Claim will be deemed denied. The addition of the “deemed denied” provision removes uncertainty as to the effect of the director’s failure to timely act.
Without the Director’s written final decision on a Verified Claim, a contractor is unable to seek further review of its claim either by commencing a contested case under the North Carolina Administrative Procedure Act or by commencing a civil action in North Carolina Superior Court. The addition of deadlines and the deemed denied provision are welcome changes to the Verified Claim process.
The amendment to the statute was effective on Jan. 1, 2020 and applies to Verified Claims submitted on or after that date.
Paul Davis is a construction lawyer with Conner Gwyn Schenck PLLC, based in Raleigh. He has studied and briefed virtually every aspect of construction contract law and concentrates his practice in the areas of construction arbitration and litigation and contract drafting and negotiation for public and private clients, including general contractors, construction managers, and subcontractors. He can be reached by email at email@example.com or by phone at (919) 789-9242 (Ext. 2343).