Model P3 Contracts Must Include Payment Protection Provisions for Subs

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The U.S. Department of Transportation’s Federal Highway Administration should include payment protection provisions for subcontractors in the model contracts for public-private partnerships that the agency is developing, the American Subcontractors Association told the DOT in an April 10, 2013, letter. Such model contracts are required by Section 1534 (Public-Private Partnerships) of Public Law 112-141 (Moving Ahead for Progress in the 21st Century Act, or “MAP-21”).

“ASA strongly urges that the proposed text of the model contracts must reflect a requirement for surety bonding on contracts for construction awarded in furtherance of the P3 project being undertaken,” ASA wrote. “Such provision should provide payment protections to subcontractors and suppliers at least as effective as those provided by the 1935 Miller Act on construction undertaken directly by a Federal agency or by the so-called Little Miller Acts of the various States for construction projects undertaken by a state agency.” Given the unpredictable diversity of public-private partnerships, ASA explained, subcontractors and suppliers too frequently encounter a dangerous void in essential payment protections for work performed.

“The severe risk inherent in the absence of reliable payment protection can only reasonably be expected to increase costs for the overall construction project being undertaken through the public-private partnership as subcontractors and suppliers seek to accommodate the increased risk or even completely deter bidding by the most-skilled subcontractors and suppliers, whose resources can be directed at projects in which solid payment protections are available.”  ASA urged the DOT to seek early public participation in its formulation of model contracts for P3s, and the DOT accepted ASA’s recommendation. Read More.