In a letter to the editor of Engineering News-Record, the American Subcontractors Association (ASA) expressed subcontractors’ concerns over the lack of payment assurances on projects financed through public-private partnerships.
“ASA is concerned that existing federal and state laws establishing payment assurances for subcontractors and suppliers may not apply to projects financed through P3s,” 2011-12 ASA President Kerrick Whisenant wrote in Subcontractors Raise Issues on P3 Projects” to be published in today’s issue of ENR. The letter was in response to ENR’s Jan. 30 special report, which focused on P3s.
At the core of the issue is that mechanic’s lien laws generally do not apply to construction on public land, but federal, state or local governments often own the real estate on which projects financed through P3s are built. Meanwhile, payment bonds may be required on contracts awarded by public owners, but the owners or primary contracting entities on P3 projects may be private or partially private. “Thus, neither mechanic’s liens nor payment bonds may provide payment assurances to subcontractors and suppliers on P3 projects,” Whisenant wrote. “[Subcontractors and suppliers] pay their laborers, suppliers and taxes even before submitting an invoice for their work to their prime-contractor client. When subcontractors harbor doubts about getting paid for their work, they may choose to charge higher prices to account for their increased risk or simply choose not to bid on such work at all. Ultimately, such projects will either cost more or not have the expertise of the best firms in the construction industry.”
ASA is educating federal and state legislators about the need for subcontractor payment protections on P3 projects. Read More.