Getting
Paid on Construction Projects:
A Guide for
Subcontractors, Suppliers and Workers
Introduction
The Seattle
Housing Authority (SHA) recognizes that prompt payment is
critical for both businesses and individuals. We are
concerned that subcontractors and suppliers are paid quickly
by the contractors that SHA hires to complete our
construction projects. Likewise, we want to help ensure that
workers employed on our construction projects receive the
appropriate wages. Unfortunately, however, payment is
sometimes delayed or withheld, causing financial hardships
for those not paid. State law provides a number of avenues
to help protect the rights of those working on public
construction projects.
The
information that follows is a summary of some of those
rights and a description of the process to follow in
securing payment from a contractor or subcontractor on a
public construction project. In addition to a description of
the basic provisions of the law, we have made available a
copy of the relevant portions of State law for your own
review as well as sample forms you may use in filing claims.
We hope that
this information will be helpful to you in protecting your
rights to payment on public construction projects. If you
have any questions, please feel free to contact any of the
individuals whose names are listed at the end of this
document.
Liz Alzeer
Contracting Manager
NOTE: The information
contained in this document is not legal advice from the
Seattle Housing Authority, and those due money on a public
construction project may conclude that contacting an
attorney is necessary in order to protect your rights to
payment. While the laws referred to in this document are
current as of the date of publication, they are frequently
amended by the State Legislature. Whenever necessary, you
should refer to a current version of the law itself, or
contact your legal advisor.
Preventing payment
disputes
The following
preventative steps may assist you in ensuring that you are
paid for your work on a public construction project.
1. Know
the contractor you’re working for.
It is important that you carefully investigate the
contractor you are considering becoming a subcontractor or
supplier to prior to entering into a contract with them.
Contracting with a contractor with a track record of
non-payment or slow payment to subcontractors and
suppliers may have a negative impact on your firm’s
finances.
· Ask
the contractor for references of other subcontractors
and suppliers they have worked with. Call the references
to find out about the contractor’s payment practices.
· Call
the State Department of Labor and Industries at (360)
902-5226, or visit their Web site at https://wws2.wa.gov/lni/bbip/contractor.asp
to find out if
any claims have been filed against the Contractor’s
Bond, required by State law for all licensed
contractors.
· Call
the local Better Business Bureau, or visit their Web
site at http://www.thebbb.org/
to find out if there have been any complaints filed
against the contractor.
2. Have
a clear written agreement of what you will provide and
what the contractor will pay. Many
misunderstandings about payment can be avoided if you make
sure you have a clear written agreement about what
services or supplies you will provide and how much (and
when) the contractor will pay you.
3. Provide
the contractor with a clear, written invoice.
A contractor may not pay you until they are satisfied that
you have billed them properly for the work you performed
or for the supplies and materials you provided. Make sure
your invoice is clear and describes when you expect
payment. This should be consistent with your written
agreement with the contractor.
4. Attempt
to discuss payment dispute issues with the contractor. If a payment
dispute occurs and you are not paid promptly or not paid
the correct amount, contact the contractor and identify
why they have not paid you. A misunderstanding about
further work they are expecting you to perform or a
concern about the quality of your work may be the reason
you are not receiving your payment. Try to resolve the
outstanding issues in order to facilitate your payment.
5. Joint
check from SHA to contractor and subcontractor or
supplier. The
Seattle Housing Authority does not ever make direct
payment to a subcontractor or supplier, except by court
order. However, if SHA receives a written request for
issuance of a check made payable to both the contractor
and a subcontractor or supplier, we will honor such a
request. The request must be signed and notarized by an
authorized representative of both the contractor and the
subcontractor or supplier.
Your rights under the law
Many times,
despite taking preventative measures, payment disputes occur
and it becomes necessary to take additional legal steps to
protect your rights to payment. There are two important
resources that are available to subcontractors, suppliers,
materialmen, and workers to help ensure they are paid for
work on a public construction project.
Contract Bond:
On every public construction project of $35,000 or more, the
Seattle Housing Authority obtains from the contractor a
Contract Bond (also known as a Performance and Payment
Bond), normally in the amount of 100% of the amount of the
contract. The Bond is a guarantee by the contractor’s
bonding company (or surety) that they will ensure that the
public construction project is successfully completed, and
that all subcontractors, suppliers, materialmen, and workers
will be paid for their work on the project. State law
provides that you may file a claim of lien against this Bond
in order to protect your rights to payment for work
performed or supplies provided on a public construction project. On
public construction projects less than $35,000, SHA assumes
the liability for claims filed against the protections
normally afforded by a Contract Bond, and filed consistent
with the requirements of State law for claims against a
Contract Bond.
Retainage:
The Seattle Housing Authority withholds from the contractor
5% of each payment we make to the prime contractor on public
construction projects of $35,000 or more. This 5% amount is
known as Retainage and is held as a trust fund to help
ensure that subcontractors, suppliers, materialmen, and
workers are paid for their work on the project. State law
provides that you may also file a claim of lien against the
Retainage in order to protect your rights to payment for
work performed or supplies provided on a public construction
project. On public construction projects less than $35,000,
SHA assumes the liability for claims filed against the
protections normally afforded by Retainage, and filed
consistent with the requirements of State law for claims
against Retainage.
Filing a
claim against the Contract Bond or Retainage does not
guarantee that you will be paid, but it is an important
first step to help ensure payment. There are a variety of
requirements that relate to when a claim must be filed and
what you must do to "perfect" the claim.
Filing and renewal of claim
You may file a claim against
the Contract Bond and Retainage after you have performed the
work and not been paid, subject to the following
restrictions:
1. End
of claim filing period:
· The
period for filing a claim against the Contract Bond ends
30 days after SHA has declared the contract complete and
formally accepted the project (RCW 39.08.030).
· The
period for filing a claim against the Retainage ends 45
days after SHA has declared the contract complete and
formally accepted the project (RCW 60.28.011).
· To find
out the date on which SHA has declared a public
construction project as complete, you may call (206)
615-3375.
· Click here for a copy of Notice
of Claim of Lien Form.
2. Renewal:
· Once you
have filed a claim against the Retainage, in order to
preserve your legal rights, you must renew the claim every
four months, or commence a lawsuit to foreclose on the
claim.
· If you
miss the four month renewal deadline, your claim against
the Retainage will lapse and cease to be considered a
properly filed claim. You may not re-file the claim.
· A claim
against the Retainage may not be filed or renewed after
the 45th day following the contract being declared
complete by SHA.
· A claim
against the Contract Bond may not be filed after the 30th
day following the contract being declared complete by SHA.
Claims against the Contract Bond do not have renewal
deadlines and requirements.
· Click here for a copy of Renewal of Claim of Lien
Form.
3. Pre-Claim
Notice for Delivery of Materials, Supplies, or Equipment:
State law requires that anyone furnishing materials,
supplies, or equipment on a public construction project
must provide a notice to the contractor within specified
time limits that they have commenced delivery of the
materials. The notice must state the name of the
subcontractor who requested the delivery and must further
state that a claim against the bond and/or retainage may
be filed by the provider of the materials. Without such a
notice being filed, no foreclosure action against a claim
will be considered valid by the courts. The specified time
limits for filing such a notice are different for
protection from the Contract Bond (within 10 days after
the first delivery of such materials) and Retainage
(within 60 days of beginning to furnish such materials).
(RCW 39.08.065 and RCW 60.28.015).
Click here for a copy
of Notice of Delivery of Materials,
Supplies, or Equipment Form.
4. Where
to file your claim: A claim (and any subsequent
renewal) against the Contract Bond and Retainage on a
Seattle Housing Authority public construction project
should be sent to:
Liz Alzeer
Contracting Manager
Seattle Housing Authority
120 Sixth Avenue North
P.O. Box 19028
Seattle, WA 98109-1028
A copy of
the claim should also be sent to the contractor and the
contractor’s bonding company. If you need information on
the contractor’s Contract Bond, you may call our office
at (206) 615-3375. We can provide you with the name and
address of the bonding company and the Contract Bond
number.
Click here for a copy of Notice
of Claim of Lien Form.
5. Release of Claim
If the contractor subsequently pays you, you should then
send a Release of Claim of Lien form to the same parties
to whom the claim form was sent. Click here for a copy of Release
of Claim of Lien Form.
Foreclosure and payment
1. Foreclosure:
In order to "perfect" your claim against the
Retainage and preserve your legal rights, you must
commence a lawsuit for foreclosure on the claim. A
foreclosure action must be filed in court prior to the
claim lapsing. A claim may lapse if you file your claim or
renewal of your claim after the deadlines noted above or
if you fail to renew your claim within four months of
filing the claim.
If all
attempts to obtain payment from the contractor have failed
and it becomes necessary to "perfect" your claim
and commence a lawsuit to foreclose on the claim, you may
want to consider hiring an attorney to assist you in the
legal proceedings.
2. Payment based on a claim: The Seattle Housing Authority does not make
payments to subcontractors or suppliers who have filed a
claim against the Retainage without a
court order directing SHA to make such a payment. SHA does
not review or pass judgment on a claim to determine if the
amount claimed should actually be paid. That role is
reserved for the courts.
Payment of claims against
the Retainage is based on the following priority order
established by State law:
· Claims
by workers for payment of prevailing wages (the process
described in this document applies to these prevailing
wage claims also)
· Claims
by the State Department of Revenue for unpaid taxes (no
court order required)
· Claims
by subcontractors, suppliers, and materialmen (court order
required)
· Claims
for other taxes due (no court order required)
· Claims
by SHA (no court order required)
If an
inadequate amount of money remains in the Retainage to cover
all claims due to be paid, the protections provided by the
Contract Bond become applicable and the amounts due to
subcontractors, suppliers, materialmen, and workers should
be paid by the contractor’s bonding company.
FOR FURTHER
INFORMATION
contact the following individuals:
Don Tucker,
Sr. Contract Administrator, (206) 615-3475
· for date of completion
of an SHA construction contract
· for information on claims and releases filed
· for name of bonding company and contract bond number
Liz Alzeer,
Contracting Manager, (206) 615-3470
Our address
and fax number
Seattle Housing Authority
Purchasing Division
120 Sixth Avenue North
P.O. Box 19028
Seattle, WA 98109-3410
Fax: (206) 615-3410
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