Prompt Payment

Public Works Contract Regulation Law
Sections Regarding Prompt Payment
P.L. 1309, No. 317 (Amended by Act 1994-142)

Section 1. Definitions.

The following words and phrases, when used in this section, shall have the following meanings unless the context clearly indicates otherwise:

"Contractor” A person who enters into a public contract with a contracting body.

"Design professional” An architect licensed under the act of December 14, 1982 (P.L.1227, No.281), known as the "Architects Licensure Law,” a professional engineer or professional land surveyor licensed under the act of May 23, 1945 (P.L.913, No.367), known as the "Engineer, Land Surveyor and Geologist Registration Law,” or a landscape architect licensed under the act of January 24, 1966 (1965 P.L.1527, No.535), known as the "Landscape Architects’ Registration Law.”

"Subcontractor” A person who has contracted to furnish labor or materials to or has performed labor for a contractor or another subcontractor in connection with a public contract.

Section 6.2. Contracting Body’s progress payment obligations.

(a) The contracting body shall pay the contractor or design professional strictly in accordance with the public contract.

(b) If the public contract does not contain a term governing the time for payment, the contractor or design professional shall be entitled to make application for payment from the contracting body for progress payments, and the contracting body shall make payment less the applicable retainage amount authorized in section 5 to the contractor or design professional within 45 calendar days of the date the application for payment is received.

(c) Except as otherwise agreed by the parties, if any progress payment less the applicable retainage amount authorized in section 5 is not made to a contractor or design professional by the due date established in the contract or in subsection (b), the contracting body shall pay to the contractor or design professional, in addition to the amount due, interest on the amount due, and the interest shall be computed at the rate determined by the Secretary of Revenue for interest payment on overdue taxes or the refund of taxes as provided in sections 806 and 806.1 of the act of April 9, 1929 (P.L.343, No.176), known as "The Fiscal Code,” and any subsequent amendments to those sections.

(d) In the event that the public contract does not contain a grace period and if a contractor or design professional is not paid by the payment date required by subsection (b), no interest penalty payment required under this section shall be paid if payment is made on or before the 15th calendar day after the payment date required under this act.

Section 6.3. Contractors’ and subcontractors’ payment obligations.

(a) Performance by a subcontractor in accordance with the provisions of the contract shall entitle the subcontractor to payment from the party with whom the subcontractor has contracted. For purposes of this section, the contract between the contractor and subcontractor is presumed to incorporate the terms of the public contract.

(b) A contractor or subcontractor shall disclose to a subcontractor, before a contract is executed, the due date for receipt of progress payments from the contracting body. Notwithstanding any other provisions of this act, if a contractor or a subcontractor fails to accurately disclose the due date to a subcontractor, the contractor or subcontractor shall be obligated to pay the subcontractor as though the due dates established in subsection (c) were met by the contracting body. This subsection shall not apply to a change in due dates because of conditions outside of the contractor’s control, including, but not limited to, design changes, change orders or delays in construction due to weather conditions.

(c) When a subcontractor has performed in accordance with the provisions of the contract, a contractor shall pay to the subcontractor and each subcontractor shall in turn pay to its subcontractors the full or proportional amount received for each such subcontractor’s work and material, based on work completed or services provided under the subcontract, 14 days after receipt of a progress payment. Payment shall be made under this section unless it is being withheld under section 6.4.

(d) If any progress payment is not made to a subcontractor by the due date established in the contract or in subsection (c), the contractor shall pay to the subcontractor, in addition to the amount due, interest as computed in section 6.2(c).

(e) In the event that the contract does not contain a grace period and if a subcontractor is not paid by the payment date required by subsection (c), no interest penalty payment required under this section shall be paid if payment is made on or before the 15th calendar day after the payment date required under this act.

Section 6.4. Withholding of payment for good faith claims.

(a) The contracting body may withhold payment for deficiency items according to terms of the public contract. The contracting body shall pay the contractor according to the provisions of this act for all other items which appear on the application for payment and have been satisfactorily completed. The contractor may withhold payment form any subcontractor responsible for a deficiency item. The contractor shall pay any subcontractor according to the provisions of this act for any item which appears on the application for payment and has been satisfactorily completed.

(b) If a contracting body withholds payment from a contractor for a deficiency item, it shall notify the contractor of the deficiency item within the time period specified in the contract or 15 calendar days of the date that the application for payment is received. If a contractor withholds payment from a subcontractor for a deficiency item, it must notify the subcontractor or supplier of the reason within 15 calendar days of the date after receipt of the notice of deficiency item from the owner.

Section 6.5. Penalty and attorney fees.

(a) If arbitration or a claim with the Board of Claims or a court of competent jurisdiction is commenced to recover payment due under this act and it is determined that the contracting body, contractor or subcontractor has failed to comply with the payment of terms of this act, the arbitrator, the Board of Claims or the court may award, in addition to all other damages due, a penalty equal to 1% per month of the amount that was withheld in bad faith. An amount shall be deemed to have been withheld in bad faith to the extent that the withholding was arbitrary or vexatious. An amount shall not be deemed to have been withheld in bad faith to the extent it was withheld pursuant to section 6.4.

(b) Notwithstanding any agreement to the contrary, the prevailing party in any proceeding to recover any payment under this act may be awarded a reasonable attorney fee in an amount to be determined by the board of claims, court or arbitrator, together with expenses, if it is determined that the contracting body, contractor or subcontractor acted in bad faith. An amount shall be deemed to have been withheld in bad faith to the extent that the withholding was arbitrary or vexatious.