Governor Set To Sign Legislation Affecting Private Party Contracts

Kristi Pronovost Merit Shop Spokesman Blog

By: Brent Sailhamer, Director of Government Affairs

Weeks ago, the Pennsylvania Senate approved significant changes to a bill that would offer the first major revamp of Pennsylvania’s private contracting law in over 20 years.  Since then, the bill has not traveled to the desk of the Governor, who has indicated that he will sign the legislation, providing more rights – but possibly less clarity – to the Contractor and Subcontractor Payment Act (CASPA).

After years of contractors claiming that they had significant disadvantages in the negotiation process with national chain owners and general contractors, the legislature acted on House Bill 566, which would overhaul CASPA in an attempt to provide more equity in the contracting process.  Among the changes proposed in the bill are:

  • Owners will now have 14 days instead of seven days to submit a written explanation for withholding payment for a deficiency claim. In return, contractors must be paid for all uncontested work in the invoice;
  • Once a substantial amount of work has been completed on a project, a contractor may post a maintenance bond with approved surety for 120% of the value of the retainage to release that retainage;
  • Contractors may now negotiate work stoppage without penalty in contracts. The process must be agreed to by both parties, but cannot require contractors to wait any more than 70 days following the end of an unpaid billing cycle or to submit more than three written notices to the delinquent entity.

While the legislation allows parties to negotiate the process for work stoppage after considerable delay in payment, it allows for continued flexibility by capping the responsibilities of the unpaid entity.  Contracting entities who maintain good historical relationships can continue to operate in a more loose fashion, using phone calls and email to alert colleagues regarding payment.  In the absence of a work stoppage clause, however, the law will now require an unpaid entity to send three written notices throughout the 70-day process.  This change, while allowing contractors the ability to negotiate flexible terms, will also place a greater responsibility on reviewing contracts and ensuring that adequate protections are in place.

While the Governor has indicated he will sign the bill, he has until June 14 to do so.

June 6, 2018