Changes to Arizona’s Prompt Pay Act

Changes to Arizona’s Prompt Pay Act:

Design Professionals on Public Projects Now Have Prompt Pay Coverage

Arizona Society of Civil Engineers Newsletter, August 2015

By Roger Owers, Ph.D., P.E., J.D.

For over a decade, construction contractors in Arizona have enjoyed the protections of the Prompt Pay Act.  In broad terms, the Act aims to ensure prompt but accurate payments on private projects by the owner to the general contractor and by the general contractor to subcontractors.

Absent from the Act, though, have been provisions governing payments to design professionals, such as engineers and architects.  However, on April 13, 2015, Governor Ducey signed into law House Bill 2336, which is known as the Arizona Design Professional Prompt Pay Act (the “ADPPPA”).  Under the ADPPA, “’Design Professional Services’ means architect services, engineer services, land surveying services, geologist services or landscape architect services or any combination of those services….”

To begin with, the ADPPPA does not apply to private projects.  Payments on private projects to design professionals are still governed mainly by the applicable contracts and other principles of law.  Instead, the ADPPPA applies specifically to public projects, such as projects of the Arizona Department of Transportation, other State agencies, and counties, cities, towns, and districts.

Also, the ADPPA does not apply to public projects in which the design professional has a direct contract with the public owner.  Instead, the ADPPA deals with those public projects in which the design professional is retained by the contractor.  Examples of such projects may include a design-build project or when the contractor hires the design professional to perform construction-related services, such as survey staking, preparing shop drawings, preparing traffic control plans, designing falsework/shoring plans, or designing temporary project utilities.  Thus the reach of the ADPPA is rather limited.

With that as background, the key provisions under the ADPPA are similar to those that have governed contractors since 2000.  Some of the key provisions under the ADPPPA are as follows.

First, unless agreed otherwise, contractors are to pay their design professionals within seven days of receipt of each progress payment from the owner.

Second, the design professional can request from the owner that the owner notify the design professional when a progress payment is made to the contractor.

Third, the contractor can, in their payment application, withhold the design professional’s payment application in cases of the design professional’s defective or disputed services, failure of the design professional to pay its subconsultants, and other similar acts.

Fourth, payments to the design professional that are delayed beyond the seven day timeframe are to include interest at the rate of 1% per month on any unpaid balance.

Fifth, contracts for design professional services cannot be made subject to the laws of another state or require that “any litigation, arbitration or other dispute resolution proceedings arising from the contract” are to be conducted in another state.

The above list is by no means an exhaustive list.  Still, though only applicable to public projects in which the design professional is working for the contractor, the ADPPA does provide the design professional working on those projects some statutory assurance that they will be paid on time.

A PDF of House Bill 2336, which contains the ADPPA, can be found at http://www.azleg.gov/legtext/52leg/1r/bills/hb2336s.pdf.

This article is intended for general information only.  It should not be construed as legal advice with respect to any particular situation.  Readers should not act upon information contained in this article without first consulting their lawyer.

Roger S. Owers is a commercial real estate professional with Keyser LLC and is a lawyer with the Kaibab Law Offices of Roger S. Owers LLC.  Roger holds a Ph.D. in civil engineering, is a registered professional civil engineer, holds a real estate license, and is a licensed attorney.  He can be reached via e-mail at rowers@kaibabllc.com or www.kaibabllc.com.  He can also be found on LinkedIn at http://www.linkedin.com/in/rogerowers/.

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