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“It comes as no surprise that payment issues continue to get a great deal of attention,” said Karen Krause, president of Searls Air Conditioning and chair of the Air Conditioning Contractors of Arizona’s Government Relations Committee. “The payment system that exists in construction takes gross advantage of subcontractors. Slow payment makes us financiers.”
Prompt pay was tops in last year’s survey as well. In the 1999 legislative session, Air Conditioning Contractors of Arizona and its lobbying group, the Arizona SubContractors Coalition, worked on a prompt payment bill. Technical revisions and a host of last-minute problems prevented the bill from going to the floor for a final vote in the early hours of the last day of the session, though.
“With a new session starting, we are laying plans to push the prompt payment bill all the way through this year,” commented Krause. The bill will be titled “Contractor’s Right to Know” (instead of “Construction Contracts; Payment Bill” which was the title of the 1999 bill) and will address the following:
- Establishes a standard payment program of 28 days — Under the default standard, a general contractor submits a bill to the owner including work and materials of all subcontractors for the 30-day work cycle. The owner has 14 days to approve the billing, then seven days to pay the general contractor. The general contractor has seven days to pay the subcontractors, and the subs have seven days to pay the suppliers.
- Owner has unlimited flexibility to redefine the billing (or work) cycles — Any change from the standard payment program requires the specific information of the billing cycles to be printed on the plans. This enables the general contractors, subcontractors, and suppliers to understand the billing cycle terms for the project prior to submitting a bid.
- Right to stop work for non-payment — When payments for approved work are not made in accordance with the standard or extended prompt payment deadlines, contractors and subcontractors may stop work after providing written notice.
- Venue — Disputes arising on Arizona construction projects will be heard by Arizona courts and will have Arizona law apply. (Currently, a contract may require that out-of-state courts be used and another state’s laws be applied to Arizona construction contract disputes.)
- Retention issues — If the general contractor is able to reduce the amount of retention with the owner, they must pass this same reduction on to the subcontractors.
“We came very close last year to accomplishing this much-needed reform. With all the support we garnered in that effort, we are hopeful that 2000 will be the year,” said Carol Goguen, executive director of the Air Conditioning Contractors of Arizona.
“We expect challenges, though, and need help from the industry. Contractors can show their support by joining the Arizona SubContractors Coalition — dues money goes straight to the lobbying effort. Volunteering to be part of our grassroots network is also key — a call or a letter to a legislator at the right time can make or break our effort.”
For more information on joining the coalition or becoming a grassroots supporter, call 602-242-6336.