The “Construction Industry Payment Protection Act of 1999” (HR1219) passed the Senate by unanimous consent recently, and was signed into law by President Clinton August 17. It takes effect March 2000 and will, according to the ASA, “better ensure that the federal government’s payments for labor and/or materials furnished by construction subcontractors and suppliers on federal and federally funded projects reach the companies that performed the work.”
Senators Thompson and Lieberman (the Chair and Ranking Member of the Senate Governmental Affairs Committee) both strongly supported the measure and were instrumental in working with the Senate Leadership to move the bill as quickly as possible, according to the Air Conditioning Contractors of America (ACCA), which supported the bill.
This simple but basic law required reform of the 1935 Prompt Payment Act, also known as the Miller Act, one that will ensure that subcontractors receive full payment for their work on federal construction projects.
Well-supported in the industryThe Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA) was one of 25 construction industry organizations that strongly supported what it called “this much-needed update to the Miller Act.”
SMACNA added: “This legislation provides overdue improvement to the security of contractors who have for too long worked every day for the federal government without adequate payment bond protection.”
ACCA described the bill as “A major legislative victory for hvacr commercial contractors, as well as contractors everywhere . . . the bill strengthens payment protections for subcontractors if the general contractor on the project defaults or files bankruptcy.”
John Saucier, chairman of the ACCA Government Relations Task Team, explained, “Passage of the Construction Subcontractor Payment Protection Enhancement Act was made possible after extensive negotiations between subcontractors, general contractors, and sureties.
“Once industry principles reached agreement on what provisions should be included in the proposal, Congress passed the legislation without a single vote in opposition.”
A significant accomplishment“After years of trying to bring payment guarantees in line with current workplace realities, it appears ACCA’s efforts are finally going to be rewarded,” said Saucier.
“This is a significant accomplishment for those who work on federal construction projects. No longer will they have to wonder, ‘will I get paid for my work.’”
Saucier is president of Temperature Inc., a commercial contractor located in Memphis, Tenn.
The legislation provides full payment protection for all segments of the construction industry by stipulating that the payment bond must equal the contract price. The current law caps the collective payment bond for subcontractors and suppliers on a federal project at $2.5 million.
The proposed reform also prohibits waiving payment bond protection prior to the subcontract being awarded.
Finally, in addition to the traditional method of using certified mail, the Bill allows for the use of new communication channels for subcontractors to serve notice on general contractors that they are initiating an action under the Miller Act.