Pennsylvania’s contractor payment act doesn’t apply to government, court rules

A recent ruling by the Pennsylvania Supreme Court puts limits on a state law meant to ensure that contractors and subcontractors receive prompt payment for their work.

The court ruled that the state’s Contractor and Subcontractor Payment Act (CASPA) does not apply to construction projects where the owner is a governmental entity. The case, Clipper Pipe & Service, Inc. v. Ohio Casualty Insurance Co., pertained to the construction of an addition and renovations to the Navy/Marine Corps Reserve Training Center in the Lehigh Valley. 

The contractor, Contracting Systems, Inc., failed to pay a subcontractor, Clipper Pipe & Service for performance of mechanical and HVAC work, according to JD Supra Business Advisor. Clipper sued CSI and its surety, asserting claims for breach of contract and violation of CASPA. The claim likely would have allowed it to recover its attorneys’ fees and possibly a statutory penalty if the court had ruled in the subcontractor’s favor.

On public projects, contractors working in Pennsylvania must rely on the Prompt Pay Act (“PPA”), which governs the payment obligations and rights of contractors and subcontractors on public projects. That statute, however, differs from CASPA with different timing provisions for payment, a different rate of interest, and a different burden of proof associated with penalty and attorneys’ fees provisions. Notably, it is also more difficult for a party to recover attorneys’ fees and penalties under the PPA than under CASPA.