Governor Gregoire Signs Prompt Payment for Extra Work Legislation

By John Ahlers

In midst of the budget gloom-and-doom coming from Olympia last week a single ray of sunshine for contractors emanated brightly. Governor Gregoire signed House Bill 1195 which now requires that public works owners pay contractors the undisputed amount of any extra work within 30 days of the completion of the extra work.

Taxpayers Win: When the Washington Prompt Payment Act (RCW 39.76 et seq.) passed some years ago the Washington Legislature made a covenant with the contractors that the State of Washington invoices for construction work would be paid within 30 days of submission. With that promise at hand contractors were able remove financing and contingencies from state bids. Taxpayers enjoyed the benefit of lower cost construction work.

The purpose of HB 1195 was also aimed at eliminating contractors financing contingencies for extra work. By assuring contractors that extra work will be promptly paid for taxpayers are the beneficiaries of lower cost construction.

Practical Implications of HB 1195: Contractors performing extra work on public works projects should bill the owner upon completion of such work. The public works owner is now obligated to issue a change order for the amount of the extra work within 30 days. If the owner disputes the amount of the extra work the owner can no longer hold the entire amount due but must instead pay the undisputed portion of the extra work invoice. If the owner fails to make prompt payment as required the contractor is entitled to interest of 1% and likely entitled to its attorneys fees in accordance with RCW 39.76.040 (the Prompt Payment Act). General contractors are similarly bound to pay their subcontractors and suppliers.

The practice of owners aggregating extra work change order both disputed and undisputed extra work to the end of the job then holding the payment undisputed change orders hostage until the contractor caves in on the disputed change order amount is now affectively thwarted. Misguided owners can no longer leverage undisputed change order to obtain a better deal on extra work in dispute.

Acknowledgement of Bill Sponsors: The bill was sponsored and unanimously approved by the Capitol Projects Advisory Review Board (CPARB). CPARB a board consisting of public works owners general contractors engineers trade labor specialty contractors legislators and industry groups appointed by the Governor to enhance the quality efficiency and accountability of public works contracting methods. The task force for HB 1195 consisted of Dan Absher (General Contractors) Vince Campenella (General Contractors) Christopher Hirst (Private Industry) and John P. Ahlers (Private Industry). Special thanks and acknowledgement go to Bob Maruska (Chair of CPARB) Mike Purdy (University of Washington) Van Collins (AGC) and Representative Kathy Haigh.

John P. Ahlers is Principal in the construction law firm of Ahlers & Cressman PLLC and a member of AGCs Legal Affairs Committee.