Missouri’s Public Prompt Payment Act was enacted in 1990, with its most recent modifications taking effect in 2014. The statute, R.S.Mo. § 34.057, has extensive requirements for owners, contractors, subcontractors and suppliers on public works projects in Missouri. For those in the construction industry, it is worth reviewing periodically to ensure that standard practices on public jobs are in compliance.
The requirements for public works projects differ in multiple respects from private projects. When performing work on a public job, it is important to make sure your contract forms and administration are consistent with the act. Here is a summary of the key requirements:
- The owner must make payments at least monthly.
- The owner must make payment within 30 days after whichever of these occurs latest:
- The materials or construction services purchased are delivered;
- The date the invoice is delivered to the person or place designated by the owner; or
- In instances where the contractor approves the public owner's estimate, the date when that notice of approval is delivered to the person or place designated by the owner.
- The contractor must pay subcontractors within 15 days of being paid by the owner or face potential penalty interest of 1.5 percent per month.
- The owner must make final payment within 30 days of the earliest of the following events:
- Completion of the project and filing with the owner of all required documentation and certifications;
- The project is certified by the authorized architect or engineer as having been completed, including the filing of all documentation and certifications required; or
- The project is certified by the contracting authority as having been completed, including the filing of all documentation and certifications required.
If the contractor receives less than the full payment due under the public construction contract, the contractor shall be obligated to disburse on a pro rata basis those funds received. When, however, the public owner does not release the full payment due because there are specific areas of work or materials he is rejecting or has otherwise determined are not suitable for payment, then the specific subcontractors or suppliers involved shall not be paid for that portion of the work. The owner, however, must give a written explanation to the contractor, subcontractor or supplier involved as to why the work or supplies were rejected or deemed not suitable for payment, and all other subcontractors and suppliers shall be paid in full.
- Retainage shall not exceed 5 percent of the value of the contract or subcontract. However, if the contractor is not required to obtain a bond because the cost of the contract is not estimated to exceed $50,000, the public owner may withhold retainage in an amount not to exceed 10 percent.
- If the owner, engineer and contractor determine that a subcontractor’s performance has been completed and that the subcontractor can be released prior to overall substantial completion, the contractor shall request an adjustment in retainage. The owner may reduce or eliminate the retainage subject to holding 150 percent of the value of any remaining minor items.
- If the owner does not agree with the contractor’s determination that the work is substantially complete, it must provide a written explanation to the contractor within 14 calendar days. The contractor must send that notice to any subcontractor or suppliers responsible for the work. If the owner fails to deliver its explanation, it must pay 98 percent of the retainage within 30 calendar days, less up to 150 percent of the value of any remaining minor items.
- If the contractor intends to withhold payment from a subcontractor due to progress, defects, disputed work, failure to comply with the contract, third-party claims, failure to pay sub-subs, evidence that subcontract cannot be completed for unpaid balance, etc., then contractor shall not include that amount in the application to the owner.
- If the contractor receives payment from the owner and then determines that funds received should be withheld from a subcontractor, the amounts shall be identified in writing and deducted from the next pay application.
Penalties for improper withholding of payment
If a court determines that a payment withheld from a contractor or subcontractor/supplier was not withheld in “good faith for reasonable cause,” the court may impose interest at a rate of 1.5 percent per month and reasonable attorneys’ fees to the prevailing party.