Issue link: https://read.dmtmag.com/i/826899
74 • JUNE 2017 • WORLD FENCE NEWS Kansas subcontractors and suppliers win important payment protections on public-private projects ALEXANDRIA, Va. – Construc- tion subcontractors and suppliers in Kansas have won important payment protections on public work financed through public-private partnerships, also known as P3 projects. On April 7, Kansas Gov. Sam Brownback (R) signed SB55, which requires a contractor with a prime contract exceeding $100,000 on a public-private partnership to provide performance and payment bonds. A performance bond states that the contractor will furnish and install whatever it has contracted to build in accordance with the contract plan and specifications. A payment bond states that those that supply labor and materials on a project will be paid subject to any re- strictions and limitations imposed by statute, the contract or subcontract, and/or the bond itself. Initiated by the American Sub- contractors Association-Greater Kan- sas City chapter, the new Kansas law requires that the payment bond must be for "the full contract amount solely for the protection of claimants supply- ing labor or materials to the contractor or subcontractors in the performance of the work." Such bonds must be underwritten by "good and sufficient sureties as determined by the public owner." "This new law is extremely im- portant for construction subcontrac- tors and suppliers," said KCASA im- mediate past president and current KCASA board member Sheila Ohren- berg, Sorella Group, Inc., Lenexa, Kan. "Lack of payment protections shifts substantial risks to the subcon- tractors and suppliers. Typically, they will extend large amounts of credit before submitting an invoice to the project's prime contractor. They have paid workers, suppliers and estimated taxes before knowing if payment is forthcoming. Such increased risk can- not be accepted without a cost by the business owner. This cost is ultimate- ly borne by the taxpayer. If the risk is deemed too great the most skilled and successful subcontractors may forgo participation, especially if less risky opportunities exist." Construction of projects for pub- lic use through a public-private part- nership is increasing at all levels of government, but especially at state and local levels. Governments are turning to P3s to be able to tap private-sector equity to finance capital projects rather than trying to budget public funds raised through taxes. Typically, the public entity will authorize the private entity to design, build and frequently operate the re- sulting public work. Private capital is attracted to such projects through financing arrangements that will pro- vide profits to the private partner's in- vestors. Depending on how a construction project funded by both public and pri- vate sources is structured, the project may be exempt from both payment bond requirements and mechanic's lien laws, leaving subcontractors and suppliers without adequate payment assurances. "This [new law] is good news for Kansas," added Brad Miller, Midwest Crane & Rigging, Olathe, Kan. A past president and current KCASA board member, Miller has been elected to serve on the national ASA board of directors. His three-year term will be- gin on July 1. "KCASA and ASA are committed to staying on top of issues that might jeopardize the construction industry." "Construction subcontractors and suppliers have a big stake in such legislation – making sure projects fi- nanced through P3s include payment rights," said E. Colette Nelson, chief advocacy officer, American Subcon- tractors Association, Alexandria, Va. "Unless specified in an autho- rizing statute or in the contract doc- uments, there are unlikely to be subcontractor payment assurances – neither payment bonds nor mechanic's continued on page 76