Now that Nebraska’s Prompt Pay Act is in full swing, it’s a good time to consider how it will impact your rights under construction contracts. The Prompt Pay Act, Nebraska Revised Statutes § 45-1201 to 41-1210, applies to construction contracts entered into after October 1, 2010. This is the first of two posts highlighting the key provisions of the Prompt Payment Act.
Impact on Public Projects
The Act has clarified the time in which claims must be brought against political subdivisions. All claims now must be filed with the appropriate clerk or office within 180 days after substantial completion of the project. The political subdivision then has 90 days to decide the claim. If no decision is made, the claim is deemed denied. The contractor may then appeal the claim’s denial by filing a lawsuit in the district court of the county where the construction project was located. This lawsuit must be filed within two years of denial.
Impact on Private Projects
The Act requires that owners must make payment within thirty (30) days after receipt of a payment request for work performed under a construction contract. Once a contractor or subcontractor receives payment, it must pay its subcontractor or supplier within ten (10) days. If payments are late, claimants may demand interest on the amount owed at 12% per annum. But, claimants must notify the non-paying party of the claimant’s right to interest before an interest claim may be pursued. Finally, if the contractor, subcontractor or supplier accepts payment, it waives interest that portion of the claim that was paid.
Impact on Pay-if-Paid Clauses
The Act does not appear to impact pay-if-paid clauses. The language of § 45-1203 provides that when a subcontractor has performed its work, the contractor shall pay the subcontractor within ten (10) days after the contractor has received payment. This language supports the argument that the contractor is not obligated to pay its subcontractors until the contractor has been paid.
The Prompt Payment Act clarifies your obligations and rights under construction contracts. And, as the title indicates, it should get you paid more promptly.