CASPA vs. Prompt Pay Act

Through the efforts of MB&M’s construction law group, the question that has lingered for the past 16 years has finally been answered; whether CASPA or the Prompt Pay Act apply to your efforts to recover or defend a claim for unpaid contract balances. CASPA, the Contractor and Subcontractor Payment Act was enacted in 1994 and deals with the relationship between an owner and contractor.  The Prompt Pay Act, which is part of the Commonwealth Procurement Code was enacted in 1998 and deals with the relationship between a contractor and a government agency.  While both statutes provide for the ability to collect penalties and attorney fees for non-payment of contract balances, the trigger under each statute differs.

Under CASPA, penalties and attorney fees are mandated on a showing that payment was wrongfully withheld and the contractor substantially prevailed in the litigation. Under the Prompt Pay Act penalties and attorney fees are mandated only where it is shown the government agency acted in bad faith.  Thus, while two statutes provide similar protections on either a private or public project, the threshold on a contract with a governmental agency is higher.

Prior to the Court’s clarification on which statue applies, contractors would routinely invoke CASPA against a governmental agency claiming that they were an owner under the statute so as to avoid having a higher burden of proof to recover penalties and attorney fees. While a government agency may fall within the definition of an owner under CASPA, the Commonwealth Court held if that were the case, the Prompt Pay Act would be rendered meaningless.  Given that two statutes exist providing for similar entitlement in the event of non-payment, the Court concluded that the prompt Pay Act, and not CASPA governs construction contract between a government agency and a contractor.

One month later the Pennsylvania Supreme Court came to a similar conclusion that only the Prompt Pay Act applies when the construction contract involves a governmental entity.

The Court also held that a six year statue of limitation applies to claims under the Prompt Pay Act. This writer is unsure how a six year limitation period will ultimately be applied to subsequent claims for penalties and attorney fees under the Prompt Pay Act.  Generally in Pennsylvania a breach of contract claim such as failure to pay contract balances is governed by a four year statute of limitation.  Does the application of a six year limitation now allow a claim to be asserted after the generally recognized four year period or does it only apply to the recovery of penalties and attorney fees? Contact Dave Raves at 412.242.4400 for more information.

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