Engineer with flag on background series - PennsylvaniaContractors doing work on publicly-owned projects in Pennsylvania may find it more difficult to recover statutory penalties and attorneys’ fees if the owner withholds funds in bad faith. Pennsylvania’s Procurement Code, which governs bidding on public projects and payment to prime contractors and subcontractors, is intended to “level the playing field” between government and contractor. Similar, but not identical to the private prompt payment act, the statute provides for the award to the contractor of interest, a penalty in the amount of 1% of the unpaid balance per month, and attorneys’ fees if the public entity acts in bad faith by refusing payment that is due to the contractor. Pennsylvania courts previously interpreted this statute to mean that if a jury determined that the public entity acted in bad faith, then an award of penalties and attorneys’ fees was required.


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Last week, the Supreme Court of Pennsylvania  issued a decision which has important consequences for all members of the construction industry involved with public works projects. In Clipper Pipe & Service, Inc. v. The Ohio Casualty Insurance Co., the Court held that the Contractor and Subcontractor Payment Act (CASPA), which is a statute that