In Louisiana public contracts and jobs have been gaining momentum for my clients. Over the past few years there has been a spike in public work and as these jobs reach completion contractors, subcontractors, equipment lessors, laborers and materials suppliers are forced to become well versed in the layout of the public bid law.
Public bid law is a term of art used in the construction industry to describe any work, construction project or improvement to (immovable) property that is owed by the State of Louisiana or an arm of the state, such as parish or city government (“public entity’). Entering into a contract for a construction project with a public entity has strict regulation. This strict regulation is necessary due the past corruption when dealing with public funds. Public jobs are funded by tax-payer money, therefore the process needs to be tightly scrutinized.
For years many contractors, equipment lessors and materials suppliers would not work on government projects due to all of the extra work required to adhere to the regulation. Recently, these same contractors have been taking on the risk for the reward of more work. Most parties are realizing that public works are not that much different than private when everything runs smoothly. When funds dry up, then the landscape can become more rigid.
This post will focus on material suppliers and the requirement to send notice when working on a public job. In many instances in Louisiana and other states, material suppliers must send notice to the owner, general contractor and the party who hired them in order to preserve some type of lien or bond claim right if not timely paid.
When large supply companies, such as ABC Supply, Grainger, or 84 Lumber, work in Louisiana by supplying to Louisiana public works, they need to be aware of the requirements needed to preserve the right to get paid. The requirements are codified in Louisiana Revised Statutes §38:2241 et seq.
Recently, in 2013, the Louisiana First Circuit rendered a decision which will make the notice requirement of material supply companies more onerous.
The basic premise of this suit has to do with whether or not a supplier sending the required notice, within seventy-five (75) days of delivery of the supplies. On public projects La R.S. 38:2242(f) states that all materials suppliers must furnish notice within 75 days of delivery of the materials.
The exact language of La R.S. 38:2242(f) reads in pertinent part:
In addition to the other provisions of this Section, if the materialman has not been paid by the subcontractor and has not sent notice of nonpayment to the general contractor and the owner, then the materialman shall lose his right to file a privilege or lien on the immovable property. The return receipt indicating that certified mail was properly addressed to the last known address of the general contractor and the owner and deposited in the U.S. mail on or before seventy-five days from the last day of the month in which the material was delivered, regardless of whether the certified mail was actually delivered, refused, or unclaimed satisfies the notice provision hereof or no later than the statutory lien period, whichever comes first. The provisions of this Subsection shall apply only to disputes arising out of recorded contracts.
To the average supplier or person, this statute would constitute that if multiple deliveries are made in multiple months, then you simply need to send one notice at the conclusion of the deliveries but within 75 days of the last delivery. The J. Reed court actually opined to the contrary.
The court goes on to discuss how statutes need to be interpreted and I believe that they missed the target on this decision, nevertheless the law in Louisiana, as of J. Reed is that the 75 day notice of non-payment needs to be sent after each month where materials were delivered. Any logical person can see how this requirement can be onerous. There is a well written dissent which describes a logical conclusion.
Regardless of whether the case is proper it is the law in Louisiana. Material suppliers need to send notice of non-payment within 75 days of each month where materials were delivered. Click on the link above to read the opinion in its entirety. Knowing these rules can mean all the difference to whether a bill gets paid or it gets written off as bad debt.