Surety Bond Quarterly - Fall 2017 - 13

entity under the standard established
by the Equal Access to Justice Act.
5 U.S.C. § 504; 28 U.S.C. § 2412. If
the contractor is a small entity, it can
recover legal fees in pursuing a claim
under the Equal Access to Justice Act,
if the government's position is not
substantially justified.
Subcontractors
While the government is not liable
if a prime contractor fails to pay a
subcontractor, federal statutes and
regulations provide subcontractors
with many rights relating to payment.
The FAR requires that federal subcontracts contain provisions stating that
subcontractors shall be paid within
seven days from receipt by the prime
contractor of payment from the government. FAR 52.232-27(c)(1). If timely
payment is not made by the prime
contractor, the subcontractor is entitled to interest from the prime contractor. The FAR also requires that first-tier
subcontractors flow down these provisions to lower-tier subcontractors.
FAR 52.232-27(d)(2). These provisions
cannot be enforced against the government, but they can be enforced in
a private action between the parties.
The FAR allows the subcontract to
contain a provision for retainage by
the prime contractor from the subcontractor even though the government
is not withholding retainage from the
prime contractor. FAR 52.232-27(d)(1).
In other words, the prime contractor
can hold retainage on the subcontractor even though the government is not
holding retainage. While the prime
contractor can hold retainage from the
subcontractor, it cannot bill the government for the retainage it intends to
hold. Thus, the government ultimately
will hold the retainage.
The FAR also allows the prime
contractor to withhold payment
from the subcontractor for deficient
work. However, the contractor needs
to be careful that it does not bill the
government for amounts that it withholds unless the deficient work was
corrected by the prime contractor or
another subcontractor. The contractor must certify that each payment
application does not contain amounts

that the prime contractor intends to
withhold from the subcontractor.
FAR 52.232-5(c). If the contractor did
bill for deficient work before it realized there was a defect, it may be
required to return that money to the
government. If the contractor violates
these requirements, it may be subject
to false claim allegations.
Upon withholding, the prime contractor is required to provide notice to
the subcontractor of the reason for the
withholding and provide a copy of that
notice to the government. FAR 52.23227(d)(2)-(3). Once the work is corrected,
the prime contractor can bill the government. The contractor then must
make payment to the subcontractor
within seven days of payment by the
government. FAR 52.232-27(e)(4).
The Miller Act is the
Subcontractor's Friend
The most important tool for the subcontractor for obtaining timely payment is
the Miller Act, which requires the prime
contractor to provide a surety bond on
federal government projects to protect
subcontractors since subcontractors
cannot lien federal property. 40 U.S.C.
§§ 3131, et seq. Subcontractors must
be aware of the provisions of the statute and the time limits for filing bond
claims as these time limits are strictly
enforced.The application and time limits of the Miller Act have been widely
chronicled and are beyond the scope
of this article.
Final Payment and
Contract Close-Out
Once the project is completed, the
contractor will want to bill for final
payment. Final payment is a prerequisite to contract close-out. A contract will not be closed out if there is
litigation or an appeal involving the
contract. FAR 4.804-1(c).
To receive final payment, the
contractor must submit a final payment application. FAR 52.232-5(h).
The government will make final
payment when:
* All of the work has been completed
and accepted by the government;
* The contractor submits a proper
payment application; and

* The contractor submits a release of
all claims against the government.
While the FAR technically permits
the contractor to except claims from
its release, in practice final payment
is not made until all claims are settled. More importantly, the contractor should ensure that all claims are
submitted to the government before
final payment is made, as final payment will act as a waiver of the right
to submit additional claims.
Conclusion
In order to expedite payment on a
government contract, the contractor
must understand how to work within
the system and regulations and continually be vigilant about timely performing the obligations necessary to
obtain payment, including promptly
preparing payment applications,
REAs, and claims and aggressively,
but professionally, pursuing them
with the government. In doing so,
the contractor must not sacrifice
accuracy for speed or it may face
false claims allegations or recover
less than it is entitled to recover. ●
Adrian L. Bastianelli, III is a partner in
Peckar & Abramson's Washington, DC
office. He has devoted his practice to
construction claims and litigation for
40 years, handling numerous large
surety bond cases. He has an active
alternative dispute resolution practice,
having served as an arbitrator, mediator, and DRB member on over 500 disputes. Bastianelli serves on the NASBP
Attorney Advisory Council. He can be
reached at abastianelli@pecklaw.com
or 202.457.4036.
Lori Ann Lange, a partner in the
Washington, DC office of the law firm
of Peckar & Abramson, P.C. specializes in government contract law, bid
protests, and corporate compliance
counseling. She represents a range
of government contractors, including construction contractors, major
defense contractors, informational
technology contractors, and service
contractors. She can be reached at
llange@pecklaw.com or 202.293.8815
ext. 7103.

NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS | WWW.NASBP.ORG

13


http://WWW.NASBP.ORG

Table of Contents for the Digital Edition of Surety Bond Quarterly - Fall 2017

NASBP Upcoming Meetings & Events
2017–2018 Executive Committee
From the CEO: Advice for the Advisor!
How Can Construction Contractors Expedite Payment on Federal Contracts?
The Growing Importance of the Bond Producer in the Efficient Resolution of Claims
Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Bond Agency Owners: The Hardest Part is Letting Go
New Software Selection and Implementation is not a Weekend Project
Is Canada Soon to Have Its Version of the Miller Act?
2017 NASBP Resource Directory
Surety Bond Quarterly - Fall 2017 - Intro
Surety Bond Quarterly - Fall 2017 - cover1
Surety Bond Quarterly - Fall 2017 - cover2
Surety Bond Quarterly - Fall 2017 - 3
Surety Bond Quarterly - Fall 2017 - 4
Surety Bond Quarterly - Fall 2017 - 5
Surety Bond Quarterly - Fall 2017 - 6
Surety Bond Quarterly - Fall 2017 - 2017–2018 Executive Committee
Surety Bond Quarterly - Fall 2017 - 8
Surety Bond Quarterly - Fall 2017 - From the CEO: Advice for the Advisor!
Surety Bond Quarterly - Fall 2017 - How Can Construction Contractors Expedite Payment on Federal Contracts?
Surety Bond Quarterly - Fall 2017 - 11
Surety Bond Quarterly - Fall 2017 - 12
Surety Bond Quarterly - Fall 2017 - 13
Surety Bond Quarterly - Fall 2017 - The Growing Importance of the Bond Producer in the Efficient Resolution of Claims
Surety Bond Quarterly - Fall 2017 - 15
Surety Bond Quarterly - Fall 2017 - 16
Surety Bond Quarterly - Fall 2017 - 17
Surety Bond Quarterly - Fall 2017 - Practical Tools to Help Jump-Start Your Company’s Cyber Plan
Surety Bond Quarterly - Fall 2017 - 19
Surety Bond Quarterly - Fall 2017 - 20
Surety Bond Quarterly - Fall 2017 - Bond Agency Owners: The Hardest Part is Letting Go
Surety Bond Quarterly - Fall 2017 - 22
Surety Bond Quarterly - Fall 2017 - 23
Surety Bond Quarterly - Fall 2017 - 24
Surety Bond Quarterly - Fall 2017 - 25
Surety Bond Quarterly - Fall 2017 - New Software Selection and Implementation is not a Weekend Project
Surety Bond Quarterly - Fall 2017 - 27
Surety Bond Quarterly - Fall 2017 - 28
Surety Bond Quarterly - Fall 2017 - 29
Surety Bond Quarterly - Fall 2017 - Is Canada Soon to Have Its Version of the Miller Act?
Surety Bond Quarterly - Fall 2017 - 31
Surety Bond Quarterly - Fall 2017 - 32
Surety Bond Quarterly - Fall 2017 - 2017 NASBP Resource Directory
Surety Bond Quarterly - Fall 2017 - 34
Surety Bond Quarterly - Fall 2017 - 35
Surety Bond Quarterly - Fall 2017 - 36
Surety Bond Quarterly - Fall 2017 - 37
Surety Bond Quarterly - Fall 2017 - 38
Surety Bond Quarterly - Fall 2017 - 39
Surety Bond Quarterly - Fall 2017 - 40
Surety Bond Quarterly - Fall 2017 - 41
Surety Bond Quarterly - Fall 2017 - 42
Surety Bond Quarterly - Fall 2017 - 43
Surety Bond Quarterly - Fall 2017 - 44
Surety Bond Quarterly - Fall 2017 - 45
Surety Bond Quarterly - Fall 2017 - 46
Surety Bond Quarterly - Fall 2017 - cover3
Surety Bond Quarterly - Fall 2017 - cover4
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