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Subcontractors Raise Issues on P3 Projects

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In response to your article, "Special Report: Which Way the Winds Are Blowing on P3s", the American Subcontractors Association would like to raise your awareness about a concern that construction subcontractors and suppliers have with public-private partnerships (P3s).

Specifically, ASA is concerned that existing federal and state laws establishing payment assurances for subcontractors and suppliers may not apply to projects financed through P3s.

State mechanic's lien laws generally do not apply to construction on public land; yet federal, state or local governments often own the real estate on which projects financed through P3s are built. Statutory payment bonds may be required on contracts awarded by public owners; yet the owners or primary contracting entities on P3 projects are likely to be private or partially private. Thus, neither mechanic's liens nor payment bonds may provide payment assurances to subcontractors and suppliers on P3 projects.

This is problematic since subcontractors and suppliers extend large amounts of credit on construction projects. They pay their laborers, suppliers and taxes even before submitting an invoice for their work to their prime-contractor client. When subcontractors harbor doubts about getting paid for their work, they may choose to charge higher prices to account for their increased risk or simply choose not to bid on such work at all. Ultimately, such projects will either cost more or not have the expertise of the best firms in the construction industry.

ASA is educating federal and state legislators about the need for subcontractor payment protections on P3 projects. Legislatures in Maine and Texas already have enacted laws that require payment bonds on projects financed by P3s. Other state legislatures will consider similar bills during their 2012 sessions.

KERRICK WHISENANT

President

American Subcontractors Association Inc., Alexandria, Va.

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