Prompt Payment Act Does not Apply to Contract with School District That is not Procured Through Competitive Process.

Last month, the Pennsylvania Commonwealth Court addressed whether the prompt payment provisions of the Commonwealth Procurement Code, 62 Pa. C.S. §§ 3931-3939, applied to an oral contract between a school district and a sheet metal subcontractor that was not procured through a competitive process. In F. Zacherl, Inc. v. West Allegheny School District, No. 1904 C.D. 2011, No. 530 C.D. 2012 (Pa. Commw. Ct. May 6, 2013) (unpublished opinion), the West Allegheny School District entered into an oral contractor with F. Zacherl, Inc., the sheet metal subcontractor on the project, after the School District terminated the prime contractor with whom F. Zacherl had contracted.  The Commonwealth Court, citing 62 Pa.C.S  § 3901, observed that the Prompt Payment Act applies only “to contracts entered into by a government agency through competitive sealed bidding or competitive sealed proposals.”  The Court held that the Prompt Payment Act did not apply to the oral contract between the School District and F. Zacherl.  Accordingly, the Court concluded that the trial court erred by ordering the School District to pay attorneys’ fees and penalties pursuant to that Prompt Payment Act.

Notwithstanding the inapplicability of the prompt payment provisions of the Procurement Code, the Commonwealth Court remarked in footnote 15 of the opinion that the trial court, on remand, may consider F. Zacherl’s claims for attorneys’ fees and penalties to the extent it is otherwise “entitled to that relief.”  While not apparent from the Commonwealth Court’s opinion, F. Zacherl’s Complaint also requested attorneys’ fees and penalties under the Pennsylvania Contractor and Subcontractor Payment Act (“CASPA”).  By this footnote, the Commonwealth Court appears to acknowledge that F. Zacherl may attempt to recover attorneys’ fees and penalties against the School District under CASPA.  Thus, this is a notable (and unusual) instance where a contractor may recover relief under CASPA against a state government entity for a project involving public funds.