Arizona's Prompt Pay Act Does Not Apply to Federal Construction Projects
In Zumar Industries, Inc. v. Camus Corporation, the Arizona Court of Appeals was asked to determine whether Arizona's Prompt Pay Act governing contractor and subcontractor payment disputes applied to federal projects.
Camus Corporation provided and installed road signs at
the Grand Canyon National Park. Camus hired Zumar, a supplier of traffic signs,
to supply the sign panels. Camus submitted pay applications to the National Park
Service, certifying the sign panels were completed, and requested and received
payment for the sign panels. Camus partially paid Zumar but withheld
approximately $35,000 pending Zumar's satisfactory performance. Zumar filed suit
against Camus seeking the $35,000, claiming that Camus violated Arizona's prompt
pay laws, which was a breach of the parties' subcontract agreement.
The Court of Appeals found that the primary purpose of
Arizona's Prompt Pay Act was to establish a framework ensuring timely payments
from the owner to the contractor and down the line to subcontractors and
suppliers whose work had been approved and paid.
ruling, the Court concluded that the Act's payment scheme does not apply to
federal projects and cannot be read into the subcontract because the federal
government and their agencies are not owners. The Court found that the federal
government and its agencies were not included in the definition of "owner" under
the Act, and therefore the Arizona Prompt Pay Act did not govern payments under
the Zumar Industries contract.
Arizona contractors need to know that the Arizona Prompt
Pay Act will not apply to any federal construction project.