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Greg Gillis

 
 

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.

In its 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.