It is no secret that Arizona’s Prompt Pay Act (the “PPA”) is constructed around a 30-day billing cycle. Indeed, the PPA codified monthly progress billings as the standard payment arrangement on all Arizona construction projects. It was not, however, the understanding or practice of those in the construction industry that payment applications submitted at the end of a billing cycle were limited to work performed or materials furnished in the preceding 30 days. But this changed with the Arizona Court of Appeals’ recent decision in SK Builders, Inc. v. Smith. In SK Builders, the court held that the PPA provision stating that “billing[s] or estimate[s]” be based on “work performed and…materials supplied during the preceding thirty day billing cycle” means that the PPA does not apply to general contractors’ billings or estimates that contain work furnished outside the past 30 days.
A decade ago, the Arizona Court of Appeals held that “the primary purpose of [Arizona’s Prompt Pay] Act is to establish a framework for ensuring timely payments from the owner to the contractor and down the line to the subcontractors and suppliers whose work has been approved.” Stonecreek Bldg. Co., Inc. v. Shure, 216 Ariz. 36, 39 (App. 2007) (emphasis added). But just recently in Zumar Industries, Inc. v. Caymus Corp., No. 1 CA-CV 16-0423, the Court of Appeals was tasked with deciding whether the Act still applied to a “down the line” relationship on a federal work project, where there was, by statute, no preceding “owner-contractor” relationship. The Court held that the Act did not apply in these circumstances.
My very first post for this blog (which is nearly two years old) covered the Arizona Court of Appeals’ decision in RSP Architects, Ltd. v. Five Star Development Resort Communities, LLC, 306 P.3d 93, 232 Ariz. 436 (App. 2013). In RSP Architects, the court held that Arizona’s private sector prompt payment laws (A.R.S. § 32-1129 et seq.) do not apply to architectural service contracts. While this remains the case, Arizona design professionals recently scored a victory on the prompt payment front. The Arizona Design Professional Prompt Pay Act (the “Act”) was created earlier this year when Governor Ducey signed H.B. 2336 into law. The Act, which went into effect on July 3, 2015, establishes requirements for promptly paying “design professionals” performing work on state, county, and municipal construction projects. For purposes of the Act, “design professional services” are defined as “architect services, engineer services, land surveying services, geologist services or landscape architect services or any combination…” thereof.
The Arizona Court of Appeals recently addressed the scope of Arizona’s Prompt Payment Act in RSP Architects, Ltd. v. Five Star Development Resort Communities, LLC, 306 P.3d 93, 232 Ariz. 436 (App. 2013). Specifically, the court was tasked with determining whether an architect performing an architectural services contract was a “contractor” entitled to protection under the Act. Consistent with the ordinary definitions of “architect” and “contractor,” the court ultimately held that the Act does not apply to architectural service contracts. But the case was not as straightforward as one might have expected.