In a recent decision, the Supreme Court of Pennsylvania has held that the Pa. Contractor and Subcontractor Payment Act (“CASPA”) does not apply to a construction project where the owner is a governmental entity. CASPA is a Pennsylvania statute governing payments to contractors and subcontractors on construction projects located in Pennsylvania. CASPA typically applies to private development projects, whereas the Pa. Procurement Code’s Prompt Pay Schedules apply to state or local public works projects.
The case of Clipper Pipe & Service, Inc. v. The Ohio Casualty Insurance Company concerned a project for the U.S. Department of the Navy. In 2010, the Navy contracted with Contracting Systems, Inc., for construction of a Navy/Marine Corps Reserve Training Center in Lehigh Valley. Contracting Systems subcontracted with Clipper Pipe & Service, Inc., for performance of mechanical work. Later, Clipper filed suit against Contracting Systems and its surety in federal court, asserting that Contracting Systems had failed to pay approximately $150,000 to Clipper. Among other claims, Clipper asserted a claim under CASPA.
Contracting Systems and its surety argued that CASPA did not apply to the federal project. The trial court rejected this argument, reasoning that a governmental entity may be an “owner” under CASPA, since the statutory definition of “person” does not exclude the federal government, and the purpose of CASPA is to protect contracting parties. After a trial, Clipper was awarded damages under CASPA. An appeal was taken to the U.S. Court of Appeals for the Third Circuit.
The Pennsylvania Supreme Court accepted certification from the Third Circuit to determine whether CASPA applied in the context of a public works project. The Supreme Court held that the federal government was not a “person” and therefore not an “owner” under the CASPA definitions, and that CASPA did not apply to public works contracts. In so holding, the Supreme Court noted: “Whether by intention or oversight, the Legislature simply did not design CASPA to apply independently to subcontracts in scenarios in which the foundational contract resides outside its boundaries.” This is the case even if, as in the Clipper case, the government entity is not a direct party to the dispute.
The Supreme Court’s decision can be found here.