Scott & Hookland LLP

SUMMARY OF STEPS NECESSARY

TO PERFECT A WASHINGTON PUBLIC WORKS CLAIM

By Douglas R. Hookland

USE THIS INFORMATION WITH CAUTION
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Table of Contents

Washington Public Works Projects summary chart
Washington Retainage Lien summary chart
Washington Public Works Claims Checklist

Go to Summary of Steps to Perfect a Construction Lien in Washington
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WASHINGTON PUBLIC WORKS PROJECTS

1. Pre-claim Notice

When	Who	Action Required
Within 10 days of first supplying materials or equipment. There is no relation back. Possible exception: supplying on an open account and not under a fixed price contract.	All subcontractors, and suppliers on Washington Public Works Projects and who are not contracting directly with the prime contractor.	Provide preclaim notice of payment bond claim to the prime contractor by certified mail.

2. The Claim

When	Who	Action Required
Within 30 days after acceptance* (not completion) of the work of improvement by the public body.	All subcontractors, and suppliers on Washington Public Works Projects.**	Notice of the Claim must be served via certified mail upon the public body that let the contract.

3. Post-Claim Notice

NONE

4. Action

When	Who	Action Required
Within four (4) months after serving the notice of payment bond claim. The limitations period will either be set forth in the bond or it will be three, four or six years after the notice of bond claim is served. In order to be consistent with the retainage lien claim foreclosure limitation, claimants may want to file their action within the four month period.	All claimants.	File suit to foreclose the payment bond claim.

* To avoid early acceptance by the public body of a portion of the overall work, serve the notice of payment bond claim within thirty (30) days after the delivery of materials or equipment is complete.

** A material or equipment supplier will not be able to claim against the Washington public works bond unless it supplies to a "subcontractor." There is a two-part test to define who is a "subcontractor." These tests are found in Farwest Steel Corp. v. Mainline Metal Works, Inc., 48 Wn. App. 719 (1987).

First test: Did the "subcontractor" perform work on the project site? If so, then it should be a "subcontractor."

Second test: Does the "subcontractor's" subcontract with the prime contractor account for at least ten percent (10%) of the owner/prime contractor contract? If so, then the "subcontractor" status may be established.

It may be unclear whether the first or second test will be applied in a given situation. If only the second test is used, then many suppliers supplying to "subcontractors" may not be able to claim against the Washington public works bond. The bottom line is that each case will turn on its own facts.

Since Farwest Steel, three cases have consistently held that a supplier to a fabricator providing little or no on-site work has standing to assert a bond claim on a federal project. See U.S. ex rel. Conveyor Rental & Sales Co. v. Aetna Casualty & Surety Co., 781 F.2d 488 (9th Cir. 1992); U.S. ex rel. Tacoma Steel Supply, Inc. v. M. A. Mortenson Co. and Federal Insurance Co., U.S. District Court, Western District of Washington at Tacoma, Case No. C96-5833FDB (April, 1997); and U.S. ex rel. ISSC Inc., dba Seaport Steel v. Cree Construction Co., Inc., U.S. District Court, Western District of Washington at Seattle, Case No. C94-836C.

Given that the Farwest Steel court relied heavily on then existing federal authority, and the fact that subsequent federal authority is inconsistent with Farwest Steel, it may be that a Washington appellate court would now find that a supplier furnishing to a fabricator or contractor having a small portion of the overall work has standing to make payment bond and retainage liens claims on Washington state public works projects. Nevertheless, at this point, it is unclear whether such standing exists.

The key is determining whether the fabricator has a subcontractor relationship or supplier relationship with the prime contractor. If it is a subcontractor relationship, the supplier to the fabricator may have bond rights. If it is a supplier relationship, the supplier to the fabricator probably does not have bond rights. The Conveyor Rental court listed these thirteen (13) factors weighing in favor of a subcontractor relationship:

(1) The product supplied is customer fabricated;

(2) The product supplied is a complex integrated system;

(3) A close financial interrelationship exists between the companies:

(4) A continuing relationship exists with the prime contractor as evidenced by either the requirement of shop drawing approval by the prime contractor or the requirement that the supplier's representative be on the job site;

(5) The supplier is required to perform on site;

(6) There is a contract for labor in addition to materials;

(7) The term "subcontractor" is used in the agreement;

(8) The material supplied did not come from existing inventory;

(9) The supplier's contract constitutes a substantial portion of the prime contract;

(10) The supplier is required to furnish all the material of a particular type;

(11) The supplier is required to post a performance bond;

(12) There is a backcharge for the cost of correcting the supplier's mistakes; and

(13) There is a system of progressive or proportionate fee payment.

The Conveyor Rental court listed the following five (5) factors when weighing in favor of a supplier relationship:

(1) A purchase order form is used by the parties;

(2) The materials come from pre-existing inventory;

(3) The items supplied are relatively simple in nature;

(4) The contract is a small percentage of the total construction costs; and

(5) Sales tax is included in the contract price.

In reaching its determination, the court will likely apply a balancing test weighing factors that tend to favor a subcontractor relationship against factors that tend to favor a supplier relationship. Not all thirteen (13) factors in favor of a subcontractor relationship must exist. Likewise, not all five (5) factors indicating a supplier relationship must exist. Significantly, the contract between the prime contractor and fabricator need not call for on site performance by the fabricator to find a subcontractor relationship. In addition, the use of the term "subcontractor" in the agreement is not necessary to find a subcontractor relationship.

Practical Tip: In determining whether to provide materials or rental equipment to a fabricator or subcontractor having a small portion of the overall work, evaluate and determine the existence of the above thirteen (13) subcontractor relationship factors and five (5) supplier relationship factors. The more subcontractor relationship factors and the less supplier relationship factors that exist, the more likely you will have bond rights on federal and possibly even state public works projects.

To help avoid this unclear issue, consider requiring your customer to post a payment bond for you to claim against. In addition, consider requiring your customer and the prime contractor to sign a joint check agreement with you under which all parties agree that for purposes of public works claims, you are providing materials at the direct request of the prime contractor and that the prime contractor and your customer have a subcontractor relationship and not a supplier relationship.

WASHINGTON RETAINAGE LIENS

1. Pre-claim Notice

When	Who	Action Required
Within 60 days of first supplying materials or equipment. Relates back 60 days.	All subcontractors, and suppliers on Washington Public Works Projects and who are not contracting directly with the prime contractor.	Provide preclaim notice of payment bond claim to the prime contractor by certified mail.

2. The Claim

When	Who	Action Required
Within 45 days after completion* of the contract between the public body and the prime contractor.	All suppliers on Washington Public Works Projects.**	Notice of the Claim must be served via certified mail upon the public body that let the contract.

3. Post-Claim Notice

NONE

4. Action

When	Who	Action Required
Within four (4) months after serving the notice of retainage lien claim.	The retainage lien claimant.	File suit to foreclose the retainage lien claim.
Within four (4) months after serving the notice of retainage lien claim, re-serve the notice. Exception: Must file foreclosure action no later than 4 months and 45 days after completion.	All retainage lien claimants.	Re-serve notice of retainage lien claim on public body that let the contract. (File suit to foreclose the retainage lien claim before 4 months and 45 days after completion.)

* See the above notes concerning acceptance of the project by the public body.

** See above for a discussion of who is a "subcontractor."

Washington Public Works Claims Checklist

To Do	Consider
1. Claimant's Name:	Call Secretary of State (360) 753-7115; Department of Labor and Industries (360) 902-5226 (for other than electrical contractors) or (360) 902-5269 (for electrical contractors). RCW 18.27.080.
2. Name of person/entity that employed Claimant:	See 1 above. Also review contracts, invoices, credit applications and payments.
3. Name of public body that let contract:	See 1 above. Also review payment bond and performance bond information.
4. All names confirmed with Secretary of State and Department of Labor and Industries? ____ Yes ____ No.	Is the information the same?
5. Claimant provided: Labor ____ Materials ____ Rental Equipment ____ Professional Services ____ (Engineer or Architect)
6. Breakdown of balance owed Claimant: $______________ for labor $______________ for materials $______________ for rental equipment $______________ for services (Arch/Eng'r) $______________ for sales tax $______________ total* Is Claimant entitled to interest higher than the legal rate of 12%? ___ No ___Yes If yes, what is the basis of higher interest rate? Contract right _____ Other _________ If Other, please explain:
7. Date of Claimant's bid/contract: Date Claimant started working:
8. Date Claimant ceased peforming work (last day of substantial, original work):	This information must be in each claim.
9. Preclaim Notice of Retainage Lien Claim sent? ____ No _____ Yes	See 10 below.
10. Date of mailing or service preclaim Notice of Retainage Lien: Receipt:	Review RCW 60.28.015. This notice must be provided by material or rental equipment suppliers who furnish to one other than the prime contractor, and relates back 60 days from the date sent. Must be sent by certified or registered mail or by personal service with written evidence of service.
11. Date of mailing or serving preclaim Notice of Right to Payment Bond Claim: Receipt	Review RCW 39.08.065. This notice must be provided by material and rental equipment suppliers furnishing to one other than the prime contractor and must be provided within 10 days after the first delivery. Where notice is sent later than 10 days after first delivery, the notice may still protect materials and rent equipment furnished after notice was sent if the material and/or rental equipment was furnished on as as needed basis. Notice should be sent by certified or registered mail or by personal service with written evidence of service.
12 . Date of project completion:	Review RCW 60.28.011(2). Completion of the project does not mean an acceptance of the prime contractor's work. Completion and acceptance can occur at different times.
13. Date project is accepted by the public body:	Revivew 39.08.030. Watch out for early acceptance of the portion of the prime contractor's work that includes the claimant's work.
14. Date notice of retainage lien served on public body:	Must be served within 45 days after the completion of the contract between the public body and the prime contractor. Service should be by certified or registered mail or by personal service with written evidence of service.
15. Date notice of payment bond claim served on public body:	Must be served within 30 days after public body accepts the work of the improvement. Watch out for early acceptance of that portion of the prime contractor's work that includes the claimant's work. Service should be by certified or registered mail or by personal service with written evidence of service.
16. 30 days after service of payment bond claim:	Right to attorney fees matures under RCW 39.08.030. Bring suit on payment bond claim and to foreclose retainage lien claim.
17. Date that is 4 months after service of notice of retainage lien claim:	This is the last day to either foreclose the retainage lien claim or re-serve it. Must file foreclosure action no later than 4 months and 45 days after completion of the contract between the public body and the prime contractor. (Can not re-serve claim at this point.) In conjunction with foreclosing retainage lien claim, also bring suit on payment bond claim even though statute of limitations on payment bond claim may be three, four or six years, or as set forth in payment bond.