Subcontract Disputes
Disputes between prime contractors and subcontractors are some of the most common in government contracting. Because a subcontractor generally has no contract with the government, its rights depend on the subcontract and the applicable state law.
Disputes we handle
- Nonpayment and slow payment
- Workshare disputes and failures to award a promised subcontract
- Terminations of subcontracts for convenience or default
- Changes, delays and claims for additional compensation
- Flow-down clause disputes
- Pass-through (sponsored) claims presented through the prime contractor
- Miller Act payment bond claims on federal construction projects
We represent both prime contractors and subcontractors in negotiation, mediation, arbitration and litigation. Many disputes can be prevented with clear subcontract terms, so we also help clients negotiate subcontracts before work begins.
Related
- Teaming Agreements
- Business Litigation
To discuss a subcontract dispute, call 703.448.1810.
Why subcontract disputes are different
A subcontractor usually has no contract with the government, so it cannot file its own Contract Disputes Act claim. Its rights come from the subcontract, the clauses flowed down from the prime contract and the law the subcontract selects. When the government caused the problem, the subcontractor's claim often has to travel through the prime as a pass-through (sponsored) claim, which requires cooperation and a liquidating or similar agreement between the prime and the subcontractor.
Getting paid
- Under federal prompt payment rules, a prime contractor generally must pay its subcontractors within seven days after it receives payment from the government for their work.
- On federal construction projects over the Miller Act threshold, subcontractors and suppliers can claim against the prime's payment bond. A second-tier subcontractor must give the prime written notice within 90 days after last furnishing labor or materials, and suit must be filed within one year after that last day.
- A "pay-if-paid" clause may shift the risk of government nonpayment to the subcontractor, while a "pay-when-paid" clause may only affect timing. The wording matters, and courts read these clauses differently.
Questions clients ask
Can a subcontractor sue the government directly? Generally no, because the subcontractor lacks privity of contract with the government. Its path is usually a pass-through claim sponsored by the prime, or a direct claim against the prime under the subcontract.
The prime is withholding payment because of a dispute with the government. What can we do? Review the payment clause, the disputes clause and any flowdown provisions first. Depending on the language, you may have a direct payment claim against the prime, a Miller Act bond claim or a right to have the prime sponsor your claim.
What is the deadline for a Miller Act claim? A second-tier claimant must give written notice to the prime within 90 days after its last work or delivery, and any suit must be filed within one year after that date.
Related reading: Hidden Dangers in a Subcontract, Construction Contracts: When to Sue a Prime Contractor and Negotiating Commercial-Item Subcontracts
