Great News For Contractors Working on SCA Projects: SCA Notice of Claim Statute is Amended to Benefit Contractors

On December 17, 2014 the SCA notice of claim statute[1] was amended to change the timing for the submission of notices of claim against the New York City School Construction Authority (“SCA”). Under the old law, which still controls claims for monies due under SCA contracts executed before December 17, 2014, contractors were required to file a verified notice of claim within three (3) months of “accrual” of such claim.

However, the old statute was silent as to when a claim begins to “accrue,” leaving the question open to interpretation by courts. Therefore, whether a claim was timely often depended on the nature of the claims and the facts of each case, which has resulted in a great deal of litigation over the timeliness of claims.

Courts have generally held that a claim begins to accrue against the SCA when damages are “ascertainable”, which is when “the work is substantially completed or a detailed invoice of the work performed is submitted.” This interpretation was particularly problematic in the context of change orders because a contractor’s change order claims were often deemed to have accrued when the change order was submitted to the SCA, as opposed to the date on which the SCA denied the change order.  Given that the SCA routinely takes more than three (3) months to process change orders, by the time the SCA got around to denying a change order the contractor’s claim may have already been time barred.

The old law was unfair to contractors, as it basically incentivized the SCA to delay processing change orders beyond three months with the hope that the contractor might fail to file a notice of claim.  Furthermore, the old rule encouraged — and most likely caused — the submission of many unnecessary claims since contractors were forced to file claims before it was clear whether the SCA could consider them.

Further complicating the claims process was the fact that a different rule applied to the New York City Department of Education (“DOE”) and school districts outside of the City of New York.  Claims against those entities are governed by N.Y. State Education Law Sec. 3813, which expressly provides that claims begin to accrue as of the date the payment of the amount claimed was “denied.”

The December 17, 2014 amendment to the SCA notice of claim statute eliminates this inconsistency. The SCA notice of claim statute now provides that a claim for monies due under SCA contracts accrues as of the date payment for the amount claimed was denied by the SCA. The new law applies to contracts executed on or after December 17, 2014.

While the new rule is helpful to contractors, the SCA claims process is still complicated, and contractors that have a claim – whether the claim arises from a change order, contract work, delay, or a combination of each – should file claims without delay, and in the proper form.

If your company has a claim on an SCA project it is best to retain counsel with experience dealing with the SCA early on in the process in order to avoid pitfalls that can be fatal to the claim. The attorneys at Marco & Sitaras, PLLC, regularly counsel contractors navigating the claims process on public contracts, and have extensive experience litigating against public agencies.

[1] N.Y. Public Authorities Law Sec.,  1744(2)

By George Sitaras

 

Marco & Sitaras, PLLC
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