NC State Construction projects– Privity, Multi-Prime Contracts, and the Ability to Be Sued by Parties You Don’t know (Law note)
At the recent seminar on construction law in North Carolina, I was asked whether parties could be sued by other parties on state construction projects when there is no contract between those parties. The answer is yes. In the following series of blog posts, I will address three major cases which address this question in several different permutations.
For today’s post, I will discuss contractual privity, the multi-prime statute, and how the two apply on North Carolina state construction projects. In later posts, I will discuss the application of that statute to different parties in the construction context.
In North Carolina, the state entity who is the owner of the construction project must bid the project pursuant to one of several designated ways. One common method sometimes required of public bidding is the “mulit-prime” contract, in which the State has at least 4 separate contracts, for:
(1) Heating, ventilating, and air conditioning
(2) Plumbing and gas fittings
(3) Electrical wiring and installations
(4) General construction relating to erection, alteration, or repair on public property
N.C. Gen. Stat. §143-128(a).
The purpose of the multi-prime statute is two-fold:
- It encourages lower bids by preventing pass-through cost mark-ups to the state
- It allows smaller specialty contractors to enter bidding directly with state without having to have a working relationship with a general contractor, thereby opening up state jobs to a wider array of potential contractors
In general, contractual privity is required to sue another entity on a construction project—that is, you have to be in a contractual relationship with the party you are suing. There are exceptions to this rule. For example, you can be sued in negligence for property and personal damage by a party that you do not have a contract with. (See my post discussing the architect’s liability for economic loss resulting from breach of architect’s common-law duty of due care ). In addition, the state legislature has provided the ability for contractors to sue one another, or other entities involved in the construction project, without having to sue the owner or deal with the State Construction Office.
NC statute on liability:
Each separate contractor shall be directly liable to the State of North Carolina, or to the county, municipality, or other public body and to the other separate contractors for the full performance of all duties and obligations due respectively under the terms of the separate contracts and in accordance with the plans and specifications, which shall specifically set forth the duties and obligations of each separate contractor. For the purpose of this section, “separate contractor” means any person, firm or corporation who shall enter into a contract with the State, or with any county, municipality, or other public entity to erect, construct, alter or repair any building or buildings, or parts of any building or buildings.
N.C. Gen. Stat. §143-128(b). [Emphasis added].
This statute has been interpreted over the past decade to allow essentially any party to sue any other party directly on state construction projects. In the next blog post, I will discuss the first of three major cases dealing with this issue.