Colorado Supreme Court Reinforces Subcontractor Payment Rights On Public Works Projects

The Colorado Supreme Court recently issued a unanimous decision that significantly strengthens subcontractors’ and suppliers’ ability to pursue payment on public construction projects. For Senn Fortis clients, as well as many others in the construction industry, this ruling represents a meaningful course correction, reaffirming critical protections under the Colorado Public Works Act and reducing formerly significant risks in pursuing payment disputes on public works projects.

A prior Court of Appeals decision in Ralph L. Wadsworth Construction Company v. Regional Rail Partners had put subcontractors and suppliers in a very difficult position: assert the full value of a claim and risk losing all rights to recovery, or take a more conservative approach and risk not getting paid. 

In its ruling, the Colorado Supreme Court rejected the previous Court of Appeals decision, holding that subcontractors may include disputed or unliquidated amounts in their claims and confirming that, even if a claim is later challenged, it does not result in a total forfeiture of recovery.

In doing so, the Court brought the law back in line with how construction projects actually operate and reinforced key protections for subcontractors and suppliers seeking payment. I was honored to support the American Subcontractors Association of Colorado and the American Subcontractors National Legal Defense Fund by participating as amicus curiae in this case, advocating for a fair and workable interpretation of the law.

Key Changes from the Colorado Supreme Court Decision

1. Disputed and Unliquidated Amounts Are Permissible

The Court confirmed that subcontractors may include disputed or evolving costs in a verified statement of claim, including:

• Delay damages
• Disruption costs
• Contested change orders
• Retainage (withheld amounts)

So long as the costs relate to labor, materials, equipment, supervision, or other project inputs, subcontractors may include them in a claim, even if the claim is not yet fully resolved.

2. The Penalty for an “Excessive” Claim Is Limited

Equally important, the Court rejected the notion that an excessive claim results in total forfeiture of all claims, including contract and equitable claims. Instead, any forfeiture applies only to statutory remedies under the Public Works Act.

Subcontractors may still pursue recovery through:

• Breach of contract and equitable claims
• Bond claims
• Other available legal and equitable avenues

Why This Ruling Matters for Subcontractors

• It protects subcontractors from overly harsh penalties when asserting claims

  The Court of Appeals’ interpretation created an untenable situation: assert your full claim (and risk losing everything), or understate your claim and risk not being paid, and rejected the assertion that the statutory term “amounts due” does not include disputed claims. In its decision, the Colorado Supreme Court acknowledged that even though certain claimed damages may be disputed or unliquidated, there is still the reasonable possibility that such amounts are due to the claimant.

• Brings balance back to risk allocation on public projects

  Under the prior Court of Appeals ruling, any dispute of a claim could potentially trigger a finding that the claim was excessive, wiping out all recovery. The Supreme Court’s decision eliminates that dynamic and strengthens subcontractor position in public works payment claims and disputes.

• It acknowledges how construction projects actually operate

  Delays, disruptions, and disputed costs are a real part of the construction industry. The Court recognized that subcontractors should be able to assert claims for these damages without the fear of losing all opportunity for recovery. 

Important Limitations Still Apply

Subcontractors should keep in mind:

• Claims must be grounded in actual project costs (labor, materials, equipment, supervision)
• Lost profits, costs for idle time associated with delays or disruptions, and purely consequential damages are not recoverable under the statute
• There must be a reasonable basis for the amount claimed at the time of filing

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.