HB3486 99TH GENERAL ASSEMBLY

LRB099 09361 SXM 31696 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
HB3486

Introduced , by Rep. William Davis

SYNOPSIS AS INTRODUCED:

20 ILCS 2705/2705-615 new
30 ILCS 500/45-45
30 ILCS 540/7	from Ch. 127, par. 132.407
30 ILCS 540/8 new

Amends the Civil Administrative Code of Illinois. Provides that a small business subcontractor may enter into an agreement with the Department of Transportation to receive direct payments from the Department on a construction project. Amends the Procurement Code. Provides that any construction project under the authority of the chief procurement officer valued at $195,000 or less shall be designated for a small business set-aside. Amends the State Prompt Payment Act. Provides that when a State official or agency responsible for administering a contract submits a voucher to the Comptroller for payment to a small business subcontractor who enters into a contract, that State official or agency shall make available electronically the voucher information. Provides that if a contractor with the Department or a small business subcontractor claims that additional payment is due under the terms of the contract, and the Department of Transportation has not agreed that payment is due, the contractor or subcontractor desiring to pursue additional compensation shall file a claim according to the requirements and procedures specified by the Department. Provides that if the claim, after consideration by the Department, is found to have merit, the Department will make an equitable adjustment.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning finance.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Department of Transportation Law of the Civil Administrative Code of Illinois is amended by adding Section 2705-615 as follows:

(20 ILCS 2705/2705-615 new)

Sec. 2705-615. Small business; Disadvantaged Business Enterprise; subcontractor direct payments.

(a) A small business subcontractor may enter into an agreement with the Department to receive direct payments from the Department on a construction project if the following conditions have been met:

(1) the subcontractor is listed on the Chief Procurement Office's Small Business Vendors Directory;

(2) the subcontractor is listed on the Department of Transportation Disadvantaged Business Enterprise Directory; and

(3) the Department has reviewed the contract and determined that it meets the requirements for fairness and responsiveness to the Department's bid specifications.

(b) Any contract entered pursuant to this Section shall include the following terms:

(1) Any mobilization payment in the contract shall be capped at the same percentage as the mobilization payment in the contract between the Department and the prime contractor. "Mobilization payment" means an advance payment to a contractor that enables the contractor to purchase necessary machinery and tools for a project or its customary meaning in the context of the contract. The mobilization payments shall be set at a per year basis. Mobilization Payments on a multi-year project shall be paid on an annual basis.

(2) If the prime contractor and the Department agree to an accelerated pay schedule, the Department must agree to the new pay schedule for the subcontractor as well.

Section 10. The Illinois Procurement Code is amended by changing Section 45-45 as follows:

(30 ILCS 500/45-45)

Sec. 45-45. Small businesses.

(a) Set-asides. Each chief procurement officer has authority to designate as small business set-asides a fair proportion of construction, supply, and service contracts for award to small businesses in Illinois. Any construction project under the authority of the chief procurement officer appointed pursuant to paragraph (2) of subsection (a) of Section 10-20 valued at $195,000 or less shall be designated for a small business set-aside. Advertisements for bids or offers for those contracts shall specify designation as small business set-asides. In awarding the contracts, only bids or offers from qualified small businesses shall be considered.

(b) Small business. "Small business" means a business that is independently owned and operated and that is not dominant in its field of operation. The chief procurement officer shall establish a detailed definition by rule, using in addition to the foregoing criteria other criteria, including the number of employees and the dollar volume of business. When computing the size status of a potential contractor, annual sales and receipts of the potential contractor and all of its affiliates shall be included. The maximum number of employees and the maximum dollar volume that a small business may have under the rules promulgated by the chief procurement officer may vary from industry to industry to the extent necessary to reflect differing characteristics of those industries, subject to the following limitations:

(1) No wholesale business is a small business if its annual sales for its most recently completed fiscal year exceed $13,000,000.

(2) No retail business or business selling services is a small business if its annual sales and receipts exceed $8,000,000.

(3) No manufacturing business is a small business if it employs more than 250 persons.

(4) No construction business is a small business if its annual sales and receipts exceed $14,000,000.

(c) Fair proportion. For the purpose of subsection (a), for State agencies of the executive branch, a fair proportion of construction contracts shall be no less than 25% nor more than 40% of the annual total contracts for construction.

(d) Withdrawal of designation. A small business set-aside designation may be withdrawn by the purchasing agency when deemed in the best interests of the State. Upon withdrawal, all bids or offers shall be rejected, and the bidders or offerors shall be notified of the reason for rejection. The contract shall then be awarded in accordance with this Code without the designation of small business set-aside.

(e) Small business specialist. The chief procurement officer shall designate a State purchasing officer who will be responsible for engaging an experienced contract negotiator to serve as its small business specialist, whose duties shall include:

(1) Compiling and maintaining a comprehensive list of potential small contractors. In this duty, he or she shall cooperate with the Federal Small Business Administration in locating potential sources for various products and services.

(2) Assisting small businesses in complying with the procedures for bidding on State contracts.

(3) Examining requests from State agencies for the purchase of property or services to help determine which invitations to bid are to be designated small business set-asides.

(4) Making recommendations to the chief procurement officer for the simplification of specifications and terms in order to increase the opportunities for small business participation.

(5) Assisting in investigations by purchasing agencies to determine the responsibility of bidders or offerors on small business set-asides.

(f) Small business annual report. The State purchasing officer designated under subsection (e) shall annually before December 1 report in writing to the General Assembly concerning the awarding of contracts to small businesses. The report shall include the total value of awards made in the preceding fiscal year under the designation of small business set-aside. The report shall also include the total value of awards made to businesses owned by minorities, females, and persons with disabilities, as defined in the Business Enterprise for Minorities, Females, and Persons with Disabilities Act, in the preceding fiscal year under the designation of small business set-aside.

The requirement for reporting to the General Assembly shall be satisfied by filing copies of the report as required by Section 3.1 of the General Assembly Organization Act.

(Source: P.A. 98-1076, eff. 1-1-15.)

Section 15. The State Prompt Payment Act is amended by changing Section 7 and by adding Section 8 as follows:

(30 ILCS 540/7) (from Ch. 127, par. 132.407)

Sec. 7. Payments to subcontractors and material suppliers.

(a) When a State official or agency responsible for administering a contract submits a voucher to the Comptroller for payment to (i) a contractor; or (ii) a subcontractor who enters into a contract pursuant to Section 2705-615 of the Civil Administrative Code of Illinois, that State official or agency shall promptly make available electronically the voucher number, the date of the voucher, and the amount of the voucher. The State official or agency responsible for administering the contract shall provide subcontractors and material suppliers, known to the State official or agency, with instructions on how to access the electronic information. When a contractor receives any payment, the contractor shall pay each subcontractor and material supplier in proportion to the work completed by each subcontractor and material supplier their application, plus interest received under this Act, less any retention. If the contractor receives less than the full payment due under the public construction contract, the contractor shall be obligated to disburse on a pro rata basis those funds received, plus interest received under this Act, with the contractor, subcontractors and material suppliers each receiving a prorated portion based on the amount of payment. When, however, the public owner does not release the full payment due under the contract because there are specific areas of work or materials the contractor is rejecting or because the contractor has otherwise determined such areas are not suitable for payment, then those specific subcontractors or suppliers involved shall not be paid for that portion of work rejected or deemed not suitable for payment and all other subcontractors and suppliers shall be paid in full, plus interest received under this Act.

(b) If the contractor, without reasonable cause, fails to make full payment of amounts due under subsection (a) to his subcontractors and material suppliers within 15 days after receipt of payment under the public construction contract, the contractor shall pay to his subcontractors and material suppliers, in addition to the payment due them, interest in the amount of 2% per month, calculated from the expiration of the 15-day period until fully paid. This subsection shall also apply to any payments made by subcontractors and material suppliers to their subcontractors and material suppliers and to all payments made to lower tier subcontractors and material suppliers throughout the contracting chain.

(1) If a contractor, without reasonable cause, fails to make payment in full as provided in subsection (a) within 15 days after receipt of payment under the public construction contract, any subcontractor or material supplier to whom payments are owed may file a written notice with the State official or agency setting forth the amount owed by the contractor and the contractor's failure to timely pay the amount owed.

(2) The State official or agency, within 15 days after receipt of a subcontractor's or material supplier's written notice of the failure to receive payment from the contractor, shall hold a hearing convened by an administrative law judge to determine whether the contractor withheld payment, without reasonable cause, from the subcontractors and material suppliers and what amount, if any, is due to the subcontractors and material suppliers. The State official or agency shall provide appropriate notice to the parties of the date, time, and location of the hearing. Each contractor, subcontractor, and material supplier has the right to be represented by counsel at the hearing and to cross-examine witnesses and challenge documents.

(3) If there is a finding by the administrative law judge that the contractor failed to make payment in full, without reasonable cause, as provided in subsection (a), then the administrative law judge shall, in writing, direct the contractor to pay the amount owed to the subcontractors and material suppliers plus interest within 15 days after the finding.

(4) If a contractor fails to make full payment within 15 days after the administrative law judge's finding, then the contractor shall be barred from entering into a State public construction contract for a period of one year beginning on the date of the administrative law judge's finding.

(Source: P.A. 94-672, eff. 1-1-06; 94-972, eff. 7-1-07.)

(30 ILCS 540/8 new)

Sec. 8. Contract Claims. If (i) a contractor who has a contract with the Department of Transportation, or (ii) a subcontractor who enters into a contract pursuant to Section 2705-615 of the Civil Administrative Code of Illinois claims that additional payment is due under the terms of the contract, or for any other reason arising out of the performance of the contract, and the Department has not agreed during the ordinary course of contract administration that the payment is due, then the contractor or subcontractor may file a claim according to the requirements and procedures specified by the Department. If written notifications are not given, or if the Department is not afforded reasonable access by the contractor or subcontractor to complete records of actual costs or additional time claimed, or if a claim is not filed according to the procedures and within the time specified in the rules of the Department of Transportation, then the contractor or subcontractor's claim is waived and the Department is released from any and all demands and claims under that contract by the contract or subcontractor. The fact that the contractor or subcontractor has provided a proper notification, provided a properly filed claim, or provided the Department access to records of actual cost shall not in any way be construed as proving or substantiating the validity of the claim. If the claim, after consideration by the Department, is found to have merit, the Department will make an equitable adjustment either in the amount of costs to be paid according to the basis of payment specified by the Department or in the time required for the work, or both. If the Department finds the claim to be without merit, no adjustment will be made.