101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB0173

 

Introduced , by Rep. Camille Y. Lilly

 

SYNOPSIS AS INTRODUCED:
 
20 ILCS 2705/2705-615 new
30 ILCS 540/7  from Ch. 127, par. 132.407
30 ILCS 540/12 new

    Amends the Department of Transportation Law of 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 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 specified contract under the Department of Transportation Law, that State official or agency shall make available electronically the voucher information. Provides that if a contractor is assessed liquidated damages from the State, the contractor is still responsible to each subcontractor under subcontracts. Provides that contractors are responsible for reasonable attorneys' fees if an administrative law judge finds in favor of the subcontractor. 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.


LRB101 04717 RJF 49726 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB0173LRB101 04717 RJF 49726 b

1    AN ACT concerning finance.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Department of Transportation Law of the
5Civil Administrative Code of Illinois is amended by adding
6Section 2705-615 as follows:
 
7    (20 ILCS 2705/2705-615 new)
8    Sec. 2705-615. Small business; Disadvantaged Business
9Enterprise; subcontractor direct payments.
10    (a) A small business subcontractor may enter into an
11agreement with the Department to receive direct payments from
12the Department on a construction project if the following
13conditions have been met:
14        (1) the subcontractor is listed on the Chief
15    Procurement Office's Small Business Vendors Directory;
16        (2) the subcontractor is listed on the Department of
17    Transportation Disadvantaged Business Enterprise
18    Directory; and
19        (3) the Department has reviewed the contract and
20    determined that it meets the requirements for fairness and
21    responsiveness to the Department's bid specifications.
22    (b) Any contract entered into under this Section shall
23include the following terms:

 

 

HB0173- 2 -LRB101 04717 RJF 49726 b

1        (1) Any mobilization payment in the contract shall be
2    capped at the same percentage as the mobilization payment
3    in the contract between the Department and the prime
4    contractor. "Mobilization payment" means an advance
5    payment to a contractor that enables the contractor to
6    purchase necessary machinery and tools for a project or its
7    customary meaning in the context of the contract. The
8    mobilization payments shall be set at a per year basis.
9    Mobilization Payments on a multi-year project shall be paid
10    on an annual basis.
11        (2) If the prime contractor and the Department agree to
12    an accelerated pay schedule, the Department must agree to
13    the new pay schedule for the subcontractor as well.
 
14    Section 10. The State Prompt Payment Act is amended by
15changing Section 7 and by adding Section 12 as follows:
 
16    (30 ILCS 540/7)   (from Ch. 127, par. 132.407)
17    Sec. 7. Payments to subcontractors and material suppliers.
18    (a) When a State official or agency responsible for
19administering a contract submits a voucher to the Comptroller
20for payment to (i) a contractor; or (ii) a subcontractor who
21enters into a contract under Section 2705-615 of the Department
22of Transportation Law of the Civil Administrative Code of
23Illinois, that State official or agency shall promptly make
24available electronically the voucher number, the date of the

 

 

HB0173- 3 -LRB101 04717 RJF 49726 b

1voucher, and the amount of the voucher. The State official or
2agency responsible for administering the contract shall
3provide subcontractors and material suppliers, known to the
4State official or agency, with instructions on how to access
5the electronic information.
6    (a-5) When a contractor receives any payment, the
7contractor shall pay each subcontractor and material supplier
8in proportion to the work completed by each subcontractor and
9material supplier its application or pay estimate, plus
10interest received under this Act. When a contractor receives
11any payment, the contractor shall pay each lower-tiered
12subcontractor and material supplier and each subcontractor and
13material supplier shall make payment to its own respective
14subcontractors and material suppliers. If the contractor
15receives less than the full payment due under the public
16construction contract, the contractor shall be obligated to
17disburse on a pro rata basis those funds received, plus
18interest received under this Act, with the contractor,
19subcontractors and material suppliers each receiving a
20prorated portion based on the amount of payment each has
21earned. If the contractor is assessed liquidated damages from
22the State, the contractor is still responsible to each
23subcontractor under the subcontracts. When, however, the State
24official or agency does not release the full payment due under
25the contract because there are specific areas of work or
26materials the State agency or official has determined are not

 

 

HB0173- 4 -LRB101 04717 RJF 49726 b

1suitable for payment, then those specific subcontractors or
2material suppliers involved shall not be paid for that portion
3of work rejected or deemed not suitable for payment and all
4other subcontractors and suppliers shall be paid based upon the
5amount of payment each has earned, plus interest received under
6this Act.
7    (a-10) For construction contracts with the Department of
8Transportation, the contractor, subcontractor, or material
9supplier, regardless of tier, shall not offset, decrease, or
10diminish payment or payments that are due to its subcontractors
11or material suppliers without reasonable cause.
12    A contractor, who refuses to make prompt payment, in whole
13or in part, shall provide to the subcontractor or material
14supplier and the public owner or its agent, a written notice of
15that refusal. The written notice shall be made by a contractor
16no later than 5 calendar days after payment is received by the
17contractor. The written notice shall identify the Department of
18Transportation's contract, any subcontract or material
19purchase agreement, a detailed reason for refusal, the value of
20the payment to be withheld, and the specific remedial actions
21required of the subcontractor or material supplier so that
22payment may be made. Written notice of refusal may be given in
23a form and method which is acceptable to the parties and public
24owner.
25    (b) If the contractor, without reasonable cause, fails to
26make full payment of amounts due under subsection (a) to its

 

 

HB0173- 5 -LRB101 04717 RJF 49726 b

1subcontractors and material suppliers within 15 calendar days
2after receipt of payment from the State official or agency, the
3contractor shall pay to its subcontractors and material
4suppliers, in addition to the payment due them, interest in the
5amount of 2% per month, calculated from the expiration of the
615-day period until fully paid. This subsection shall further
7apply to any payments made by subcontractors and material
8suppliers to their subcontractors and material suppliers and to
9all payments made to lower tier subcontractors and material
10suppliers throughout the contracting chain.
11        (1) If a contractor, without reasonable cause, fails to
12    make payment in full as provided in subsection (a-5) within
13    15 calendar days after receipt of payment under the public
14    construction contract, any subcontractor or material
15    supplier to whom payments are owed may file a written
16    notice and request for administrative hearing with the
17    State official or agency setting forth the amount owed by
18    the contractor and the contractor's failure to timely pay
19    the amount owed. The written notice and request for
20    administrative hearing shall identify the public
21    construction contract, the contractor, and the amount
22    owed, and shall contain a sworn statement or attestation to
23    verify the accuracy of the notice. The notice and request
24    for administrative hearing shall be filed with the State
25    official for the public construction contract, with a copy
26    of the notice concurrently provided to the contractor.

 

 

HB0173- 6 -LRB101 04717 RJF 49726 b

1    Notice to the State official may be made by certified or
2    registered mail, messenger service, or personal service,
3    and must include proof of delivery to the State official.
4        (2) The State official or agency, within 15 calendar
5    days after receipt of a subcontractor's or material
6    supplier's written notice and request for administrative
7    hearing, shall hold a hearing convened by an administrative
8    law judge to determine whether the contractor withheld
9    payment, without reasonable cause, from the subcontractors
10    or material suppliers and what amount, if any, is due to
11    the subcontractors or material suppliers, and the
12    reasonable cause or causes asserted by the contractor. The
13    State official or agency shall provide appropriate notice
14    to the parties of the date, time, and location of the
15    hearing. Each contractor, subcontractor, or material
16    supplier has the right to be represented by counsel at a
17    hearing and to cross-examine witnesses and challenge
18    documents. Upon the request of the subcontractor or
19    material supplier and a showing of good cause, reasonable
20    continuances may be granted by the administrative law
21    judge.
22        (3) Upon a finding by the administrative law judge that
23    the contractor failed to make payment in full, without
24    reasonable cause, as provided in subsection (a-10), then
25    the administrative law judge shall, in writing, order the
26    contractor to pay the amount owed to the subcontractors or

 

 

HB0173- 7 -LRB101 04717 RJF 49726 b

1    material suppliers plus interest and all reasonable
2    attorneys' fees incurred by the subcontractor within 15
3    calendar days after the order.
4        (4) If a contractor fails to make full payment as
5    ordered under paragraph (3) of this subsection (b) within
6    15 days after the administrative law judge's order, then
7    the contractor shall be barred from entering into a State
8    public construction contract for a period of one year
9    beginning on the date of the administrative law judge's
10    order.
11        (5) If, on 2 or more occasions within a 3-calendar-year
12    period, there is a finding by an administrative law judge
13    that the contractor failed to make payment in full, without
14    reasonable cause, and a written order was issued to a
15    contractor under paragraph (3) of this subsection (b), then
16    the contractor shall be barred from entering into a State
17    public construction contract for a period of 6 months
18    beginning on the date of the administrative law judge's
19    second written order, even if the payments required under
20    the orders were made in full.
21        (6) If a contractor fails to make full payment as
22    ordered under paragraph (4) of this subsection (b), the
23    subcontractor or material supplier may, within 30 days of
24    the date of that order, petition the State agency for an
25    order for reasonable attorney's fees and costs incurred in
26    the prosecution of the action under this subsection (b).

 

 

HB0173- 8 -LRB101 04717 RJF 49726 b

1    Upon that petition and taking of additional evidence, as
2    may be required, the administrative law judge may issue a
3    supplemental order directing the contractor to pay those
4    reasonable attorney's fees and costs.
5        (7) The written order of the administrative law judge
6    shall be final and appealable under the Administrative
7    Review Law.
8    (c) This Section shall not be construed to in any manner
9diminish, negate, or interfere with the
10contractor-subcontractor or contractor-material supplier
11relationship or commercially useful function.
12    (d) This Section shall not preclude, bar, or stay the
13rights, remedies, and defenses available to the parties by way
14of the operation of their contract, purchase agreement, the
15Mechanics Lien Act, or the Public Construction Bond Act.
16    (e) State officials and agencies may adopt rules as may be
17deemed necessary in order to establish the formal procedures
18required under this Section.
19    (f) As used in this Section:
20    "Payment" means the discharge of an obligation in money or
21other valuable consideration or thing delivered in full or
22partial satisfaction of an obligation to pay. "Payment" shall
23include interest paid pursuant to this Act.
24    "Reasonable cause" may include, but is not limited to,
25unsatisfactory workmanship or materials; failure to provide
26documentation required by the contract, subcontract, or

 

 

HB0173- 9 -LRB101 04717 RJF 49726 b

1material purchase agreement; claims made against the
2Department of Transportation or the subcontractor pursuant to
3subsection (c) of Section 23 of the Mechanics Lien Act or the
4Public Construction Bond Act; judgments, levies, garnishments,
5or other court-ordered assessments or offsets in favor of the
6Department of Transportation or other State agency entered
7against a subcontractor or material supplier. "Reasonable
8cause" does not include payments issued to the contractor that
9create a negative or reduced valuation pay application or pay
10estimate due to a reduction of contract quantities or work not
11performed or provided by the subcontractor or material
12supplier; the interception or withholding of funds for reasons
13not related to the subcontractor's or material supplier's work
14on the contract; anticipated claims or assessments of third
15parties not a party related to the contract or subcontract;
16asserted claims or assessments of third parties that are not
17authorized by court order, administrative tribunal, or
18statute. "Reasonable cause" further does not include the
19withholding, offset, or reduction of payment, in whole or in
20part, due to the assessment of liquidated damages or penalties
21assessed by the Department of Transportation against the
22contractor, unless the subcontractor's performance or supplied
23materials were the sole and proximate cause of the liquidated
24damage or penalty.
25(Source: P.A. 100-43, eff. 8-9-17; 100-376, eff. 1-1-18;
26100-863, eff. 8-14-18.)
 

 

 

HB0173- 10 -LRB101 04717 RJF 49726 b

1    (30 ILCS 540/12 new)
2    Sec. 12. Contract claims. If (i) a contractor who has a
3contract with the Department of Transportation; or (ii) a
4subcontractor who enters into a contract under Section 2705-615
5of the Civil Administrative Code of Illinois claims that
6additional payment is due under the terms of the contract, or
7for any other reason arising out of the performance of the
8contract, and the Department has not agreed during the ordinary
9course of contract administration that the payment is due, then
10the contractor or subcontractor may file a claim according to
11the requirements and procedures specified by the Department. If
12written notifications are not given, or if the Department is
13not afforded reasonable access by the contractor or
14subcontractor to complete records of actual costs or additional
15time claimed, or if a claim is not filed according to the
16procedures and within the time specified in the rules of the
17Department of Transportation, then the contractor or
18subcontractor's claim is waived and the Department is released
19from any and all demands and claims under that contract by the
20contractor or subcontractor. The fact that the contractor or
21subcontractor has provided a proper notification, provided a
22properly filed claim, or provided the Department access to
23records of actual cost shall not in any way be construed as
24proving or substantiating the validity of the claim. If the
25claim, after consideration by the Department, is found to have

 

 

HB0173- 11 -LRB101 04717 RJF 49726 b

1merit, the Department will make an equitable adjustment either
2in the amount of costs to be paid according to the basis of
3payment specified by the Department or in the time required for
4the work, or both. If the Department finds the claim to be
5without merit, no adjustment will be made.