Rep. Camille Y. Lilly

Filed: 2/27/2019

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 173

2    AMENDMENT NO. ______. Amend House Bill 173 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The State Prompt Payment Act is amended by
5changing Section 7 as follows:
 
6    (30 ILCS 540/7)   (from Ch. 127, par. 132.407)
7    Sec. 7. Payments to subcontractors and material suppliers.
8    (a) When a State official or agency responsible for
9administering a contract submits a voucher to the Comptroller
10for payment to a contractor, that State official or agency
11shall promptly make available electronically the voucher
12number, the date of the voucher, and the amount of the voucher,
13and the names of all subcontractors who are to be paid from
14that pay period in the voucher. The State official or agency
15responsible for administering the contract shall provide
16subcontractors and material suppliers, known to the State

 

 

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1official or agency, with instructions on how to access the
2electronic information.
3    (a-5) When a contractor receives any payment, the
4contractor shall pay each subcontractor and material supplier
5electronically within 72 hours after receiving payment in
6proportion to the work completed by each subcontractor and
7material supplier its application or pay estimate, plus
8interest received under this Act. When a contractor receives
9any payment, the contractor shall pay each lower-tiered
10subcontractor and material supplier and each subcontractor and
11material supplier shall make payment to its own respective
12subcontractors and material suppliers. If the contractor
13receives less than the full payment due under the public
14construction contract, the contractor shall be obligated to
15disburse on a pro rata basis those funds received, plus
16interest received under this Act, with the contractor,
17subcontractors and material suppliers each receiving a
18prorated portion based on the amount of payment each has
19earned. When, however, the State official or agency does not
20release the full payment due under the contract because there
21are specific areas of work or materials the State agency or
22official has determined are not suitable for payment, then
23those specific subcontractors or material suppliers involved
24shall not be paid for that portion of work rejected or deemed
25not suitable for payment and all other subcontractors and
26suppliers shall be paid based upon the amount of payment each

 

 

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1has earned, plus interest received under this Act.
2    (a-10) For construction contracts with the Department of
3Transportation, the contractor, subcontractor, or material
4supplier, regardless of tier, shall not offset, decrease, or
5diminish payment or payments that are due to its subcontractors
6or material suppliers without reasonable cause.
7    A contractor, who refuses to make prompt payment
8electronically within 72 hours after receiving payment, in
9whole or in part, shall provide to the subcontractor or
10material supplier and the public owner or its agent, a written
11notice of that refusal. The written notice shall be made by a
12contractor no later than 5 calendar days after payment is
13received by the contractor. The written notice shall identify
14the Department of Transportation's contract, any subcontract
15or material purchase agreement, a detailed reason for refusal,
16the value of the payment to be withheld, and the specific
17remedial actions required of the subcontractor or material
18supplier so that payment may be made. Written notice of refusal
19may be given in a form and method which is acceptable to the
20parties and public owner.
21    (b) If the contractor, without reasonable cause, fails to
22make full payment of amounts due under subsection (a) to its
23subcontractors and material suppliers within 72 hours 15
24calendar days after receipt of payment from the State official
25or agency, the contractor shall pay to its subcontractors and
26material suppliers, in addition to the payment due them,

 

 

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1interest in the amount of 2% per month, calculated from the
2expiration of the 72-hour 15-day period until fully paid. This
3subsection shall further apply to any payments made by
4subcontractors and material suppliers to their subcontractors
5and material suppliers and to all payments made to lower tier
6subcontractors and material suppliers throughout the
7contracting chain.
8        (1) If a contractor, without reasonable cause, fails to
9    make payment in full as provided in subsection (a-5) within
10    72 hours 15 calendar days after receipt of payment under
11    the public construction contract, any subcontractor or
12    material supplier to whom payments are owed may file a
13    written notice and request for administrative hearing with
14    the State official or agency setting forth the amount owed
15    by the contractor and the contractor's failure to timely
16    pay the amount owed. The written notice and request for
17    administrative hearing shall identify the public
18    construction contract, the contractor, and the amount
19    owed, and shall contain a sworn statement or attestation to
20    verify the accuracy of the notice. The notice and request
21    for administrative hearing shall be filed with the State
22    official for the public construction contract, with a copy
23    of the notice concurrently provided to the contractor.
24    Notice to the State official may be made by certified or
25    registered mail, messenger service, or personal service,
26    and must include proof of delivery to the State official.

 

 

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

 

 

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

 

 

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

 

 

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1or other court-ordered assessments or offsets in favor of the
2Department of Transportation or other State agency entered
3against a subcontractor or material supplier. "Reasonable
4cause" does not include payments issued to the contractor that
5create a negative or reduced valuation pay application or pay
6estimate due to a reduction of contract quantities or work not
7performed or provided by the subcontractor or material
8supplier; the interception or withholding of funds for reasons
9not related to the subcontractor's or material supplier's work
10on the contract; anticipated claims or assessments of third
11parties not a party related to the contract or subcontract;
12asserted claims or assessments of third parties that are not
13authorized by court order, administrative tribunal, or
14statute. "Reasonable cause" further does not include the
15withholding, offset, or reduction of payment, in whole or in
16part, due to the assessment of liquidated damages or penalties
17assessed by the Department of Transportation against the
18contractor, unless the subcontractor's performance or supplied
19materials were the sole and proximate cause of the liquidated
20damage or penalty.
21(Source: P.A. 100-43, eff. 8-9-17; 100-376, eff. 1-1-18;
22100-863, eff. 8-14-18.)".