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1 | AN ACT concerning finance.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Department of Transportation Law of the
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5 | Civil Administrative Code of Illinois is amended by adding | |||||||||||||||||||||||
6 | Section 2705-625 as follows: | |||||||||||||||||||||||
7 | (20 ILCS 2705/2705-625 new) | |||||||||||||||||||||||
8 | Sec. 2705-625. Small business; Disadvantaged Business | |||||||||||||||||||||||
9 | Enterprise; subcontractor direct payments. | |||||||||||||||||||||||
10 | (a) A small business subcontractor may enter into an | |||||||||||||||||||||||
11 | agreement with the Department to receive direct payments from | |||||||||||||||||||||||
12 | the Department on a construction project if the following | |||||||||||||||||||||||
13 | conditions 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 | |||||||||||||||||||||||
23 | include the following terms: |
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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 | ||||||
7 | its 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 | ||||||
10 | paid on an annual basis. | ||||||
11 | (2) If the prime contractor and the Department agree | ||||||
12 | to an accelerated pay schedule, the Department must agree | ||||||
13 | to the new pay schedule for the subcontractor as well. | ||||||
14 | Section 10. The State Prompt Payment Act is amended by | ||||||
15 | changing Section 7 and by adding Section 12 as follows:
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16 | (30 ILCS 540/7)
(from Ch. 127, par. 132.407)
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17 | Sec. 7. Payments to subcontractors and material suppliers. | ||||||
18 | (a) When a State official or agency responsible for | ||||||
19 | administering a
contract submits a voucher to the Comptroller | ||||||
20 | for
payment to a subcontractor who enters into a contract | ||||||
21 | under Section 2705-620 of the Department of Transportation Law | ||||||
22 | of the Civil Administrative Code of Illinois or a contractor, | ||||||
23 | that State official or agency shall promptly make
available | ||||||
24 | electronically
the voucher number, the date of the voucher, |
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1 | and
the amount of the voucher.
The State official or agency | ||||||
2 | responsible for administering the contract shall
provide | ||||||
3 | subcontractors and material suppliers, known to the State | ||||||
4 | official or
agency, with instructions on how to access the | ||||||
5 | electronic information. | ||||||
6 | (a-5) When a
contractor receives any payment, the | ||||||
7 | contractor shall
pay each subcontractor and material supplier | ||||||
8 | electronically within 7 10 business days or 15 calendar days, | ||||||
9 | whichever occurs earlier , or, if paid by a printed check, the | ||||||
10 | printed check must be postmarked within 7 10 business days or | ||||||
11 | 15 calendar days, whichever occurs earlier, after receiving | ||||||
12 | payment in proportion to the work
completed by each | ||||||
13 | subcontractor and material supplier its application or pay | ||||||
14 | estimate, plus interest received under this Act. When a | ||||||
15 | contractor receives any payment, the contractor shall pay each | ||||||
16 | lower-tiered subcontractor and material supplier and each | ||||||
17 | subcontractor and material supplier shall make payment to its | ||||||
18 | own respective subcontractors and material suppliers. If the | ||||||
19 | contractor receives less than the full payment
due under the | ||||||
20 | public construction contract, the contractor shall be
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21 | obligated to disburse on a pro rata basis those funds | ||||||
22 | received, plus interest received under this Act, with the
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23 | contractor, subcontractors and material suppliers each | ||||||
24 | receiving a prorated
portion based on the amount of payment | ||||||
25 | each has earned. If the contractor is assessed liquidated | ||||||
26 | damages from the State, the contractor is still responsible to |
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1 | each subcontractor under the subcontracts. When, however, the | ||||||
2 | State official or agency
does not release the full payment due | ||||||
3 | under the contract because there are
specific areas of work or | ||||||
4 | materials the State agency or official has determined are not | ||||||
5 | suitable for
payment, then those specific subcontractors or | ||||||
6 | material suppliers involved shall not
be paid for that portion | ||||||
7 | of work rejected or deemed not suitable for
payment and all | ||||||
8 | other subcontractors and suppliers shall be paid based upon | ||||||
9 | the amount of payment each has earned, plus interest received | ||||||
10 | under this Act.
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11 | (a-10) For construction contracts with the Department of | ||||||
12 | Transportation, the contractor, subcontractor, or material | ||||||
13 | supplier, regardless of tier, shall not offset, decrease, or | ||||||
14 | diminish payment or payments that are due to its | ||||||
15 | subcontractors or material suppliers without reasonable cause. | ||||||
16 | A contractor, who refuses to make prompt payment within 7 | ||||||
17 | 10 business days or 15 calendar days, whichever occurs | ||||||
18 | earlier, after receiving payment, in whole or in part, shall | ||||||
19 | provide to the subcontractor or material supplier and the | ||||||
20 | public owner or its agent, a written notice of that refusal. | ||||||
21 | The written notice shall be made by a contractor no later than | ||||||
22 | 5 calendar days after payment is received by the contractor. | ||||||
23 | The written notice shall identify the Department of | ||||||
24 | Transportation's contract, any subcontract or material | ||||||
25 | purchase agreement, a detailed reason for refusal, the value | ||||||
26 | of the payment to be withheld, and the specific remedial |
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1 | actions required of the subcontractor or material supplier so | ||||||
2 | that payment may be made. Written notice of refusal may be | ||||||
3 | given in a form and method which is acceptable to the parties | ||||||
4 | and public owner. | ||||||
5 | (b) If the contractor, without reasonable cause, fails to | ||||||
6 | make full payment of amounts due under subsection (a) to its
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7 | subcontractors and material suppliers within 7 10 business | ||||||
8 | days or 15 calendar days, whichever occurs earlier, after
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9 | receipt of
payment from the State official or agency, the | ||||||
10 | contractor shall pay to its
subcontractors and material | ||||||
11 | suppliers, in addition to the payment due
them, interest in | ||||||
12 | the amount of
2% per month, calculated from the
expiration of | ||||||
13 | the 7-business-day period 10-business-day period or the | ||||||
14 | 15-calendar-day period until fully paid. This subsection shall | ||||||
15 | further
apply to any payments made by subcontractors and | ||||||
16 | material suppliers to
their subcontractors and material | ||||||
17 | suppliers and to all payments made to
lower tier | ||||||
18 | subcontractors and material suppliers throughout the | ||||||
19 | contracting
chain.
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20 | (1) If a contractor, without reasonable cause, fails | ||||||
21 | to make payment in
full as
provided in subsection (a-5) | ||||||
22 | within 7 10 business days or 15 calendar days, whichever | ||||||
23 | occurs earlier, after receipt of payment under the
public
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24 | construction contract, any subcontractor or material | ||||||
25 | supplier to whom payments
are owed
may file a written | ||||||
26 | notice and request for administrative hearing with the |
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1 | State official or agency setting forth the
amount owed by
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2 | the contractor and the contractor's failure to timely pay | ||||||
3 | the amount owed. The written notice and request for | ||||||
4 | administrative hearing shall identify the public | ||||||
5 | construction contract, the contractor, and the amount | ||||||
6 | owed, and shall contain a sworn statement or attestation | ||||||
7 | to verify the accuracy of the notice. The notice and | ||||||
8 | request for administrative hearing shall be filed with the | ||||||
9 | State official for the public construction contract, with | ||||||
10 | a copy of the notice concurrently provided to the | ||||||
11 | contractor. Notice to the State official may be made by | ||||||
12 | certified or registered mail, messenger service, or | ||||||
13 | personal service, and must include proof of delivery to | ||||||
14 | the State official.
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15 | (2) The State official or agency, within 15 calendar | ||||||
16 | days after receipt of a
subcontractor's
or material | ||||||
17 | supplier's written notice and request for administrative | ||||||
18 | hearing,
shall hold a hearing convened by an | ||||||
19 | administrative law judge to determine whether the | ||||||
20 | contractor withheld payment,
without
reasonable cause, | ||||||
21 | from the subcontractors or material suppliers and what
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22 | amount, if any,
is due to the subcontractors or material | ||||||
23 | suppliers, and the reasonable cause or causes asserted by | ||||||
24 | the contractor. The State official or
agency shall
provide | ||||||
25 | appropriate notice to the parties of the date, time, and | ||||||
26 | location of
the hearing. Each contractor, subcontractor, |
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1 | or material supplier has the right to be represented by | ||||||
2 | counsel at a hearing and to cross-examine witnesses and | ||||||
3 | challenge documents. Upon the request of the subcontractor | ||||||
4 | or material supplier and a showing of good cause, | ||||||
5 | reasonable continuances may be granted by the | ||||||
6 | administrative law judge.
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7 | (3) Upon a finding by the administrative law judge | ||||||
8 | that the contractor failed
to make
payment in full, | ||||||
9 | without reasonable cause, as provided in subsection | ||||||
10 | (a-10), then
the administrative law judge shall, in | ||||||
11 | writing, order the contractor to pay the amount
owed to | ||||||
12 | the
subcontractors or material suppliers plus interest and | ||||||
13 | all reasonable attorney's fees incurred by the | ||||||
14 | subcontractor within 15 calendar days after the order.
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15 | (4) If a contractor fails to make full payment as | ||||||
16 | ordered under paragraph (3) of this subsection (b) within | ||||||
17 | 15 days after the
administrative law judge's order, then | ||||||
18 | the contractor shall be barred from
entering into a State
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19 | public construction contract for a period of one year | ||||||
20 | beginning on the date of
the administrative law judge's | ||||||
21 | order.
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22 | (5) If, on 2 or more occasions within a | ||||||
23 | 3-calendar-year period, there is a finding by an | ||||||
24 | administrative law judge that the contractor failed to | ||||||
25 | make payment in full, without reasonable cause, and a | ||||||
26 | written order was issued to a contractor under paragraph |
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1 | (3) of this subsection (b), then the contractor shall be | ||||||
2 | barred from entering into a State public construction | ||||||
3 | contract for a period of 6 months beginning on the date of | ||||||
4 | the administrative law judge's second written order, even | ||||||
5 | if the payments required under the orders were made in | ||||||
6 | full. | ||||||
7 | (6) If a contractor fails to make full payment as | ||||||
8 | ordered under paragraph (4) of this subsection (b), the | ||||||
9 | subcontractor or material supplier may, within 30 days of | ||||||
10 | the date of that order, petition the State agency for an | ||||||
11 | order for reasonable attorney's fees and costs incurred in | ||||||
12 | the prosecution of the action under this subsection (b). | ||||||
13 | Upon that petition and taking of additional evidence, as | ||||||
14 | may be required, the administrative law judge may issue a | ||||||
15 | supplemental order directing the contractor to pay those | ||||||
16 | reasonable attorney's fees and costs. | ||||||
17 | (7) The written order of the administrative law judge | ||||||
18 | shall be final and appealable under the Administrative | ||||||
19 | Review Law. | ||||||
20 | (b-5) On or before July 2021, the Department of | ||||||
21 | Transportation shall publish on its website a searchable | ||||||
22 | database that allows for queries for each active construction | ||||||
23 | contract by the name of a subcontractor or the pay item such | ||||||
24 | that each pay item is associated with either the prime | ||||||
25 | contractor or a subcontractor. | ||||||
26 | (c) This Section shall not be construed to in any manner |
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1 | diminish, negate, or interfere with the | ||||||
2 | contractor-subcontractor or contractor-material supplier | ||||||
3 | relationship or commercially useful function. | ||||||
4 | (d) This Section shall not preclude, bar, or stay the | ||||||
5 | rights, remedies, and defenses available to the parties by way | ||||||
6 | of the operation of their contract, purchase agreement, the | ||||||
7 | Mechanics Lien Act, or the Public Construction Bond Act. | ||||||
8 | (e) State officials and agencies may adopt rules as may be | ||||||
9 | deemed necessary in order to establish the formal procedures | ||||||
10 | required under this Section. | ||||||
11 | (f) As used in this Section: | ||||||
12 | "Payment" means the discharge of an obligation in money or | ||||||
13 | other valuable consideration or thing delivered in full or | ||||||
14 | partial satisfaction of an obligation to pay. "Payment" shall | ||||||
15 | include interest paid pursuant to this Act. | ||||||
16 | "Reasonable cause" may include, but is not limited to, | ||||||
17 | unsatisfactory workmanship or materials; failure to provide | ||||||
18 | documentation required by the contract, subcontract, or | ||||||
19 | material purchase agreement; claims made against the | ||||||
20 | Department of Transportation or the subcontractor pursuant to | ||||||
21 | subsection (c) of Section 23 of the Mechanics Lien Act or the | ||||||
22 | Public Construction Bond Act; judgments, levies, garnishments, | ||||||
23 | or other court-ordered assessments or offsets in favor of the | ||||||
24 | Department of Transportation or other State agency entered | ||||||
25 | against a subcontractor or material supplier. "Reasonable | ||||||
26 | cause" does not include payments issued to the contractor that |
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1 | create a negative or reduced valuation pay application or pay | ||||||
2 | estimate due to a reduction of contract quantities or work not | ||||||
3 | performed or provided by the subcontractor or material | ||||||
4 | supplier; the interception or withholding of funds for reasons | ||||||
5 | not related to the subcontractor's or material supplier's work | ||||||
6 | on the contract; anticipated claims or assessments of third | ||||||
7 | parties not a party related to the contract or subcontract; | ||||||
8 | asserted claims or assessments of third parties that are not | ||||||
9 | authorized by court order, administrative tribunal, or | ||||||
10 | statute. "Reasonable cause" further does not include the | ||||||
11 | withholding, offset, or reduction of payment, in whole or in | ||||||
12 | part, due to the assessment of liquidated damages or penalties | ||||||
13 | assessed by the Department of Transportation against the | ||||||
14 | contractor, unless the subcontractor's performance or supplied | ||||||
15 | materials were the sole and proximate cause of the liquidated | ||||||
16 | damage or penalty. | ||||||
17 | (Source: P.A. 100-43, eff. 8-9-17; 100-376, eff. 1-1-18; | ||||||
18 | 100-863, eff. 8-14-18; 101-524, eff. 1-1-20 .)
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19 | (30 ILCS 540/12 new) | ||||||
20 | Sec. 12. Contract claims. If a contractor who has a | ||||||
21 | contract with the Department of Transportation or a | ||||||
22 | subcontractor who enters into a contract under Section | ||||||
23 | 2705-620 of the Civil Administrative Code of Illinois claims | ||||||
24 | that additional payment is due under the terms of the | ||||||
25 | contract, or for any other reason arising out of the |
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1 | performance of the contract, and the Department has not agreed | ||||||
2 | during the ordinary course of contract administration that the | ||||||
3 | payment is due, then the contractor or subcontractor may file | ||||||
4 | a claim according to the requirements and procedures specified | ||||||
5 | by the Department. If written notifications are not given, if | ||||||
6 | the Department is not afforded reasonable access by the | ||||||
7 | contractor or subcontractor to complete records of actual | ||||||
8 | costs or additional time claimed, or if a claim is not filed | ||||||
9 | according to the procedures and within the time specified in | ||||||
10 | the rules of the Department of Transportation, then the | ||||||
11 | contractor or subcontractor's claim is waived and the | ||||||
12 | Department is released from any and all demands and claims | ||||||
13 | under that contract by the contractor or subcontractor. The | ||||||
14 | fact that the contractor or subcontractor has provided a | ||||||
15 | proper notification, provided a properly filed claim, or | ||||||
16 | provided the Department access to records of actual cost shall | ||||||
17 | not in any way be construed as proving or substantiating the | ||||||
18 | validity of the claim. If the claim, after consideration by | ||||||
19 | the Department, is found to have merit, the Department will | ||||||
20 | make an equitable adjustment either in the amount of costs to | ||||||
21 | be paid according to the basis of payment specified by the | ||||||
22 | Department or in the time required for the work, or both. If | ||||||
23 | the Department finds the claim to be without merit, no | ||||||
24 | adjustment will be made.
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