Illinois General Assembly - Full Text of SB0104
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Full Text of SB0104  101st General Assembly


Sen. Martin A. Sandoval

Filed: 3/25/2019





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2    AMENDMENT NO. ______. Amend Senate Bill 104 by replacing
3everything after the enacting clause with the following:
4    "Section 5. The State Prompt Payment Act is amended by
5changing Sections 1 and 7 as follows:
6    (30 ILCS 540/1)  (from Ch. 127, par. 132.401)
7    Sec. 1. This Act applies to any State official or agency
8authorized to provide for payment from State funds, by virtue
9of any appropriation of the General Assembly, for goods or
10services furnished to the State.
11    For purposes of this Act, "goods or services furnished to
12the State" include but are not limited to (i) covered health
13care provided to eligible members and their covered dependents
14in accordance with the State Employees Group Insurance Act of
151971, including coverage through a physician-owned health
16maintenance organization under Section 6.1 of that Act, (ii)



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1prevention, intervention, or treatment services and supports
2for persons with developmental disabilities, mental health
3services, alcohol and substance abuse services, rehabilitation
4services, and early intervention services provided by a vendor,
5and (iii) prevention, intervention, or treatment services and
6supports for youth provided by a vendor by virtue of a
7contractual grant agreement. For the purposes of items (ii) and
8(iii), a vendor includes but is not limited to sellers of goods
9and services, including community-based organizations that are
10licensed to provide prevention, intervention, or treatment
11services and supports for persons with developmental
12disabilities, mental illness, and substance abuse problems, or
13that provides prevention, intervention, or treatment services
14and supports for youth.
15    For the purposes of this Act, "appropriate State official
16or agency" is defined as the Director or Chief Executive or his
17designee of that State agency or department or facility of such
18agency or department. With respect to covered health care
19provided to eligible members and their dependents in accordance
20with the State Employees Group Insurance Act of 1971,
21"appropriate State official or agency" also includes an
22administrator of a program of health benefits under that Act.
23    As used in this Act, "eligible member" means a member who
24is eligible for health benefits under the State Employees Group
25Insurance Act of 1971, and "member" and "dependent" have the
26meanings ascribed to those terms in that Act.



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1    As used in this Act, "a proper bill or invoice" means a
2bill or invoice, including, but not limited to, an invoice
3issued under a contractual grant agreement, that includes the
4information necessary for processing the payment as may be
5specified by a State agency and in rules adopted in accordance
6with this Act. Beginning on and after July 1, 2021, "a proper
7bill or invoice" shall also include the names of all
8subcontractors or subconsultants to be paid from the bill or
9invoice and the amounts due to each of them, if any.
10(Source: P.A. 100-549, eff. 1-1-18.)
11    (30 ILCS 540/7)   (from Ch. 127, par. 132.407)
12    Sec. 7. Payments to subcontractors and material suppliers.
13    (a) When a State official or agency responsible for
14administering a contract submits a voucher to the Comptroller
15for payment to a contractor, that State official or agency
16shall promptly make available electronically the voucher
17number, the date of the voucher, and the amount of the voucher.
18The State official or agency responsible for administering the
19contract shall provide subcontractors and material suppliers,
20known to the State official or agency, with instructions on how
21to access the electronic information.
22    (a-5) When a contractor receives any payment, the
23contractor shall pay each subcontractor and material supplier
24electronically within 7 business days or, if paid by a printed
25check, the printed check must be postmarked within 7 business



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



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1or material suppliers without reasonable cause.
2    A contractor, who refuses to make prompt payment within 7
3business days after receiving payment, in whole or in part,
4shall provide to the subcontractor or material supplier and the
5public owner or its agent, a written notice of that refusal.
6The written notice shall be made by a contractor no later than
75 calendar days after payment is received by the contractor.
8The written notice shall identify the Department of
9Transportation's contract, any subcontract or material
10purchase agreement, a detailed reason for refusal, the value of
11the payment to be withheld, and the specific remedial actions
12required of the subcontractor or material supplier so that
13payment may be made. Written notice of refusal may be given in
14a form and method which is acceptable to the parties and public
16    (b) If the contractor, without reasonable cause, fails to
17make full payment of amounts due under subsection (a) to its
18subcontractors and material suppliers within 7 business days 15
19calendar days after receipt of payment from the State official
20or agency, the contractor shall pay to its subcontractors and
21material suppliers, in addition to the payment due them,
22interest in the amount of 2% per month, calculated from the
23expiration of the 7-business-day 15-day period until fully
24paid. This subsection shall further apply to any payments made
25by subcontractors and material suppliers to their
26subcontractors and material suppliers and to all payments made



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



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



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1    order.
2        (5) If, on 2 or more occasions within a 3-calendar-year
3    period, there is a finding by an administrative law judge
4    that the contractor failed to make payment in full, without
5    reasonable cause, and a written order was issued to a
6    contractor under paragraph (3) of this subsection (b), then
7    the contractor shall be barred from entering into a State
8    public construction contract for a period of 6 months
9    beginning on the date of the administrative law judge's
10    second written order, even if the payments required under
11    the orders were made in full.
12        (6) If a contractor fails to make full payment as
13    ordered under paragraph (4) of this subsection (b), the
14    subcontractor or material supplier may, within 30 days of
15    the date of that order, petition the State agency for an
16    order for reasonable attorney's fees and costs incurred in
17    the prosecution of the action under this subsection (b).
18    Upon that petition and taking of additional evidence, as
19    may be required, the administrative law judge may issue a
20    supplemental order directing the contractor to pay those
21    reasonable attorney's fees and costs.
22        (7) The written order of the administrative law judge
23    shall be final and appealable under the Administrative
24    Review Law.
25    (b-5) On or before July 2021, the Department of
26Transportation shall publish on its website a searchable



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1database that allows for queries by the name of a subcontractor
2or the pay item such that each pay item is associated with
3either the prime contractor or a subcontractor.
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.)".