102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3203

 

Introduced 2/19/2021, by Rep. Jaime M. Andrade, Jr.

 

SYNOPSIS AS INTRODUCED:
 
30 ILCS 500/20-120
30 ILCS 540/7  from Ch. 127, par. 132.407

    Amends the Illinois Procurement Code. Provides that the Capital Development Board and the Department of Transportation shall each, by rule, implement a pilot program under which select construction contracts shall contain provisions that if a subcontractor has performed in accordance with the provisions of the subcontract and the work has been accepted by the State agency, the State agency shall pay the subcontractor directly. Provides that the program shall be implemented by January 1, 2023. Amends the State Prompt Payment Act. Provides that certain provisions concerning payments to subcontractors do not apply to payments to a subcontractor for work performed under a subcontract entered into with a construction contractor if the contract contains a provision that the State agency shall pay the subcontractor directly.


LRB102 17000 RJF 22420 b

 

 

A BILL FOR

 

HB3203LRB102 17000 RJF 22420 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 Illinois Procurement Code is amended by
5changing Section 20-120 as follows:
 
6    (30 ILCS 500/20-120)
7    Sec. 20-120. Subcontractors.
8    (a) Any contract granted under this Code shall state
9whether the services of a subcontractor will be used. The
10contract shall include the names and addresses of all known
11subcontractors with subcontracts with an annual value of more
12than $50,000, the general type of work to be performed by these
13subcontractors, and the expected amount of money each will
14receive under the contract. Upon the request of the chief
15procurement officer appointed pursuant to paragraph (2) of
16subsection (a) of Section 10-20, the contractor shall provide
17the chief procurement officer a copy of a subcontract so
18identified within 15 calendar days after the request is made.
19A subcontractor, or contractor on behalf of a subcontractor,
20may identify information that is deemed proprietary or
21confidential. If the chief procurement officer determines the
22information is not relevant to the primary contract, the chief
23procurement officer may excuse the inclusion of the

 

 

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1information. If the chief procurement officer determines the
2information is proprietary or could harm the business interest
3of the subcontractor, the chief procurement officer may, in
4his or her discretion, redact the information. Redacted
5information shall not become part of the public record.
6    (b) If at any time during the term of a contract, a
7contractor adds or changes any subcontractors, he or she shall
8promptly notify, in writing, the chief procurement officer,
9State purchasing officer, or their designee of the names and
10addresses of each new or replaced subcontractor and the
11general type of work to be performed. Upon the request of the
12chief procurement officer appointed pursuant to paragraph (2)
13of subsection (a) of Section 10-20, the contractor shall
14provide the chief procurement officer a copy of any new or
15amended subcontract so identified within 15 calendar days
16after the request is made.
17    (c) In addition to any other requirements of this Code, a
18subcontract subject to this Section must include all of the
19subcontractor's certifications required by Article 50 of the
20Code.
21    (c-5) The Capital Development Board and the Department of
22Transportation shall each, by rule, implement a pilot program
23under which select construction contracts granted under this
24Code and all subcontracts pursuant to those contracts shall
25contain provisions that if a subcontractor has performed in
26accordance with the provisions of his or her subcontract and

 

 

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1the work has been accepted by the appropriate State agency,
2the State agency shall pay the amount due the subcontractor
3directly to the subcontractor pursuant to the proper bill or
4invoice provided by the contractor to the State agency in
5accordance with the provisions of the State Prompt Payment
6Act. If a construction contract granted under this Code
7contains a provision that the State agency shall pay the
8subcontractor directly, the contractor shall deliver to the
9State agency a proper bill or invoice, as defined in the State
10Prompt Payment Act, for each subcontractor with whom the
11contractor has a subcontract. The program shall be implemented
12by January 1, 2023.
13    (d) This Section applies to procurements solicited on or
14after the effective date of this amendatory Act of the 96th
15General Assembly. The changes made to this Section by this
16amendatory Act of the 97th General Assembly apply to
17procurements solicited on or after the effective date of this
18amendatory Act of the 97th General Assembly.
19(Source: P.A. 97-895, eff. 8-3-12; 98-1076, eff. 1-1-15.)
 
20    Section 10. The State Prompt Payment Act is amended by
21changing Section 7 as follows:
 
22    (30 ILCS 540/7)   (from Ch. 127, par. 132.407)
23    Sec. 7. Payments to subcontractors and material suppliers.
24    (a) When a State official or agency responsible for

 

 

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1administering a contract submits a voucher to the Comptroller
2for payment to a contractor, that State official or agency
3shall promptly make available electronically the voucher
4number, the date of the voucher, and the amount of the voucher.
5The State official or agency responsible for administering the
6contract shall provide subcontractors and material suppliers,
7known to the State official or agency, with instructions on
8how to access the electronic information.
9    (a-5) When a contractor receives any payment, the
10contractor shall pay each subcontractor and material supplier
11electronically within 10 business days or 15 calendar days,
12whichever occurs earlier, or, if paid by a printed check, the
13printed check must be postmarked within 10 business days or 15
14calendar days, whichever occurs earlier, after receiving
15payment in proportion to the work completed by each
16subcontractor and material supplier its application or pay
17estimate, plus interest received under this Act. When a
18contractor receives any payment, the contractor shall pay each
19lower-tiered subcontractor and material supplier and each
20subcontractor and material supplier shall make payment to its
21own respective subcontractors and material suppliers. If the
22contractor receives less than the full payment due under the
23public construction contract, the contractor shall be
24obligated to disburse on a pro rata basis those funds
25received, plus interest received under this Act, with the
26contractor, subcontractors and material suppliers each

 

 

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1receiving a prorated portion based on the amount of payment
2each has earned. When, however, the State official or agency
3does not release the full payment due under the contract
4because there are specific areas of work or materials the
5State agency or official has determined are not suitable for
6payment, then those specific subcontractors or material
7suppliers involved shall not be paid for that portion of work
8rejected or deemed not suitable for payment and all other
9subcontractors and suppliers shall be paid based upon the
10amount of payment each has earned, plus interest received
11under this Act.
12    (a-10) For construction contracts with the Department of
13Transportation, the contractor, subcontractor, or material
14supplier, regardless of tier, shall not offset, decrease, or
15diminish payment or payments that are due to its
16subcontractors or material suppliers without reasonable cause.
17    A contractor, who refuses to make prompt payment within 10
18business days or 15 calendar days, whichever occurs earlier,
19after receiving payment, in whole or in part, shall provide to
20the subcontractor or material supplier and the public owner or
21its agent, a written notice of that refusal. The written
22notice shall be made by a contractor no later than 5 calendar
23days after payment is received by the contractor. The written
24notice shall identify the Department of Transportation's
25contract, any subcontract or material purchase agreement, a
26detailed reason for refusal, the value of the payment to be

 

 

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1withheld, and the specific remedial actions required of the
2subcontractor or material supplier so that payment may be
3made. Written notice of refusal may be given in a form and
4method which is acceptable to the parties and public owner.
5    (b) If the contractor, without reasonable cause, fails to
6make full payment of amounts due under subsection (a) to its
7subcontractors and material suppliers within 10 business days
8or 15 calendar days, whichever occurs earlier, after receipt
9of payment from the State official or agency, the contractor
10shall pay to its subcontractors and material suppliers, in
11addition to the payment due them, interest in the amount of 2%
12per month, calculated from the expiration of the
1310-business-day period or the 15-calendar-day period until
14fully paid. This subsection shall further apply to any
15payments made by subcontractors and material suppliers to
16their subcontractors and material suppliers and to all
17payments made to lower tier subcontractors and material
18suppliers throughout the contracting chain.
19        (1) If a contractor, without reasonable cause, fails
20    to make payment in full as provided in subsection (a-5)
21    within 10 business days or 15 calendar days, whichever
22    occurs earlier, after receipt of payment under the public
23    construction contract, any subcontractor or material
24    supplier to whom payments are owed may file a written
25    notice and request for administrative hearing with the
26    State official or agency setting forth the amount owed by

 

 

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1    the contractor and the contractor's failure to timely pay
2    the amount owed. The written notice and request for
3    administrative hearing shall identify the public
4    construction contract, the contractor, and the amount
5    owed, and shall contain a sworn statement or attestation
6    to verify the accuracy of the notice. The notice and
7    request for administrative hearing shall be filed with the
8    State official for the public construction contract, with
9    a copy of the notice concurrently provided to the
10    contractor. Notice to the State official may be made by
11    certified or registered mail, messenger service, or
12    personal service, and must include proof of delivery to
13    the State official.
14        (2) The State official or agency, within 15 calendar
15    days after receipt of a subcontractor's or material
16    supplier's written notice and request for administrative
17    hearing, shall hold a hearing convened by an
18    administrative law judge to determine whether the
19    contractor withheld payment, without reasonable cause,
20    from the subcontractors or material suppliers and what
21    amount, if any, is due to the subcontractors or material
22    suppliers, and the reasonable cause or causes asserted by
23    the contractor. The State official or agency shall provide
24    appropriate notice to the parties of the date, time, and
25    location of the hearing. Each contractor, subcontractor,
26    or material supplier has the right to be represented by

 

 

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

 

 

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1    contract for a period of 6 months beginning on the date of
2    the administrative law judge's second written order, even
3    if the payments required under the orders were made in
4    full.
5        (6) If a contractor fails to make full payment as
6    ordered under paragraph (4) of this subsection (b), the
7    subcontractor or material supplier may, within 30 days of
8    the date of that order, petition the State agency for an
9    order for reasonable attorney's fees and costs incurred in
10    the prosecution of the action under this subsection (b).
11    Upon that petition and taking of additional evidence, as
12    may be required, the administrative law judge may issue a
13    supplemental order directing the contractor to pay those
14    reasonable attorney's fees and costs.
15        (7) The written order of the administrative law judge
16    shall be final and appealable under the Administrative
17    Review Law.
18    (b-5) On or before July 2021, the Department of
19Transportation shall publish on its website a searchable
20database that allows for queries for each active construction
21contract by the name of a subcontractor or the pay item such
22that each pay item is associated with either the prime
23contractor or a subcontractor.
24    (c) This Section shall not be construed to in any manner
25diminish, negate, or interfere with the
26contractor-subcontractor or contractor-material supplier

 

 

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1relationship or commercially useful function.
2    (c-5) The provisions of this Section do not apply to
3payments to a subcontractor for work performed under a
4subcontract entered into with a construction contractor if the
5contract contains a provision that the State agency shall pay
6the subcontractor directly as required under a pilot program
7implemented by the Capital Development Board or the Department
8of Transportation under subsection (c-5) of Section 20-120 of
9the Illinois Procurement Code.
10    (d) This Section shall not preclude, bar, or stay the
11rights, remedies, and defenses available to the parties by way
12of the operation of their contract, purchase agreement, the
13Mechanics Lien Act, or the Public Construction Bond Act.
14    (e) State officials and agencies may adopt rules as may be
15deemed necessary in order to establish the formal procedures
16required under this Section.
17    (f) As used in this Section:
18    "Payment" means the discharge of an obligation in money or
19other valuable consideration or thing delivered in full or
20partial satisfaction of an obligation to pay. "Payment" shall
21include interest paid pursuant to this Act.
22    "Reasonable cause" may include, but is not limited to,
23unsatisfactory workmanship or materials; failure to provide
24documentation required by the contract, subcontract, or
25material purchase agreement; claims made against the
26Department of Transportation or the subcontractor pursuant to

 

 

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1subsection (c) of Section 23 of the Mechanics Lien Act or the
2Public Construction Bond Act; judgments, levies, garnishments,
3or other court-ordered assessments or offsets in favor of the
4Department of Transportation or other State agency entered
5against a subcontractor or material supplier. "Reasonable
6cause" does not include payments issued to the contractor that
7create a negative or reduced valuation pay application or pay
8estimate due to a reduction of contract quantities or work not
9performed or provided by the subcontractor or material
10supplier; the interception or withholding of funds for reasons
11not related to the subcontractor's or material supplier's work
12on the contract; anticipated claims or assessments of third
13parties not a party related to the contract or subcontract;
14asserted claims or assessments of third parties that are not
15authorized by court order, administrative tribunal, or
16statute. "Reasonable cause" further does not include the
17withholding, offset, or reduction of payment, in whole or in
18part, due to the assessment of liquidated damages or penalties
19assessed by the Department of Transportation against the
20contractor, unless the subcontractor's performance or supplied
21materials were the sole and proximate cause of the liquidated
22damage or penalty.
23(Source: P.A. 100-43, eff. 8-9-17; 100-376, eff. 1-1-18;
24100-863, eff. 8-14-18; 101-524, eff. 1-1-20.)