Full Text of HB2816 103rd General Assembly
HB2816 103RD GENERAL ASSEMBLY |
| | 103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024 HB2816 Introduced 2/16/2023, by Rep. Camille Y. Lilly SYNOPSIS AS INTRODUCED: |
| 20 ILCS 2705/2705-625 new | | 30 ILCS 540/7 | from Ch. 127, par. 132.407 | 30 ILCS 540/12 new | |
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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. Requires contractors to pay each subcontractor and material supplier within 7 business days after receiving payment (currently, 10 business days or 15 calendar days). 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 attorney's 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. Makes conforming changes.
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| | A BILL FOR |
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| 1 | | AN ACT concerning finance.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Department of Transportation Law of the
| 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:
| 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 | 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
| 21 | | obligated to disburse on a pro rata basis those funds | 22 | | received, plus interest received under this Act, with the
| 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.
| 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
| 7 | | subcontractors and material suppliers within 7 10 business | 8 | | days or 15 calendar days, whichever occurs earlier, after
| 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.
| 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
| 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
| 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.
| 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
| 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.
| 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.
| 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
| 19 | | public construction contract for a period of one year | 20 | | beginning on the date of
the administrative law judge's | 21 | | order.
| 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 .)
| 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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