Bill Text: IL HB2664 | 2017-2018 | 100th General Assembly | Enrolled

Bill Title: Amends the State Prompt Payment Act. Provides that if a contractor is assessed liquidated damages by the State, the contractor is still responsible to each subcontractor under the subcontracts. For contracts with the Department of Transportation, provides that if a contractor is assessed a liquidated damages penalty equal to or exceeding the total amount of the contract and the contractor is unable to pay its subcontractors, the Department of Transportation shall verify completion of the work performed by the subcontractor and, upon successful verification, pay the subcontractor the amount owed on the subcontract with the contractor.

Spectrum: Partisan Bill (Democrat 6-0)

Status: (Enrolled) 2017-06-28 - Sent to the Governor [HB2664 Detail]

Download: Illinois-2017-HB2664-Enrolled.html

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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 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.
13The State official or agency responsible for administering the
14contract shall provide subcontractors and material suppliers,
15known to the State official or agency, with instructions on how
16to access the electronic information.
17 (a-5) When a contractor receives any payment, the
18contractor shall pay each subcontractor and material supplier
19in proportion to the work completed by each subcontractor and
20material supplier its their application or pay estimate, plus
21interest received under this Act, less any retention. When a
22contractor receives any payment, the contractor shall pay each
23lower-tiered subcontractor and material supplier and each

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1subcontractor and material supplier shall make payment to its
2own respective subcontractors and material suppliers. If the
3contractor receives less than the full payment due under the
4public construction contract, the contractor shall be
5obligated to disburse on a pro rata basis those funds received,
6plus interest received under this Act, with the contractor,
7subcontractors and material suppliers each receiving a
8prorated portion based on the amount of payment each has
9earned. When, however, the State official or agency public
10owner does not release the full payment due under the contract
11because there are specific areas of work or materials the State
12agency or official has determined contractor is rejecting or
13because the contractor has otherwise determined such areas are
14not suitable for payment, then those specific subcontractors or
15material suppliers involved shall not be paid for that portion
16of work rejected or deemed not suitable for payment and all
17other subcontractors and suppliers shall be paid based upon the
18amount of payment each has earned in full, plus interest
19received under this Act.
20 (a-10) For construction contracts with the Department of
21Transportation, the contractor, subcontractor, or material
22supplier, regardless of tier, shall not offset, decrease, or
23diminish payment or payments that are due to its subcontractors
24or material suppliers without reasonable cause.
25 A contractor, who refuses to make prompt payment, in whole
26or in part, shall provide to the subcontractor or material

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

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

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

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1 that the contractor failed to make payment in full, without
2 reasonable cause, and a written order was issued to a
3 contractor under paragraph (3) of this subsection (b), then
4 the contractor shall be barred from entering into a State
5 public construction contract for a period of 6 months
6 beginning on the date of the administrative law judge's
7 second written order, even if the payments required under
8 the orders were made in full.
9 (6) If a contractor fails to make full payment as
10 ordered under paragraph (4) of this subsection (b), the
11 subcontractor or material supplier may, within 30 days of
12 the date of that order, petition the State agency for an
13 order for reasonable attorney's fees and costs incurred in
14 the prosecution of the action under this subsection (b).
15 Upon that petition and taking of additional evidence, as
16 may be required, the administrative law judge may issue a
17 supplemental order directing the contractor to pay those
18 reasonable attorney's fees and costs.
19 (7) The written order of the administrative law judge
20 shall be final and appealable under the Administrative
21 Review Law.
22 (c) This Section shall not be construed to in any manner
23diminish, negate, or interfere with the
24contractor-subcontractor or contractor-material supplier
25relationship or commercially useful function.
26 (d) This Section shall not preclude, bar, or stay the

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1rights, remedies, and defenses available to the parties by way
2of the operation of their contract, purchase agreement, the
3Mechanics Lien Act, or the Public Construction Bond Act.
4 (e) State officials and agencies may adopt rules as may be
5deemed necessary in order to establish the formal procedures
6required under this Section.
7 (f) As used in this Section,
8 "Payment" means the discharge of an obligation in money or
9other valuable consideration or thing delivered in full or
10partial satisfaction of an obligation to pay. "Payment" shall
11include interest paid pursuant to this Act.
12 "Reasonable cause" may include, but is not limited to,
13unsatisfactory workmanship or materials; failure to provide
14documentation required by the contract, subcontract, or
15material purchase agreement; claims made against the
16Department of Transportation or the subcontractor pursuant to
17subsection (c) of Section 23 of the Mechanics Lien Act or the
18Public Construction Bond Act; judgments, levies, garnishments,
19or other court-ordered assessments or offsets in favor of the
20Department of Transportation or other State agency entered
21against a subcontractor or material supplier. "Reasonable
22cause" does not include payments issued to the contractor that
23create a negative or reduced valuation pay application or pay
24estimate due to a reduction of contract quantities or work not
25performed or provided by the subcontractor or material
26supplier; the interception or withholding of funds for reasons

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1not related to the subcontractor's or material supplier's work
2on the contract; anticipated claims or assessments of third
3parties not a party related to the contract or subcontract;
4asserted claims or assessments of third parties that are not
5authorized by court order, administrative tribunal, or
6statute. "Reasonable cause" further does not include the
7withholding, offset, or reduction of payment, in whole or in
8part, due to the assessment of liquidated damages or penalties
9assessed by the Department of Transportation against the
10contractor, unless the subcontractor's performance or supplied
11materials were the sole and proximate cause of the liquidated
12damage or penalty.
13(Source: P.A. 94-672, eff. 1-1-06; 94-972, eff. 7-1-07.)