Bill Text: IL SB0104 | 2019-2020 | 101st General Assembly | Chaptered


Bill Title: 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, 2021. 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.

Spectrum: Partisan Bill (Democrat 16-0)

Status: (Passed) 2019-08-23 - Public Act . . . . . . . . . 101-0524 [SB0104 Detail]

Download: Illinois-2019-SB0104-Chaptered.html



Public Act 101-0524
SB0104 EnrolledLRB101 04773 RJF 49782 b
AN ACT concerning finance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The State Prompt Payment Act is amended by
changing Sections 1 and 7 as follows:
(30 ILCS 540/1) (from Ch. 127, par. 132.401)
Sec. 1. This Act applies to any State official or agency
authorized to provide for payment from State funds, by virtue
of any appropriation of the General Assembly, for goods or
services furnished to the State.
For purposes of this Act, "goods or services furnished to
the State" include but are not limited to (i) covered health
care provided to eligible members and their covered dependents
in accordance with the State Employees Group Insurance Act of
1971, including coverage through a physician-owned health
maintenance organization under Section 6.1 of that Act, (ii)
prevention, intervention, or treatment services and supports
for persons with developmental disabilities, mental health
services, alcohol and substance abuse services, rehabilitation
services, and early intervention services provided by a vendor,
and (iii) prevention, intervention, or treatment services and
supports for youth provided by a vendor by virtue of a
contractual grant agreement. For the purposes of items (ii) and
(iii), a vendor includes but is not limited to sellers of goods
and services, including community-based organizations that are
licensed to provide prevention, intervention, or treatment
services and supports for persons with developmental
disabilities, mental illness, and substance abuse problems, or
that provides prevention, intervention, or treatment services
and supports for youth.
For the purposes of this Act, "appropriate State official
or agency" is defined as the Director or Chief Executive or his
designee of that State agency or department or facility of such
agency or department. With respect to covered health care
provided to eligible members and their dependents in accordance
with the State Employees Group Insurance Act of 1971,
"appropriate State official or agency" also includes an
administrator of a program of health benefits under that Act.
As used in this Act, "eligible member" means a member who
is eligible for health benefits under the State Employees Group
Insurance Act of 1971, and "member" and "dependent" have the
meanings ascribed to those terms in that Act.
As used in this Act, "a proper bill or invoice" means a
bill or invoice, including, but not limited to, an invoice
issued under a contractual grant agreement, that includes the
information necessary for processing the payment as may be
specified by a State agency and in rules adopted in accordance
with this Act. Beginning on and after July 1, 2021, "a proper
bill or invoice" shall also include the names of all
subcontractors or subconsultants to be paid from the bill or
invoice and the amounts due to each of them, if any.
(Source: P.A. 100-549, eff. 1-1-18.)
(30 ILCS 540/7) (from Ch. 127, par. 132.407)
Sec. 7. Payments to subcontractors and material suppliers.
(a) When a State official or agency responsible for
administering a contract submits a voucher to the Comptroller
for payment to a contractor, that State official or agency
shall promptly make available electronically the voucher
number, the date of the voucher, and the amount of the voucher.
The State official or agency responsible for administering the
contract shall provide subcontractors and material suppliers,
known to the State official or agency, with instructions on how
to access the electronic information.
(a-5) When a contractor receives any payment, the
contractor shall pay each subcontractor and material supplier
electronically within 10 business days or 15 calendar days,
whichever occurs earlier, or, if paid by a printed check, the
printed check must be postmarked within 10 business days or 15
calendar days, whichever occurs earlier, after receiving
payment in proportion to the work completed by each
subcontractor and material supplier its application or pay
estimate, plus interest received under this Act. When a
contractor receives any payment, the contractor shall pay each
lower-tiered subcontractor and material supplier and each
subcontractor and material supplier shall make payment to its
own respective subcontractors and material suppliers. If the
contractor receives less than the full payment due under the
public construction contract, the contractor shall be
obligated to disburse on a pro rata basis those funds received,
plus interest received under this Act, with the contractor,
subcontractors and material suppliers each receiving a
prorated portion based on the amount of payment each has
earned. When, however, the State official or agency does not
release the full payment due under the contract because there
are specific areas of work or materials the State agency or
official has determined are not suitable for payment, then
those specific subcontractors or material suppliers involved
shall not be paid for that portion of work rejected or deemed
not suitable for payment and all other subcontractors and
suppliers shall be paid based upon the amount of payment each
has earned, plus interest received under this Act.
(a-10) For construction contracts with the Department of
Transportation, the contractor, subcontractor, or material
supplier, regardless of tier, shall not offset, decrease, or
diminish payment or payments that are due to its subcontractors
or material suppliers without reasonable cause.
A contractor, who refuses to make prompt payment within 10
business days or 15 calendar days, whichever occurs earlier,
after receiving payment, in whole or in part, shall provide to
the subcontractor or material supplier and the public owner or
its agent, a written notice of that refusal. The written notice
shall be made by a contractor no later than 5 calendar days
after payment is received by the contractor. The written notice
shall identify the Department of Transportation's contract,
any subcontract or material purchase agreement, a detailed
reason for refusal, the value of the payment to be withheld,
and the specific remedial actions required of the subcontractor
or material supplier so that payment may be made. Written
notice of refusal may be given in a form and method which is
acceptable to the parties and public owner.
(b) If the contractor, without reasonable cause, fails to
make full payment of amounts due under subsection (a) to its
subcontractors and material suppliers within 10 business days
or 15 calendar days, whichever occurs earlier, 15 calendar days
after receipt of payment from the State official or agency, the
contractor shall pay to its subcontractors and material
suppliers, in addition to the payment due them, interest in the
amount of 2% per month, calculated from the expiration of the
10-business-day period or the 15-calendar-day 15-day period
until fully paid. This subsection shall further apply to any
payments made by subcontractors and material suppliers to their
subcontractors and material suppliers and to all payments made
to lower tier subcontractors and material suppliers throughout
the contracting chain.
(1) If a contractor, without reasonable cause, fails to
make payment in full as provided in subsection (a-5) within
10 business days or 15 calendar days, whichever occurs
earlier, 15 calendar days after receipt of payment under
the public construction contract, any subcontractor or
material supplier to whom payments are owed may file a
written notice and request for administrative hearing with
the State official or agency setting forth the amount owed
by the contractor and the contractor's failure to timely
pay the amount owed. The written notice and request for
administrative hearing shall identify the public
construction contract, the contractor, and the amount
owed, and shall contain a sworn statement or attestation to
verify the accuracy of the notice. The notice and request
for administrative hearing shall be filed with the State
official for the public construction contract, with a copy
of the notice concurrently provided to the contractor.
Notice to the State official may be made by certified or
registered mail, messenger service, or personal service,
and must include proof of delivery to the State official.
(2) The State official or agency, within 15 calendar
days after receipt of a subcontractor's or material
supplier's written notice and request for administrative
hearing, shall hold a hearing convened by an administrative
law judge to determine whether the contractor withheld
payment, without reasonable cause, from the subcontractors
or material suppliers and what amount, if any, is due to
the subcontractors or material suppliers, and the
reasonable cause or causes asserted by the contractor. The
State official or agency shall provide appropriate notice
to the parties of the date, time, and location of the
hearing. Each contractor, subcontractor, or material
supplier has the right to be represented by counsel at a
hearing and to cross-examine witnesses and challenge
documents. Upon the request of the subcontractor or
material supplier and a showing of good cause, reasonable
continuances may be granted by the administrative law
judge.
(3) Upon a finding by the administrative law judge that
the contractor failed to make payment in full, without
reasonable cause, as provided in subsection (a-10), then
the administrative law judge shall, in writing, order the
contractor to pay the amount owed to the subcontractors or
material suppliers plus interest within 15 calendar days
after the order.
(4) If a contractor fails to make full payment as
ordered under paragraph (3) of this subsection (b) within
15 days after the administrative law judge's order, then
the contractor shall be barred from entering into a State
public construction contract for a period of one year
beginning on the date of the administrative law judge's
order.
(5) If, on 2 or more occasions within a 3-calendar-year
period, there is a finding by an administrative law judge
that the contractor failed to make payment in full, without
reasonable cause, and a written order was issued to a
contractor under paragraph (3) of this subsection (b), then
the contractor shall be barred from entering into a State
public construction contract for a period of 6 months
beginning on the date of the administrative law judge's
second written order, even if the payments required under
the orders were made in full.
(6) If a contractor fails to make full payment as
ordered under paragraph (4) of this subsection (b), the
subcontractor or material supplier may, within 30 days of
the date of that order, petition the State agency for an
order for reasonable attorney's fees and costs incurred in
the prosecution of the action under this subsection (b).
Upon that petition and taking of additional evidence, as
may be required, the administrative law judge may issue a
supplemental order directing the contractor to pay those
reasonable attorney's fees and costs.
(7) The written order of the administrative law judge
shall be final and appealable under the Administrative
Review Law.
(b-5) On or before July 2021, the Department of
Transportation shall publish on its website a searchable
database that allows for queries for each active construction
contract by the name of a subcontractor or the pay item such
that each pay item is associated with either the prime
contractor or a subcontractor.
(c) This Section shall not be construed to in any manner
diminish, negate, or interfere with the
contractor-subcontractor or contractor-material supplier
relationship or commercially useful function.
(d) This Section shall not preclude, bar, or stay the
rights, remedies, and defenses available to the parties by way
of the operation of their contract, purchase agreement, the
Mechanics Lien Act, or the Public Construction Bond Act.
(e) State officials and agencies may adopt rules as may be
deemed necessary in order to establish the formal procedures
required under this Section.
(f) As used in this Section:
"Payment" means the discharge of an obligation in money or
other valuable consideration or thing delivered in full or
partial satisfaction of an obligation to pay. "Payment" shall
include interest paid pursuant to this Act.
"Reasonable cause" may include, but is not limited to,
unsatisfactory workmanship or materials; failure to provide
documentation required by the contract, subcontract, or
material purchase agreement; claims made against the
Department of Transportation or the subcontractor pursuant to
subsection (c) of Section 23 of the Mechanics Lien Act or the
Public Construction Bond Act; judgments, levies, garnishments,
or other court-ordered assessments or offsets in favor of the
Department of Transportation or other State agency entered
against a subcontractor or material supplier. "Reasonable
cause" does not include payments issued to the contractor that
create a negative or reduced valuation pay application or pay
estimate due to a reduction of contract quantities or work not
performed or provided by the subcontractor or material
supplier; the interception or withholding of funds for reasons
not related to the subcontractor's or material supplier's work
on the contract; anticipated claims or assessments of third
parties not a party related to the contract or subcontract;
asserted claims or assessments of third parties that are not
authorized by court order, administrative tribunal, or
statute. "Reasonable cause" further does not include the
withholding, offset, or reduction of payment, in whole or in
part, due to the assessment of liquidated damages or penalties
assessed by the Department of Transportation against the
contractor, unless the subcontractor's performance or supplied
materials were the sole and proximate cause of the liquidated
damage or penalty.
(Source: P.A. 100-43, eff. 8-9-17; 100-376, eff. 1-1-18;
100-863, eff. 8-14-18.)
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