STATE OF NEW YORK
________________________________________________________________________
574
2019-2020 Regular Sessions
IN ASSEMBLY
(Prefiled)
January 9, 2019
___________
Introduced by M. of A. BRAUNSTEIN, LUPARDO, CRESPO, WOERNER, STECK,
BRONSON -- read once and referred to the Committee on Governmental
Operations
AN ACT to amend the state finance law and the general municipal law, in
relation to requiring full payment for delivered and accepted materi-
als pertaining to public work projects; and to amend the general busi-
ness law, in relation to prohibiting the retention of any payment due
and owing a material supplier for a construction project
The People of the State of New York, represented in Senate and Assem-
bly, do enact as follows:
1 Section 1. Subdivisions 1 and 2 of section 139-f of the state finance
2 law, subdivision 1 as added by chapter 769 of the laws of 1978 and
3 subdivision 2 as amended by section 16 of part MM of chapter 57 of the
4 laws of 2008, are amended to read as follows:
5 1. Payment by public owners to contractors. The contractor shall peri-
6 odically, in accordance with the terms of the contract, submit to the
7 public owner and/or [his] its agent a requisition for a progress payment
8 for the work performed and/or materials furnished to the date of the
9 requisition, less any amount previously paid to the contractor. The
10 public owner shall in accordance with the terms of the contract approve
11 and promptly pay the requisition for the progress payment less an amount
12 necessary to satisfy any claims, liens or judgments against the contrac-
13 tor which have not been suitably discharged and less any retained amount
14 as hereafter described. The public owner shall retain not more than five
15 per centum of each progress payment, not including any payment for mate-
16 rials pertinent to the project which have been delivered, accepted and
17 are covered by a manufacturer's warranty, and/or are graded to meet
18 industry standards, to the contractor except that the public owner may
19 retain in excess of five per centum but not more than ten per centum of
20 each progress payment, not including any payment for materials pertinent
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD02675-01-9
A. 574 2
1 to the project which have been delivered, accepted and are covered by a
2 manufacturer's warranty, and/or are graded to meet industry standards,
3 to the contractor provided that there are no requirements by the public
4 owner for the contractor to provide a performance bond and a labor and
5 material bond both in the full amount of the contract. The public owner
6 shall pay in full, upon requisition from the contractor, for all materi-
7 als pertinent to the project which have been delivered to the site or
8 off-site by the contractor and/or subcontractor and suitably stored and
9 secured as required by the public owner and the contractor [provided,
10 the public owner may limit such payment to materials in short and/or
11 critical supply and materials specially fabricated for the project each
12 as defined in the contract]. When the work or major portions thereof as
13 contemplated by the terms of the contract are substantially completed,
14 the contractor shall submit to the public owner and/or [his] its agent a
15 requisition for payment of the remaining amount of the contract balance.
16 Upon receipt of such requisition the public owner shall approve and
17 promptly pay the remaining amount of the contract balance less two times
18 the value of any remaining items to be completed and an amount necessary
19 to satisfy any claims, liens or judgments against the contractor which
20 have not been suitably discharged. As the remaining items of work are
21 satisfactorily completed or corrected, the public owner shall promptly
22 pay, upon receipt of a requisition, for these remaining items less an
23 amount necessary to satisfy any claims, liens or judgments against the
24 contractor which have not been suitably discharged. Any claims, liens
25 and judgments referred to in this section shall pertain to the project
26 and shall be filed in accordance with the terms of the applicable
27 contract and/or applicable laws.
28 2. Payment by contractors to subcontractors. Within seven calendar
29 days of the receipt of any payment from the public owner, the contractor
30 shall pay each of [his] its subcontractors and materialmen the proceeds
31 from the payment representing the value of the work performed and/or
32 materials furnished by the subcontractor and/or materialman and reflect-
33 ing the percentage of the subcontractor's work completed or the
34 materialman's material supplied in the requisition approved by the owner
35 and based upon the actual value of the subcontract or purchase order
36 less an amount necessary to satisfy any claims, liens or judgments
37 against the subcontractor or materialman which have not been suitably
38 discharged and, with regard to subcontractors, less any retained amount
39 as hereafter described. Failure by the contractor to pay any subcontrac-
40 tor or materialman within seven calendar days of the receipt of any
41 payment from the public owner shall result in the commencement and
42 accrual of interest on amounts due to such subcontractor or materialman
43 for the period beginning on the day immediately following the expiration
44 of such seven calendar day period and ending on the date on which
45 payment is made by the contractor to such subcontractor or materialman.
46 Such interest payment shall be the sole responsibility of the contrac-
47 tor, and shall be paid at the rate of interest in effect on the date
48 payment is made by the contractor. Notwithstanding any other provision
49 of law to the contrary, interest shall be computed at the rate estab-
50 lished in paragraph (b) of subdivision one of section seven hundred
51 fifty-six-b of the general business law. The contractor shall retain not
52 more than five per centum of each payment to the subcontractor [and/or
53 materialman] except that the contractor may retain in excess of five per
54 centum but not more than ten per centum of each payment to the subcon-
55 tractor provided that prior to entering into a subcontract with the
56 contractor, the subcontractor is unable or unwilling to provide a
A. 574 3
1 performance bond and a labor and material bond, both in the full amount
2 of the subcontract, at the request of the contractor. The contractor
3 shall pay in full, upon payment by the public owner, for all materials
4 pertinent to the project which have been delivered to and accepted at
5 the site or off-site by a materialman and are covered by a manufactur-
6 er's warranty, and/or are graded to meet industry standards. However,
7 except in the case of a materialman who is also contracted to install a
8 product he/she delivered, the contractor shall retain nothing from those
9 payments representing proceeds owed the subcontractor and/or materialman
10 from the public owner's payments to the contractor for the remaining
11 amounts of the contract balance as provided in subdivision one of this
12 section. If the contractor has failed to submit a requisition for
13 payment of the remaining amounts of the contract balance within ninety
14 days of substantial completion as provided in subdivision one of this
15 section, then any clause in the subcontract between the contractor and
16 the subcontractor or materialman which states that payment by the
17 contractor to such subcontractor or materialman is contingent upon
18 payment by the owner to the contractor shall be deemed invalid. Within
19 seven calendar days of the receipt of payment from the contractor, the
20 subcontractor and/or materialman shall pay each of [his] its subcontrac-
21 tors and materialmen in the same manner as the contractor has paid the
22 subcontractor, including interest as herein provided above. Nothing
23 provided herein shall create any obligation on the part of the public
24 owner to pay or to see to the payment of any moneys to any subcontractor
25 or materialman from any contractor nor shall anything provided herein
26 serve to create any relationship in contract or otherwise, implied or
27 expressed, between the subcontractor or materialman and the public
28 owner.
29 § 2. Paragraph (a) of subdivision 1 and subdivision 2 of section 106-b
30 of the general municipal law, paragraph (a) of subdivision 1 as amended
31 by chapter 98 of the laws of 1995 and subdivision 2 as amended by
32 section 15 of part MM of chapter 57 of the laws of 2008, are amended to
33 read as follows:
34 (a) The contractor shall periodically, in accordance with the terms of
35 the contract, submit to the public owner and/or [his] its agent a requi-
36 sition for a progress payment for the work performed and/or materials
37 furnished to the date of the requisition less any amount previously paid
38 to the contractor. The public owner shall in accordance with the terms
39 of the contract approve and promptly pay the requisition for the
40 progress payment less an amount necessary to satisfy any claims, liens
41 or judgments against the contractor which have not been suitably
42 discharged and less any retained amount as hereafter described. The
43 public owner shall retain not more than five per centum of each progress
44 payment, not including any payment for materials pertinent to the
45 project which have been delivered, accepted and are covered by a
46 manufacturer's warranty, and/or are graded to meet industry standards,
47 to the contractor except that the public owner may retain in excess of
48 five per centum but not more than ten per centum of each progress
49 payment, not including any payment for materials pertinent to the
50 project which have been delivered, accepted and are covered by a
51 manufacturer's warranty, and/or are graded to meet industry standards,
52 to the contractor provided that there are no requirements by the public
53 owner for the contractor to provide a performance bond and a labor and
54 material bond both in the full amount of the contract. The public owner
55 shall pay in full, upon requisition from the contractor, for all materi-
56 als pertinent to the project which have been delivered to the site or
A. 574 4
1 off-site by the contractor and/or subcontractor and suitably stored and
2 secured as required by the public owner and the contractor [provided,
3 the public owner may limit such payment to materials in short and/or
4 critical supply and materials specially fabricated for the project each
5 as defined in the contract]. When the work or major portions thereof as
6 contemplated by the terms of the contract are substantially completed,
7 the contractor shall submit to the public owner and/or [his] its agent a
8 requisition for payment of the remaining amount of the contract balance.
9 Upon receipt of such requisition the public owner shall approve and
10 promptly pay the remaining amount of the contract balance less two times
11 the value of any remaining items to be completed and an amount necessary
12 to satisfy any claims, liens or judgments against the contractor which
13 have not been suitably discharged. As the remaining items of work are
14 satisfactorily completed or corrected, the public owner shall promptly
15 pay, upon receipt of a requisition, for these items less an amount
16 necessary to satisfy any claims, liens or judgments against the contrac-
17 tor which have not been suitably discharged. Any claims, liens and judg-
18 ments referred to in this section shall pertain to the project and shall
19 be filed in accordance with the terms of the applicable contract and/or
20 applicable laws. Where the public owner is other than the city of New
21 York, the term "promptly pay" shall mean payment within thirty days,
22 excluding legal holidays, of receipt of the requisition unless such
23 requisition is not approvable in accordance with the terms of the
24 contract. Notwithstanding the foregoing, where the public owner is other
25 than the city of New York and is a municipal corporation which requires
26 an elected official to approve progress payments, "promptly pay" shall
27 mean payment within forty-five days, excluding legal holidays, of
28 receipt of the requisition unless such requisition is not approvable in
29 accordance with the terms of the contract.
30 2. Payment by contractors to subcontractors. Within seven calendar
31 days of the receipt of any payment from the public owner, the contractor
32 shall pay each of [his] its subcontractors and materialmen the proceeds
33 from the payment representing the value of the work performed and/or
34 materials furnished by the subcontractor and/or materialman and reflect-
35 ing the percentage of the subcontractor's work completed or the
36 materialman's material supplied in the requisition approved by the owner
37 and based upon the actual value of the subcontract or purchase order
38 less an amount necessary to satisfy any claims, liens or judgments
39 against the subcontractor or materialman which have not been suitably
40 discharged and, with regard to subcontractors, less any retained amount
41 as hereafter described. Failure by the contractor to make any payment,
42 including any remaining amounts of the contract balance as hereinafter
43 described, to any subcontractor or materialman within seven calendar
44 days of the receipt of any payment from the public owner shall result in
45 the commencement and accrual of interest on amounts due to such subcon-
46 tractor or materialman for the period beginning on the day immediately
47 following the expiration of such seven calendar day period and ending on
48 the date on which payment is made by the contractor to such subcontrac-
49 tor or materialman. Such interest shall be the sole responsibility of
50 the contractor, and shall be paid at the rate of interest in effect on
51 the date payment is made by the contractor. Notwithstanding any other
52 provision of law to the contrary, interest shall be computed at the rate
53 established in paragraph (b) of subdivision one of section seven hundred
54 fifty-six-b of the general business law. The contractor shall retain not
55 more than five per centum of each payment to the subcontractor [and/or
56 materialman] except that the contractor may retain in excess of five per
A. 574 5
1 centum but not more than ten per centum of each payment to the subcon-
2 tractor provided that prior to entering into a subcontract with the
3 contractor, the subcontractor is unable or unwilling to provide a
4 performance bond and a labor and material bond both in the full amount
5 of the subcontract at the request of the contractor. The contractor
6 shall pay in full, upon payment by the public owner, for all materials
7 pertinent to the project which have been delivered to and accepted at
8 the site or off-site by a materialman and are covered by a manufactur-
9 er's warranty, and/or are graded to meet industry standards. However,
10 except in the case of a materialman who is also contracted to install a
11 product he/she delivered, the contractor shall retain nothing from those
12 payments representing proceeds owed the subcontractor and/or materialman
13 from the public owner's payments to the contractor for the remaining
14 amounts of the contract balance as provided in subdivision one of this
15 section. If the contractor has failed to submit a requisition for
16 payment of the remaining amounts of the contract balance within ninety
17 days of substantial completion as provided in subdivision one of this
18 section, then any clause in the subcontract between the contractor and
19 the subcontractor or materialman which states that payment by the
20 contractor to such subcontractor or materialman is contingent upon
21 payment by the owner to the contractor shall be deemed invalid. Within
22 seven calendar days of the receipt of payment from the contractor, the
23 subcontractor and/or materialman shall pay each of [his] its subcontrac-
24 tors and materialmen in the same manner as the contractor has paid the
25 subcontractor, including interest as herein provided above. Nothing
26 provided herein shall create any obligation on the part of the public
27 owner to pay or to see to the payment of any moneys to any subcontractor
28 or materialman from any contractor nor shall anything provided herein
29 serve to create any relationship in contract or otherwise, implied or
30 expressed, between the subcontractor or materialman and the public
31 owner.
32 § 3. Section 756-c of the general business law, as added by chapter
33 127 of the laws of 2002, is amended to read as follows:
34 § 756-c. Retention. 1. By mutual agreement of the relevant parties an
35 owner may retain a reasonable amount of the contract sum as retainage. A
36 contractor or subcontractor may also retain a reasonable amount for
37 retainage so long as the amount does not exceed the actual percentage
38 retained by the owner. Retainage shall be released by the owner to the
39 contractor no later than thirty days after the final approval of the
40 work under a construction contract. In the event that an owner fails to
41 release retainage as required by this article, or the contractor or
42 subcontractor fails to release a proportionate amount of retainage to
43 the relevant parties after receipt of retainage from the owner, the
44 owner, contractor, or subcontractor, as the case may be, shall be
45 subject to the payment of interest at the rate of one percent per month
46 on the date retention was due and owing.
47 2. Notwithstanding the provisions of subdivision one of this section,
48 no portion of any payment due and owing to a material supplier for mate-
49 rials which have been delivered, accepted and are covered by a manufac-
50 turer's warranty, and/or graded to meet industry standards shall be
51 retained by an owner, contractor or subcontractor.
52 § 4. This act shall take effect on the thirtieth day after it shall
53 have become a law and shall apply to materials delivered and accepted on
54 or after such effective date.