Bill Text: OR HB4034 | 2012 | Regular Session | Enrolled
Bill Title: Relating to prompt progress payments on public improvement contracts; and declaring an emergency.
Spectrum: Unknown
Status: (Passed) 2012-02-27 - Chapter 4, (2012 Laws): Effective date February 27, 2012. [HB4034 Detail]
Download: Oregon-2012-HB4034-Enrolled.html
76th OREGON LEGISLATIVE ASSEMBLY--2012 Regular Session
Enrolled
House Bill 4034
Introduced and printed pursuant to House Rule 12.00. Presession
filed (at the request of House Interim Committee on Business
and Labor)
CHAPTER ................
AN ACT
Relating to prompt progress payments on public improvement
contracts; creating new provisions; amending ORS 279C.515 and
279C.580; and declaring an emergency.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 279C.515 is amended to read:
279C.515. (1) Every public improvement contract { - shall - }
{ + must + } contain a clause or condition that, if the
contractor fails, neglects or refuses to { - make prompt
payment of any - } { + pay promptly a person's + } claim for
labor or services { - furnished - } { + that the person
provides + } to the contractor or a subcontractor { - by any
person - } in connection with the public improvement contract as
the claim becomes due, the proper officer { - or officers
representing - } { + that represents + } the state or a county,
school district, municipality { - , - } { + or + } municipal
corporation or { + a + } subdivision { - thereof, as the case
may be, - } { + of the state, county, school district,
municipality or municipal corporation + } may pay { - such - }
{ + the amount of the + } claim to the person
{ - furnishing - } { + that provides + } the labor or services
and charge the amount of the payment against funds due or to
become due the contractor by reason of the contract.
(2) Every public improvement contract { - shall - } { +
must + } contain a clause or condition that, if the contractor or
a first-tier subcontractor fails, neglects or refuses to
{ - make payment to - } { + pay + } a person
{ - furnishing - } { + that provides + } labor or materials in
connection with the public improvement contract within 30 days
after { - receipt of - } { + receiving + } payment from the
contracting agency or a contractor, the contractor or first-tier
subcontractor { - shall owe - } { + owes + } the person the
amount due plus interest charges
{ - commencing - } { + that begin + } at the end of the
10-day period { - that - } { + within which + } payment is
due under ORS 279C.580 (4) and { - ending - } { + that
end + } upon final payment, unless payment is subject to a good
faith dispute as defined in ORS 279C.580. The rate of interest
{ - charged to the contractor or first-tier subcontractor on
the amount due shall equal three times the discount rate on
90-day commercial paper in effect at the Federal Reserve Bank in
Enrolled House Bill 4034 (HB 4034-INTRO) Page 1
the Federal Reserve district that includes Oregon on the date
that is 30 days after the date when payment was received from the
contracting agency or from the contractor, but the rate of
interest may not exceed 30 percent. - } { + on the amount due
is nine percent per annum. + } The amount of interest may not be
waived.
(3) Every public improvement contract and every contract
related to the public improvement contract { - shall - } { +
must + } contain a clause or condition that, if the contractor or
a subcontractor fails, neglects or refuses to { - make payment
to - } { + pay + } a person
{ - furnishing - } { + that provides + } labor or materials
in connection with the public improvement contract, the person
may file a complaint with the Construction Contractors Board,
unless payment is subject to a good faith dispute as defined in
ORS 279C.580.
(4) { - The payment of - } { + Paying + } a claim in the
manner authorized in this section does not relieve the contractor
or the contractor's surety from obligation with respect to
{ - any - } { + an + } unpaid { - claims - } { +
claim + }.
SECTION 2. ORS 279C.580 is amended to read:
279C.580. (1) A contractor may not request payment from the
contracting agency of any amount withheld or retained in
accordance with subsection (5) of this section until { - such
time as - } the contractor has determined and certified to the
contracting agency that the subcontractor has determined and
certified to the contracting agency that the subcontractor is
entitled to the payment { - of such amount - } .
(2) A dispute between a contractor and first-tier subcontractor
relating to the amount or entitlement of a first-tier
subcontractor to a payment or a late payment interest penalty
under a clause included in the subcontract under subsection (3)
or (4) of this section does not constitute a dispute to which the
contracting agency is a party. The contracting agency may not be
included as a party in any administrative or judicial proceeding
involving such a dispute.
(3) Each public improvement contract awarded by a contracting
agency { - shall - } { + must + } include a clause that
requires the contractor to include in each subcontract for
property or services { - entered - } { + the contractor
enters + } into { - by the contractor and - } { + with + } a
first-tier subcontractor, including a material supplier, for the
purpose of performing a construction contract:
(a) A payment clause that obligates the contractor to pay the
first-tier subcontractor for satisfactory performance under
{ - its - } { + the + } subcontract within 10 days out of
{ - such - } amounts { - as are paid - } { + the
contracting agency pays + } to the contractor { - by the
contracting agency - } under the { + public improvement + }
contract { - ; and - } { + . + }
{ + (b) A clause that requires the contractor to provide a
first-tier subcontractor with a standard form that the first-tier
subcontractor may use as an application for payment or as another
method by which the subcontractor may claim a payment due from
the contractor.
(c) A clause that requires the contractor, except as otherwise
provided in this paragraph, to use the same form and regular
administrative procedures for processing payments during the
entire term of the subcontract. A contractor may change the form
Enrolled House Bill 4034 (HB 4034-INTRO) Page 2
or the regular administrative procedures the contractor uses for
processing payments if the contractor:
(A) Notifies the subcontractor in writing at least 45 days
before the date on which the contractor makes the change; and
(B) Includes with the written notice a copy of the new or
changed form or a description of the new or changed
procedure. + }
{ - (b) - } { + (d) + } An interest penalty clause that
obligates the contractor, if { - payment is not made - } { +
the contractor does not pay the first-tier subcontractor + }
within 30 days after { - receipt of - } { + receiving + }
payment from the contracting agency, to pay { - to - } the
first-tier subcontractor an interest penalty on amounts due in
{ - the case of - } each payment { - not made - } { + the
contractor does not make + } in accordance with the payment
clause included in the subcontract under paragraph (a) of this
subsection. A contractor or first-tier subcontractor { - may
not be - } { + is not + } obligated to pay an interest penalty
if the only reason that the contractor or first-tier
subcontractor did not make payment when payment was due is that
the contractor or first-tier subcontractor did not receive
payment from the contracting agency or contractor when payment
was due. The interest penalty { - shall be - } :
(A) { - For - } { + Applies to + } the period
{ - beginning - } { + that begins + } on the day after the
required payment date and { - ending - } { + that ends + } on
the date on which { - payment of - } the amount due is
{ - made - } { + paid + }; and
(B) { + Is + } computed at the rate specified in ORS 279C.515
(2).
(4) { - The - } { + A public improvement + } contract
{ - awarded by - } { + that + } the contracting agency
{ + awards + } shall { - require - } { + obligate + } the
contractor
{ - to include - } { + , + } in each of the contractor's
subcontracts, { - for the purpose of performance of such
contract condition, a provision requiring - } { + to
require + } the first-tier subcontractor to include a payment
clause and an interest penalty clause { - conforming - } { +
that conforms + } to the standards of subsection (3) of this
section in each of the first-tier subcontractor's subcontracts
and to require each of the first-tier subcontractor's
subcontractors to include such clauses in { - their - } { +
the first-tier subcontractors' + } subcontracts with each
lower-tier subcontractor or supplier.
(5)(a) The clauses required by subsections (3) and (4) of this
section { - are not intended to - } { + do not + } impair the
right of a contractor or a subcontractor at any tier to
negotiate, and to include in the subcontract, provisions that:
(A) Permit the contractor or a subcontractor to retain, in the
event of a good faith dispute, an amount not to exceed 150
percent of the amount in dispute from the amount due a
subcontractor under the subcontract without incurring any
obligation to pay a late payment interest penalty, in accordance
with terms and conditions { - agreed to by - } the parties to
the subcontract { + agree upon + }, giving such recognition as
the parties consider appropriate to the ability of a
subcontractor to furnish a performance bond and a payment bond;
Enrolled House Bill 4034 (HB 4034-INTRO) Page 3
(B) Permit the contractor or subcontractor to make a
determination that part or all of the subcontractor's request for
payment may be withheld in accordance with the subcontract
{ - agreement - } ; and
(C) Permit such withholdings without incurring any obligation
to pay a late payment interest penalty if:
(i) A notice { - conforming - } { + that conforms + } to
the standards of subsection (8) of this section has been
previously furnished to the subcontractor; and
(ii) A copy of any notice { - issued by - } a
contractor { + issues + } under sub-subparagraph (i) of this
subparagraph has been furnished to the contracting agency.
(b) As used in this subsection, 'good faith dispute' means a
documented dispute concerning:
(A) Unsatisfactory job progress.
(B) Defective work not remedied.
(C) Third-party claims filed or reasonable evidence that claims
will be filed.
(D) Failure to make timely payments for labor, equipment and
materials.
(E) Damage to the { - prime - } contractor or subcontractor.
(F) Reasonable evidence that the subcontract cannot be
completed for the unpaid balance of the subcontract sum.
(6) If, after { - making application - } { + applying + }
to a contracting agency for payment under a { + public
improvement + } contract but before
{ - making a payment to - } { + paying + } a subcontractor
for the subcontractor's performance covered by { - such - }
{ + the + } application, a contractor discovers that all or a
portion of the payment otherwise due the subcontractor is subject
to withholding from the subcontractor in accordance with the
subcontract { - agreement - } , the contractor shall:
(a) Furnish to the subcontractor a notice conforming to the
standards of subsection (8) of this section as soon as
practicable
{ - upon - } { + after + } ascertaining the cause
{ - giving rise to a - } { + for the + } withholding, but
{ - prior to - } { + before + } the due date for
{ - subcontractor - } payment { + to the subcontractor + };
(b) Furnish to the contracting agency, as soon as practicable,
a copy of the notice furnished to the subcontractor under
paragraph (a) of this subsection;
(c) Reduce the { - subcontractor's - } progress payment
{ + to the subcontractor + } by an amount not to exceed the
amount specified in the notice of withholding furnished under
paragraph (a) of this subsection;
(d) Pay the subcontractor as soon as practicable after the
correction of the identified subcontract performance deficiency;
(e) Make such payment within:
(A) Seven days after correction of the identified subcontract
performance deficiency unless the funds { - therefor - } { +
for the payment + } must be recovered from the contracting agency
because of a reduction under paragraph (f)(A) of this subsection;
or
(B) Seven days after the contractor recovers { - such - }
{ + the + } funds from the contracting agency;
(f) Notify the contracting agency upon:
(A) Reduction of the amount of any subsequent certified
application for payment; or
Enrolled House Bill 4034 (HB 4034-INTRO) Page 4
(B) Payment to the subcontractor of any withheld amounts of a
progress payment, specifying:
(i) The amounts of the progress payments withheld under
paragraph (a) of this subsection; and
(ii) The dates { - that such - } { + on which the + }
withholding began and ended; and
(g) Be obligated to pay to the contracting agency an amount
equal to interest on the withheld payments computed in the manner
provided in ORS 279C.570 from the 11th day after { - receipt
of - } { + receiving + } the withheld amounts from the
contracting agency until:
(A) The day the identified subcontractor performance deficiency
is corrected; or
(B) The date that any subsequent payment is reduced under
paragraph (f)(A) of this subsection.
(7)(a) If a contractor, after { - making payment to - } { +
paying + } a first-tier subcontractor, receives from a supplier
or subcontractor of the first-tier subcontractor a written notice
asserting a deficiency in { - such - } { + the + } first-tier
subcontractor's performance under the { + public improvement + }
contract for which the contractor may be ultimately liable and
the contractor determines that all or a portion of future
payments otherwise due { - such - } { + the + } first-tier
subcontractor is subject to withholding in accordance with the
subcontract { - agreement - } , the contractor may, without
incurring an obligation to pay a late payment interest penalty
under subsection (6)(e) of this section:
(A) Furnish to the first-tier subcontractor a notice
{ - conforming - } { + that conforms + } to the standards of
subsection (8) of this section as soon as practicable
{ - upon - } { + after + } making { - such - } { + the + }
determination; and
(B) Withhold from the first-tier subcontractor's next available
progress payment or payments an amount not to exceed the amount
specified in the notice of withholding furnished under
subparagraph (A) of this paragraph.
(b) As soon as practicable, but not later than 10 days after
{ - receipt of - } { + receiving + } satisfactory written
{ - notification - } { + notice + } that the identified
subcontract performance deficiency has been corrected, the
contractor shall pay the amount withheld under paragraph (a)(B)
of this subsection to { - such - } { + the + } first-tier
subcontractor, or shall incur an obligation to pay a late payment
interest penalty to { - such - } { + the + } first-tier
subcontractor computed at the rate specified in ORS 279C.570.
(8) A written notice of any withholding { - shall - } { +
must + } be issued to a subcontractor, with a copy to the
contracting agency
{ - of any such notice issued by a contractor, specifying - }
{ + , that specifies + }:
(a) The amount to be withheld;
(b) The specified causes for the withholding under the terms of
the subcontract; and
(c) The remedial actions { - to be taken by - } the
subcontractor { + must take + } in order to receive payment of
the amounts withheld.
(9) Except as provided in subsection (2) of this section, this
section does not limit or impair any contractual, administrative
or judicial remedies otherwise available to a contractor or a
subcontractor in the event of a dispute involving { + a
Enrolled House Bill 4034 (HB 4034-INTRO) Page 5
contractor's + }late payment or nonpayment { - by a
contractor - } or { + a subcontractor's + } deficient
performance or nonperformance { - by a subcontractor - } .
(10) A contractor's obligation to pay a late payment interest
penalty to a subcontractor under the clause included in a
subcontract under subsection (3) or (4) of this section is not
{ - intended to be - } an obligation of the contracting
agency. A contract modification may not be made for the purpose
of providing reimbursement of { - such - } { + a + } late
payment interest penalty. A cost reimbursement claim may not
include any amount for reimbursement of { - such - } { +
a + } late payment interest penalty.
SECTION 3. { + The amendments to ORS 279C.515 and 279C.580 by
sections 1 and 2 of this 2012 Act apply to a public improvement
contract that a contracting agency first advertises or otherwise
solicits on or after the operative date specified in section 4 of
this 2012 Act or, if the contracting agency does not advertise or
solicit the public improvement contract, to a public improvement
contract that the contracting agency enters into on or after the
operative date specified in section 4 of this 2012 Act. + }
SECTION 4. { + (1) The amendments to ORS 279C.515 and 279C.580
by sections 1 and 2 of this 2012 Act become operative 91 days
after the effective date of this 2012 Act.
(2) The Director of the Oregon Department of Administrative
Services, the Attorney General or a contracting agency that
adopts rules under ORS 279A.065 may take any action before the
operative date specified in subsection (1) of this section that
is necessary to enable the director, the Attorney General or the
contracting agency to exercise, on and after the operative date
specified in subsection (1) of this section, all of the duties,
functions and powers conferred on the director, the Attorney
General or the contracting agency by the amendments to ORS
279C.515 and 279C.580 by sections 1 and 2 of this 2012 Act. + }
SECTION 5. { + This 2012 Act being necessary for the immediate
preservation of the public peace, health and safety, an emergency
is declared to exist, and this 2012 Act takes effect on its
passage. + }
----------
Passed by House February 6, 2012
.............................................................
Ramona Kenady Line, Chief Clerk of House
.............................................................
Bruce Hanna, Speaker of House
.............................................................
Arnie Roblan, Speaker of House
Passed by Senate February 20, 2012
.............................................................
Peter Courtney, President of Senate
Enrolled House Bill 4034 (HB 4034-INTRO) Page 6
Received by Governor:
......M.,............., 2012
Approved:
......M.,............., 2012
.............................................................
John Kitzhaber, Governor
Filed in Office of Secretary of State:
......M.,............., 2012
.............................................................
Kate Brown, Secretary of State
Enrolled House Bill 4034 (HB 4034-INTRO) Page 7
