101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB0104

 

Introduced 1/23/2019, by Sen. Martin A. Sandoval

 

SYNOPSIS AS INTRODUCED:
 
30 ILCS 500/20-120
30 ILCS 540/7  from Ch. 127, par. 132.407

    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.


LRB101 04773 RJF 49782 b

 

 

A BILL FOR

 

SB0104LRB101 04773 RJF 49782 b

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 Illinois Procurement Code is amended by
5changing Section 20-120 as follows:
 
6    (30 ILCS 500/20-120)
7    Sec. 20-120. Subcontractors.
8    (a) Any contract granted under this Code shall state
9whether the services of a subcontractor will be used. The
10contract shall include the names and addresses of all known
11subcontractors with subcontracts with an annual value of more
12than $50,000, the general type of work to be performed by these
13subcontractors, and the expected amount of money each will
14receive under the contract. Upon the request of the chief
15procurement officer appointed pursuant to paragraph (2) of
16subsection (a) of Section 10-20, the contractor shall provide
17the chief procurement officer a copy of a subcontract so
18identified within 15 calendar days after the request is made. A
19subcontractor, or contractor on behalf of a subcontractor, may
20identify information that is deemed proprietary or
21confidential. If the chief procurement officer determines the
22information is not relevant to the primary contract, the chief
23procurement officer may excuse the inclusion of the

 

 

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1information. If the chief procurement officer determines the
2information is proprietary or could harm the business interest
3of the subcontractor, the chief procurement officer may, in his
4or her discretion, redact the information. Redacted
5information shall not become part of the public record.
6    (b) If at any time during the term of a contract, a
7contractor adds or changes any subcontractors, he or she shall
8promptly notify, in writing, the chief procurement officer,
9State purchasing officer, or their designee of the names and
10addresses of each new or replaced subcontractor and the general
11type of work to be performed. Upon the request of the chief
12procurement officer appointed pursuant to paragraph (2) of
13subsection (a) of Section 10-20, the contractor shall provide
14the chief procurement officer a copy of any new or amended
15subcontract so identified within 15 calendar days after the
16request is made.
17    (c) In addition to any other requirements of this Code, a
18subcontract subject to this Section must include all of the
19subcontractor's certifications required by Article 50 of the
20Code.
21    (c-5) The Capital Development Board and the Department of
22Transportation shall each, by rule, implement a pilot program
23under which select construction contracts granted under this
24Code and all subcontracts pursuant to those contracts shall
25contain provisions that if a subcontractor has performed in
26accordance with the provisions of his or her subcontract and

 

 

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1the work has been accepted by the appropriate State agency, the
2State agency shall pay the amount due the subcontractor
3directly to the subcontractor pursuant to the proper bill or
4invoice provided by the contractor to the State agency in
5accordance with the provisions of the State Prompt Payment Act.
6If a construction contract granted under this Code contains a
7provision that the State agency shall pay the subcontractor
8directly, the contractor shall deliver to the State agency a
9proper bill or invoice, as defined in the State Prompt Payment
10Act, for each subcontractor with whom the contractor has a
11subcontract. The program shall be implemented by January 1,
122021.
13    (d) This Section applies to procurements solicited on or
14after the effective date of this amendatory Act of the 96th
15General Assembly. The changes made to this Section by this
16amendatory Act of the 97th General Assembly apply to
17procurements solicited on or after the effective date of this
18amendatory Act of the 97th General Assembly.
19(Source: P.A. 97-895, eff. 8-3-12; 98-1076, eff. 1-1-15.)
 
20    Section 10. The State Prompt Payment Act is amended by
21changing Section 7 as follows:
 
22    (30 ILCS 540/7)   (from Ch. 127, par. 132.407)
23    Sec. 7. Payments to subcontractors and material suppliers.
24    (a) When a State official or agency responsible for

 

 

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1administering a contract submits a voucher to the Comptroller
2for payment to a contractor, that State official or agency
3shall promptly make available electronically the voucher
4number, the date of the voucher, and the amount of the voucher.
5The State official or agency responsible for administering the
6contract shall provide subcontractors and material suppliers,
7known to the State official or agency, with instructions on how
8to access the electronic information.
9    (a-5) When a contractor receives any payment, the
10contractor shall pay each subcontractor and material supplier
11in proportion to the work completed by each subcontractor and
12material supplier its application or pay estimate, plus
13interest received under this Act. When a contractor receives
14any payment, the contractor shall pay each lower-tiered
15subcontractor and material supplier and each subcontractor and
16material supplier shall make payment to its own respective
17subcontractors and material suppliers. If the contractor
18receives less than the full payment due under the public
19construction contract, the contractor shall be obligated to
20disburse on a pro rata basis those funds received, plus
21interest received under this Act, with the contractor,
22subcontractors and material suppliers each receiving a
23prorated portion based on the amount of payment each has
24earned. When, however, the State official or agency does not
25release the full payment due under the contract because there
26are specific areas of work or materials the State agency or

 

 

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1official has determined are not suitable for payment, then
2those specific subcontractors or material suppliers involved
3shall not be paid for that portion of work rejected or deemed
4not suitable for payment and all other subcontractors and
5suppliers shall be paid based upon the amount of payment each
6has earned, plus interest received under this Act.
7    (a-10) For construction contracts with the Department of
8Transportation, the contractor, subcontractor, or material
9supplier, regardless of tier, shall not offset, decrease, or
10diminish payment or payments that are due to its subcontractors
11or material suppliers without reasonable cause.
12    A contractor, who refuses to make prompt payment, in whole
13or in part, shall provide to the subcontractor or material
14supplier and the public owner or its agent, a written notice of
15that refusal. The written notice shall be made by a contractor
16no later than 5 calendar days after payment is received by the
17contractor. The written notice shall identify the Department of
18Transportation's contract, any subcontract or material
19purchase agreement, a detailed reason for refusal, the value of
20the payment to be withheld, and the specific remedial actions
21required of the subcontractor or material supplier so that
22payment may be made. Written notice of refusal may be given in
23a form and method which is acceptable to the parties and public
24owner.
25    (b) If the contractor, without reasonable cause, fails to
26make full payment of amounts due under subsection (a) to its

 

 

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1subcontractors and material suppliers within 15 calendar days
2after receipt of payment from the State official or agency, the
3contractor shall pay to its subcontractors and material
4suppliers, in addition to the payment due them, interest in the
5amount of 2% per month, calculated from the expiration of the
615-day period until fully paid. This subsection shall further
7apply to any payments made by subcontractors and material
8suppliers to their subcontractors and material suppliers and to
9all payments made to lower tier subcontractors and material
10suppliers throughout the contracting chain.
11        (1) If a contractor, without reasonable cause, fails to
12    make payment in full as provided in subsection (a-5) within
13    15 calendar days after receipt of payment under the public
14    construction contract, any subcontractor or material
15    supplier to whom payments are owed may file a written
16    notice and request for administrative hearing with the
17    State official or agency setting forth the amount owed by
18    the contractor and the contractor's failure to timely pay
19    the amount owed. The written notice and request for
20    administrative hearing shall identify the public
21    construction contract, the contractor, and the amount
22    owed, and shall contain a sworn statement or attestation to
23    verify the accuracy of the notice. The notice and request
24    for administrative hearing shall be filed with the State
25    official for the public construction contract, with a copy
26    of the notice concurrently provided to the contractor.

 

 

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1    Notice to the State official may be made by certified or
2    registered mail, messenger service, or personal service,
3    and must include proof of delivery to the State official.
4        (2) The State official or agency, within 15 calendar
5    days after receipt of a subcontractor's or material
6    supplier's written notice and request for administrative
7    hearing, shall hold a hearing convened by an administrative
8    law judge to determine whether the contractor withheld
9    payment, without reasonable cause, from the subcontractors
10    or material suppliers and what amount, if any, is due to
11    the subcontractors or material suppliers, and the
12    reasonable cause or causes asserted by the contractor. The
13    State official or agency shall provide appropriate notice
14    to the parties of the date, time, and location of the
15    hearing. Each contractor, subcontractor, or material
16    supplier has the right to be represented by counsel at a
17    hearing and to cross-examine witnesses and challenge
18    documents. Upon the request of the subcontractor or
19    material supplier and a showing of good cause, reasonable
20    continuances may be granted by the administrative law
21    judge.
22        (3) Upon a finding by the administrative law judge that
23    the contractor failed to make payment in full, without
24    reasonable cause, as provided in subsection (a-10), then
25    the administrative law judge shall, in writing, order the
26    contractor to pay the amount owed to the subcontractors or

 

 

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1    material suppliers plus interest within 15 calendar days
2    after the order.
3        (4) If a contractor fails to make full payment as
4    ordered under paragraph (3) of this subsection (b) within
5    15 days after the administrative law judge's order, then
6    the contractor shall be barred from entering into a State
7    public construction contract for a period of one year
8    beginning on the date of the administrative law judge's
9    order.
10        (5) If, on 2 or more occasions within a 3-calendar-year
11    period, there is a finding by an administrative law judge
12    that the contractor failed to make payment in full, without
13    reasonable cause, and a written order was issued to a
14    contractor under paragraph (3) of this subsection (b), then
15    the contractor shall be barred from entering into a State
16    public construction contract for a period of 6 months
17    beginning on the date of the administrative law judge's
18    second written order, even if the payments required under
19    the orders were made in full.
20        (6) If a contractor fails to make full payment as
21    ordered under paragraph (4) of this subsection (b), the
22    subcontractor or material supplier may, within 30 days of
23    the date of that order, petition the State agency for an
24    order for reasonable attorney's fees and costs incurred in
25    the prosecution of the action under this subsection (b).
26    Upon that petition and taking of additional evidence, as

 

 

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1    may be required, the administrative law judge may issue a
2    supplemental order directing the contractor to pay those
3    reasonable attorney's fees and costs.
4        (7) The written order of the administrative law judge
5    shall be final and appealable under the Administrative
6    Review Law.
7    (c) This Section shall not be construed to in any manner
8diminish, negate, or interfere with the
9contractor-subcontractor or contractor-material supplier
10relationship or commercially useful function.
11    (c-5) The provisions of this Section do not apply to
12payments to a subcontractor for work performed under a
13subcontract entered into with a construction contractor if the
14contract contains a provision that the State agency shall pay
15the subcontractor directly as required under a pilot program
16implemented by the Capital Development Board or the Department
17of Transportation under subsection (c-5) of Section 20-120 of
18the Illinois Procurement Code.
19    (d) This Section shall not preclude, bar, or stay the
20rights, remedies, and defenses available to the parties by way
21of the operation of their contract, purchase agreement, the
22Mechanics Lien Act, or the Public Construction Bond Act.
23    (e) State officials and agencies may adopt rules as may be
24deemed necessary in order to establish the formal procedures
25required under this Section.
26    (f) As used in this Section:

 

 

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1    "Payment" means the discharge of an obligation in money or
2other valuable consideration or thing delivered in full or
3partial satisfaction of an obligation to pay. "Payment" shall
4include interest paid pursuant to this Act.
5    "Reasonable cause" may include, but is not limited to,
6unsatisfactory workmanship or materials; failure to provide
7documentation required by the contract, subcontract, or
8material purchase agreement; claims made against the
9Department of Transportation or the subcontractor pursuant to
10subsection (c) of Section 23 of the Mechanics Lien Act or the
11Public Construction Bond Act; judgments, levies, garnishments,
12or other court-ordered assessments or offsets in favor of the
13Department of Transportation or other State agency entered
14against a subcontractor or material supplier. "Reasonable
15cause" does not include payments issued to the contractor that
16create a negative or reduced valuation pay application or pay
17estimate due to a reduction of contract quantities or work not
18performed or provided by the subcontractor or material
19supplier; the interception or withholding of funds for reasons
20not related to the subcontractor's or material supplier's work
21on the contract; anticipated claims or assessments of third
22parties not a party related to the contract or subcontract;
23asserted claims or assessments of third parties that are not
24authorized by court order, administrative tribunal, or
25statute. "Reasonable cause" further does not include the
26withholding, offset, or reduction of payment, in whole or in

 

 

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1part, due to the assessment of liquidated damages or penalties
2assessed by the Department of Transportation against the
3contractor, unless the subcontractor's performance or supplied
4materials were the sole and proximate cause of the liquidated
5damage or penalty.
6(Source: P.A. 100-43, eff. 8-9-17; 100-376, eff. 1-1-18;
7100-863, eff. 8-14-18.)