SB0104 EngrossedLRB101 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 State Prompt Payment Act is amended by
5changing Sections 1 and 7 as follows:
 
6    (30 ILCS 540/1)  (from Ch. 127, par. 132.401)
7    Sec. 1. This Act applies to any State official or agency
8authorized to provide for payment from State funds, by virtue
9of any appropriation of the General Assembly, for goods or
10services furnished to the State.
11    For purposes of this Act, "goods or services furnished to
12the State" include but are not limited to (i) covered health
13care provided to eligible members and their covered dependents
14in accordance with the State Employees Group Insurance Act of
151971, including coverage through a physician-owned health
16maintenance organization under Section 6.1 of that Act, (ii)
17prevention, intervention, or treatment services and supports
18for persons with developmental disabilities, mental health
19services, alcohol and substance abuse services, rehabilitation
20services, and early intervention services provided by a vendor,
21and (iii) prevention, intervention, or treatment services and
22supports for youth provided by a vendor by virtue of a
23contractual grant agreement. For the purposes of items (ii) and

 

 

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1(iii), a vendor includes but is not limited to sellers of goods
2and services, including community-based organizations that are
3licensed to provide prevention, intervention, or treatment
4services and supports for persons with developmental
5disabilities, mental illness, and substance abuse problems, or
6that provides prevention, intervention, or treatment services
7and supports for youth.
8    For the purposes of this Act, "appropriate State official
9or agency" is defined as the Director or Chief Executive or his
10designee of that State agency or department or facility of such
11agency or department. With respect to covered health care
12provided to eligible members and their dependents in accordance
13with the State Employees Group Insurance Act of 1971,
14"appropriate State official or agency" also includes an
15administrator of a program of health benefits under that Act.
16    As used in this Act, "eligible member" means a member who
17is eligible for health benefits under the State Employees Group
18Insurance Act of 1971, and "member" and "dependent" have the
19meanings ascribed to those terms in that Act.
20    As used in this Act, "a proper bill or invoice" means a
21bill or invoice, including, but not limited to, an invoice
22issued under a contractual grant agreement, that includes the
23information necessary for processing the payment as may be
24specified by a State agency and in rules adopted in accordance
25with this Act. Beginning on and after July 1, 2021, "a proper
26bill or invoice" shall also include the names of all

 

 

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1subcontractors or subconsultants to be paid from the bill or
2invoice and the amounts due to each of them, if any.
3(Source: P.A. 100-549, eff. 1-1-18.)
 
4    (30 ILCS 540/7)   (from Ch. 127, par. 132.407)
5    Sec. 7. Payments to subcontractors and material suppliers.
6    (a) When a State official or agency responsible for
7administering a contract submits a voucher to the Comptroller
8for payment to a contractor, that State official or agency
9shall promptly make available electronically the voucher
10number, the date of the voucher, and the amount of the voucher.
11The State official or agency responsible for administering the
12contract shall provide subcontractors and material suppliers,
13known to the State official or agency, with instructions on how
14to access the electronic information.
15    (a-5) When a contractor receives any payment, the
16contractor shall pay each subcontractor and material supplier
17electronically within 7 business days or, if paid by a printed
18check, the printed check must be postmarked within 7 business
19days after receiving payment in proportion to the work
20completed by each subcontractor and material supplier its
21application or pay estimate, plus interest received under this
22Act. When a contractor receives any payment, the contractor
23shall pay each lower-tiered subcontractor and material
24supplier and each subcontractor and material supplier shall
25make payment to its own respective subcontractors and material

 

 

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1suppliers. If the contractor receives less than the full
2payment due under the public construction contract, the
3contractor shall be obligated to disburse on a pro rata basis
4those funds received, plus interest received under this Act,
5with the contractor, subcontractors and material suppliers
6each receiving a prorated portion based on the amount of
7payment each has earned. When, however, the State official or
8agency does not release the full payment due under the contract
9because there are specific areas of work or materials the State
10agency or official has determined are not suitable for payment,
11then those specific subcontractors or material suppliers
12involved shall not be paid for that portion of work rejected or
13deemed not suitable for payment and all other subcontractors
14and suppliers shall be paid based upon the amount of payment
15each has earned, plus interest received under this Act.
16    (a-10) For construction contracts with the Department of
17Transportation, the contractor, subcontractor, or material
18supplier, regardless of tier, shall not offset, decrease, or
19diminish payment or payments that are due to its subcontractors
20or material suppliers without reasonable cause.
21    A contractor, who refuses to make prompt payment within 7
22business days after receiving payment, in whole or in part,
23shall provide to the subcontractor or material supplier and the
24public owner or its agent, a written notice of that refusal.
25The written notice shall be made by a contractor no later than
265 calendar days after payment is received by the contractor.

 

 

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1The written notice shall identify the Department of
2Transportation's contract, any subcontract or material
3purchase agreement, a detailed reason for refusal, the value of
4the payment to be withheld, and the specific remedial actions
5required of the subcontractor or material supplier so that
6payment may be made. Written notice of refusal may be given in
7a form and method which is acceptable to the parties and public
8owner.
9    (b) If the contractor, without reasonable cause, fails to
10make full payment of amounts due under subsection (a) to its
11subcontractors and material suppliers within 7 business days 15
12calendar days after receipt of payment from the State official
13or agency, the contractor shall pay to its subcontractors and
14material suppliers, in addition to the payment due them,
15interest in the amount of 2% per month, calculated from the
16expiration of the 7-business-day 15-day period until fully
17paid. This subsection shall further apply to any payments made
18by subcontractors and material suppliers to their
19subcontractors and material suppliers and to all payments made
20to lower tier subcontractors and material suppliers throughout
21the contracting chain.
22        (1) If a contractor, without reasonable cause, fails to
23    make payment in full as provided in subsection (a-5) within
24    7 business days 15 calendar days after receipt of payment
25    under the public construction contract, any subcontractor
26    or material supplier to whom payments are owed may file a

 

 

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

 

 

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

 

 

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1    public construction contract for a period of 6 months
2    beginning on the date of the administrative law judge's
3    second written order, even if the payments required under
4    the orders were made in full.
5        (6) If a contractor fails to make full payment as
6    ordered under paragraph (4) of this subsection (b), the
7    subcontractor or material supplier may, within 30 days of
8    the date of that order, petition the State agency for an
9    order for reasonable attorney's fees and costs incurred in
10    the prosecution of the action under this subsection (b).
11    Upon that petition and taking of additional evidence, as
12    may be required, the administrative law judge may issue a
13    supplemental order directing the contractor to pay those
14    reasonable attorney's fees and costs.
15        (7) The written order of the administrative law judge
16    shall be final and appealable under the Administrative
17    Review Law.
18    (b-5) On or before July 2021, the Department of
19Transportation shall publish on its website a searchable
20database that allows for queries for each active construction
21contract by the name of a subcontractor or the pay item such
22that each pay item is associated with either the prime
23contractor or a subcontractor.
24    (c) This Section shall not be construed to in any manner
25diminish, negate, or interfere with the
26contractor-subcontractor or contractor-material supplier

 

 

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

 

 

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1performed or provided by the subcontractor or material
2supplier; the interception or withholding of funds for reasons
3not related to the subcontractor's or material supplier's work
4on the contract; anticipated claims or assessments of third
5parties not a party related to the contract or subcontract;
6asserted claims or assessments of third parties that are not
7authorized by court order, administrative tribunal, or
8statute. "Reasonable cause" further does not include the
9withholding, offset, or reduction of payment, in whole or in
10part, due to the assessment of liquidated damages or penalties
11assessed by the Department of Transportation against the
12contractor, unless the subcontractor's performance or supplied
13materials were the sole and proximate cause of the liquidated
14damage or penalty.
15(Source: P.A. 100-43, eff. 8-9-17; 100-376, eff. 1-1-18;
16100-863, eff. 8-14-18.)