Illinois General Assembly - Full Text of HB3675
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Full Text of HB3675  102nd General Assembly




State of Illinois
2021 and 2022


Introduced 2/22/2021, by Rep. Camille Y. Lilly


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    Amends the Department of Transportation Law of the Civil Administrative Code of Illinois. Provides that a small business subcontractor may enter into an agreement with the Department of Transportation to receive direct payments from the Department on a construction project. Amends the State Prompt Payment Act. Requires contractors to pay each subcontractor and material supplier within 7 business days after receiving payment (currently, 10 business days or 15 calendar days). Provides that when a State official or agency responsible for administering a contract submits a voucher to the Comptroller for payment to a small business subcontractor who enters into a specified contract under the Department of Transportation Law, that State official or agency shall make available electronically the voucher information. Provides that if a contractor is assessed liquidated damages from the State, the contractor is still responsible to each subcontractor under subcontracts. Provides that contractors are responsible for reasonable attorneys' fees if an administrative law judge finds in favor of the subcontractor. Provides that if a contractor with the Department or a small business subcontractor claims that additional payment is due under the terms of the contract, and the Department of Transportation has not agreed that payment is due, the contractor or subcontractor desiring to pursue additional compensation shall file a claim according to the requirements and procedures specified by the Department. Provides that if the claim, after consideration by the Department, is found to have merit, the Department will make an equitable adjustment. Makes conforming changes.

LRB102 14588 RJF 19941 b






HB3675LRB102 14588 RJF 19941 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 Department of Transportation Law of the
5Civil Administrative Code of Illinois is amended by adding
6Section 2705-620 as follows:
7    (20 ILCS 2705/2705-620 new)
8    Sec. 2705-620. Small business; Disadvantaged Business
9Enterprise; subcontractor direct payments.
10    (a) A small business subcontractor may enter into an
11agreement with the Department to receive direct payments from
12the Department on a construction project if the following
13conditions have been met:
14        (1) the subcontractor is listed on the Chief
15    Procurement Office's Small Business Vendors Directory;
16        (2) the subcontractor is listed on the Department of
17    Transportation Disadvantaged Business Enterprise
18    Directory; and
19        (3) the Department has reviewed the contract and
20    determined that it meets the requirements for fairness and
21    responsiveness to the Department's bid specifications.
22    (b) Any contract entered into under this Section shall
23include the following terms:



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1        (1) Any mobilization payment in the contract shall be
2    capped at the same percentage as the mobilization payment
3    in the contract between the Department and the prime
4    contractor. "Mobilization payment" means an advance
5    payment to a contractor that enables the contractor to
6    purchase necessary machinery and tools for a project or
7    its customary meaning in the context of the contract. The
8    mobilization payments shall be set at a per year basis.
9    Mobilization Payments on a multi-year project shall be
10    paid on an annual basis.
11        (2) If the prime contractor and the Department agree
12    to an accelerated pay schedule, the Department must agree
13    to the new pay schedule for the subcontractor as well.
14    Section 10. The State Prompt Payment Act is amended by
15changing Section 7 and by adding Section 12 as follows:
16    (30 ILCS 540/7)   (from Ch. 127, par. 132.407)
17    Sec. 7. Payments to subcontractors and material suppliers.
18    (a) When a State official or agency responsible for
19administering a contract submits a voucher to the Comptroller
20for payment to (i) a contractor; or (ii) a subcontractor who
21enters into a contract under Section 2705-620 of the
22Department of Transportation Law of the Civil Administrative
23Code of Illinois, that State official or agency shall promptly
24make available electronically the voucher number, the date of



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1the voucher, and the amount of the voucher. The State official
2or agency responsible for administering the contract shall
3provide subcontractors and material suppliers, known to the
4State official or agency, with instructions on how to access
5the electronic information.
6    (a-5) When a contractor receives any payment, the
7contractor shall pay each subcontractor and material supplier
8electronically within 7 10 business days or 15 calendar days,
9whichever occurs earlier, or, if paid by a printed check, the
10printed check must be postmarked within 7 10 business days or
1115 calendar days, whichever occurs earlier, after receiving
12payment in proportion to the work completed by each
13subcontractor and material supplier its application or pay
14estimate, plus interest received under this Act. When a
15contractor receives any payment, the contractor shall pay each
16lower-tiered subcontractor and material supplier and each
17subcontractor and material supplier shall make payment to its
18own respective subcontractors and material suppliers. If the
19contractor receives less than the full payment due under the
20public construction contract, the contractor shall be
21obligated to disburse on a pro rata basis those funds
22received, plus interest received under this Act, with the
23contractor, subcontractors and material suppliers each
24receiving a prorated portion based on the amount of payment
25each has earned. If the contractor is assessed liquidated
26damages from the State, the contractor is still responsible to



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1each subcontractor under the subcontracts. When, however, the
2State official or agency does not release the full payment due
3under the contract because there are specific areas of work or
4materials the State agency or official has determined are not
5suitable for payment, then those specific subcontractors or
6material suppliers involved shall not be paid for that portion
7of work rejected or deemed not suitable for payment and all
8other subcontractors and suppliers shall be paid based upon
9the amount of payment each has earned, plus interest received
10under this Act.
11    (a-10) For construction contracts with the Department of
12Transportation, the contractor, subcontractor, or material
13supplier, regardless of tier, shall not offset, decrease, or
14diminish payment or payments that are due to its
15subcontractors or material suppliers without reasonable cause.
16    A contractor, who refuses to make prompt payment within 7
1710 business days or 15 calendar days, whichever occurs
18earlier, after receiving payment, in whole or in part, shall
19provide to the subcontractor or material supplier and the
20public owner or its agent, a written notice of that refusal.
21The written notice shall be made by a contractor no later than
225 calendar days after payment is received by the contractor.
23The written notice shall identify the Department of
24Transportation's contract, any subcontract or material
25purchase agreement, a detailed reason for refusal, the value
26of the payment to be withheld, and the specific remedial



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1actions required of the subcontractor or material supplier so
2that payment may be made. Written notice of refusal may be
3given in a form and method which is acceptable to the parties
4and public owner.
5    (b) If the contractor, without reasonable cause, fails to
6make full payment of amounts due under subsection (a) to its
7subcontractors and material suppliers within 7 10 business
8days or 15 calendar days, whichever occurs earlier, after
9receipt of payment from the State official or agency, the
10contractor shall pay to its subcontractors and material
11suppliers, in addition to the payment due them, interest in
12the amount of 2% per month, calculated from the expiration of
13the 7-business-day period 10-business-day period or the
1415-calendar-day period until fully paid. This subsection shall
15further apply to any payments made by subcontractors and
16material suppliers to their subcontractors and material
17suppliers and to all payments made to lower tier
18subcontractors and material suppliers throughout the
19contracting chain.
20        (1) If a contractor, without reasonable cause, fails
21    to make payment in full as provided in subsection (a-5)
22    within 7 10 business days or 15 calendar days, whichever
23    occurs earlier, after receipt of payment under the public
24    construction contract, any subcontractor or material
25    supplier to whom payments are owed may file a written
26    notice and request for administrative hearing with the



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



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



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



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



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1create a negative or reduced valuation pay application or pay
2estimate due to a reduction of contract quantities or work not
3performed or provided by the subcontractor or material
4supplier; the interception or withholding of funds for reasons
5not related to the subcontractor's or material supplier's work
6on the contract; anticipated claims or assessments of third
7parties not a party related to the contract or subcontract;
8asserted claims or assessments of third parties that are not
9authorized by court order, administrative tribunal, or
10statute. "Reasonable cause" further does not include the
11withholding, offset, or reduction of payment, in whole or in
12part, due to the assessment of liquidated damages or penalties
13assessed by the Department of Transportation against the
14contractor, unless the subcontractor's performance or supplied
15materials were the sole and proximate cause of the liquidated
16damage or penalty.
17(Source: P.A. 100-43, eff. 8-9-17; 100-376, eff. 1-1-18;
18100-863, eff. 8-14-18; 101-524, eff. 1-1-20.)
19    (30 ILCS 540/12 new)
20    Sec. 12. Contract claims. If (i) a contractor who has a
21contract with the Department of Transportation; or (ii) a
22subcontractor who enters into a contract under Section
232705-620 of the Civil Administrative Code of Illinois claims
24that additional payment is due under the terms of the
25contract, or for any other reason arising out of the



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1performance of the contract, and the Department has not agreed
2during the ordinary course of contract administration that the
3payment is due, then the contractor or subcontractor may file
4a claim according to the requirements and procedures specified
5by the Department. If written notifications are not given, or
6if the Department is not afforded reasonable access by the
7contractor or subcontractor to complete records of actual
8costs or additional time claimed, or if a claim is not filed
9according to the procedures and within the time specified in
10the rules of the Department of Transportation, then the
11contractor or subcontractor's claim is waived and the
12Department is released from any and all demands and claims
13under that contract by the contractor or subcontractor. The
14fact that the contractor or subcontractor has provided a
15proper notification, provided a properly filed claim, or
16provided the Department access to records of actual cost shall
17not in any way be construed as proving or substantiating the
18validity of the claim. If the claim, after consideration by
19the Department, is found to have merit, the Department will
20make an equitable adjustment either in the amount of costs to
21be paid according to the basis of payment specified by the
22Department or in the time required for the work, or both. If
23the Department finds the claim to be without merit, no
24adjustment will be made.



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2 Statutes amended in order of appearance
3    20 ILCS 2705/2705-620 new
4    30 ILCS 540/7from Ch. 127, par. 132.407
5    30 ILCS 540/12 new