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| Public Act 100-0376 | ||||
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AN ACT concerning finance.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 5. The State Prompt Payment Act is amended by | ||||
changing Section 7 as follows:
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(30 ILCS 540/7)
(from Ch. 127, par. 132.407)
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Sec. 7. Payments to subcontractors and material suppliers. | ||||
(a) When a State official or agency responsible for | ||||
administering a
contract submits a voucher to the Comptroller | ||||
for
payment to a contractor, that State official or agency | ||||
shall promptly make
available electronically
the voucher | ||||
number, the date of the voucher, and
the amount of the voucher.
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The State official or agency responsible for administering the | ||||
contract shall
provide subcontractors and material suppliers, | ||||
known to the State official or
agency, with instructions on how | ||||
to access the electronic information. | ||||
(a-5) When a
contractor receives any payment, the | ||||
contractor shall
pay each subcontractor and material supplier | ||||
in proportion to the work
completed by each subcontractor and | ||||
material supplier its their application or pay estimate, plus | ||||
interest received under this Act,
less any retention. When a | ||||
contractor receives any payment, the contractor shall pay each | ||||
lower-tiered subcontractor and material supplier and each | ||||
subcontractor and material supplier shall make payment to its | ||
own respective subcontractors and material suppliers. If the | ||
contractor receives less than the full payment
due under the | ||
public construction contract, the contractor shall be
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obligated to disburse on a pro rata basis those funds received, | ||
plus interest received under this Act, with the
contractor, | ||
subcontractors and material suppliers each receiving a | ||
prorated
portion based on the amount of payment each has | ||
earned. When, however, the State official or agency public | ||
owner
does not release the full payment due under the contract | ||
because there are
specific areas of work or materials the State | ||
agency or official has determined contractor is rejecting or | ||
because
the contractor has otherwise determined such areas are | ||
not suitable for
payment, then those specific subcontractors or | ||
material suppliers involved shall not
be paid for that portion | ||
of work rejected or deemed not suitable for
payment and all | ||
other subcontractors and suppliers shall be paid based upon the | ||
amount of payment each has earned in full, plus interest | ||
received under this Act.
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(a-10) For construction contracts with the Department of | ||
Transportation, the contractor, subcontractor, or material | ||
supplier, regardless of tier, shall not offset, decrease, or | ||
diminish payment or payments that are due to its subcontractors | ||
or material suppliers without reasonable cause. | ||
A contractor, who refuses to make prompt payment, in whole | ||
or in part, shall provide to the subcontractor or material | ||
supplier and the public owner or its agent, a written notice of | ||
that refusal. The written notice shall be made by a contractor | ||
no later than 5 calendar days after payment is received by the | ||
contractor. The written notice shall identify the Department of | ||
Transportation's contract, any subcontract or material | ||
purchase agreement, a detailed reason for refusal, the value of | ||
the payment to be withheld, and the specific remedial actions | ||
required of the subcontractor or material supplier so that | ||
payment may be made. Written notice of refusal may be given in | ||
a form and method which is acceptable to the parties and public | ||
owner. | ||
(b) If the contractor, without reasonable cause, fails to | ||
make full payment of amounts due under subsection (a) to its
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his subcontractors and material suppliers within 15 calendar | ||
days after
receipt of
payment from the State official or agency | ||
under the public construction contract, the contractor shall | ||
pay to its
his subcontractors and material suppliers, in | ||
addition to the payment due
them, interest in the amount of
2% | ||
per month, calculated from the
expiration of the 15-day period | ||
until fully paid. This subsection shall further
also apply to | ||
any payments made by subcontractors and material suppliers to
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their subcontractors and material suppliers and to all payments | ||
made to
lower tier subcontractors and material suppliers | ||
throughout the contracting
chain.
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(1) If a contractor, without reasonable cause, fails to | ||
make payment in
full as
provided in subsection (a-5) (a) | ||
within 15 calendar days after receipt of payment under the
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public
construction contract, any subcontractor or | ||
material supplier to whom payments
are owed
may file a | ||
written notice and request for administrative hearing with | ||
the State official or agency setting forth the
amount owed | ||
by
the contractor and the contractor's failure to timely | ||
pay the amount owed. The written notice and request for | ||
administrative hearing shall identify the public | ||
construction contract, the contractor, and the amount | ||
owed, and shall contain a sworn statement or attestation to | ||
verify the accuracy of the notice. The notice and request | ||
for administrative hearing shall be filed with the State | ||
official for the public construction contract, with a copy | ||
of the notice concurrently provided to the contractor. | ||
Notice to the State official may be made by certified or | ||
registered mail, messenger service, or personal service, | ||
and must include proof of delivery to the State official.
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(2) The State official or agency, within 15 calendar | ||
days after receipt of a
subcontractor's
or material | ||
supplier's written notice and request for administrative | ||
hearing of the failure to receive payment from
the | ||
contractor,
shall hold a hearing convened by an | ||
administrative law judge to determine whether the | ||
contractor withheld payment,
without
reasonable cause, | ||
from the subcontractors or and material suppliers and what
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amount, if any,
is due to the subcontractors or and | ||
material suppliers, and the reasonable cause or causes | ||
asserted by the contractor. The State official or
agency | ||
shall
provide appropriate notice to the parties of the | ||
date, time, and location of
the hearing. Each contractor, | ||
subcontractor, or and material supplier has the right to be | ||
represented by counsel at a the hearing and to | ||
cross-examine witnesses and challenge documents. Upon the | ||
request of the subcontractor or material supplier and a | ||
showing of good cause, reasonable continuances may be | ||
granted by the administrative law judge.
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(3) Upon If there is a finding by the administrative | ||
law judge that the contractor failed
to make
payment in | ||
full, without reasonable cause, as provided in subsection | ||
(a-10) (a), then
the administrative law judge shall, in | ||
writing, order direct the contractor to pay the amount
owed | ||
to the
subcontractors or and material suppliers plus | ||
interest within 15 calendar days after the order
finding.
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(4) If a contractor fails to make full payment as | ||
ordered under paragraph (3) of this subsection (b) within | ||
15 days after the
administrative law judge's order finding, | ||
then the contractor shall be barred from
entering into a | ||
State
public construction contract for a period of one year | ||
beginning on the date of
the administrative law judge's | ||
order finding.
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(5) If, on 2 or more occasions within a 3-calendar-year | ||
period, there is a finding by an administrative law judge | ||
that the contractor failed to make payment in full, without | ||
reasonable cause, and a written order was issued to a | ||
contractor under paragraph (3) of this subsection (b), then | ||
the contractor shall be barred from entering into a State | ||
public construction contract for a period of 6 months | ||
beginning on the date of the administrative law judge's | ||
second written order, even if the payments required under | ||
the orders were made in full. | ||
(6) If a contractor fails to make full payment as | ||
ordered under paragraph (4) of this subsection (b), the | ||
subcontractor or material supplier may, within 30 days of | ||
the date of that order, petition the State agency for an | ||
order for reasonable attorney's fees and costs incurred in | ||
the prosecution of the action under this subsection (b). | ||
Upon that petition and taking of additional evidence, as | ||
may be required, the administrative law judge may issue a | ||
supplemental order directing the contractor to pay those | ||
reasonable attorney's fees and costs. | ||
(7) The written order of the administrative law judge | ||
shall be final and appealable under the Administrative | ||
Review Law. | ||
(c) This Section shall not be construed to in any manner | ||
diminish, negate, or interfere with the | ||
contractor-subcontractor or contractor-material supplier | ||
relationship or commercially useful function. | ||
(d) This Section shall not preclude, bar, or stay the | ||
rights, remedies, and defenses available to the parties by way | ||
of the operation of their contract, purchase agreement, the | ||
Mechanics Lien Act, or the Public Construction Bond Act. | ||
(e) State officials and agencies may adopt rules as may be | ||
deemed necessary in order to establish the formal procedures | ||
required under this Section. | ||
(f) As used in this Section, | ||
"Payment" means the discharge of an obligation in money or | ||
other valuable consideration or thing delivered in full or | ||
partial satisfaction of an obligation to pay. "Payment" shall | ||
include interest paid pursuant to this Act. | ||
"Reasonable cause" may include, but is not limited to, | ||
unsatisfactory workmanship or materials; failure to provide | ||
documentation required by the contract, subcontract, or | ||
material purchase agreement; claims made against the | ||
Department of Transportation or the subcontractor pursuant to | ||
subsection (c) of Section 23 of the Mechanics Lien Act or the | ||
Public Construction Bond Act; judgments, levies, garnishments, | ||
or other court-ordered assessments or offsets in favor of the | ||
Department of Transportation or other State agency entered | ||
against a subcontractor or material supplier. "Reasonable | ||
cause" does not include payments issued to the contractor that | ||
create a negative or reduced valuation pay application or pay | ||
estimate due to a reduction of contract quantities or work not | ||
performed or provided by the subcontractor or material | ||
supplier; the interception or withholding of funds for reasons | ||
not related to the subcontractor's or material supplier's work | ||
on the contract; anticipated claims or assessments of third | ||
parties not a party related to the contract or subcontract; | ||
asserted claims or assessments of third parties that are not | ||
authorized by court order, administrative tribunal, or | ||
statute. "Reasonable cause" further does not include the | ||
withholding, offset, or reduction of payment, in whole or in | ||
part, due to the assessment of liquidated damages or penalties | ||
assessed by the Department of Transportation against the | ||
contractor, unless the subcontractor's performance or supplied | ||
materials were the sole and proximate cause of the liquidated | ||
damage or penalty. | ||
(Source: P.A. 94-672, eff. 1-1-06; 94-972, eff. 7-1-07.)
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