Contractors would be paid by governmental units in a more timely manner, in legislation passing House Committee this week.
The package of bills known as “prompt pay” legislation (HB 6173-6176) is a MITA initiative that has been in the works for two years. The legislation also cracks down on the practice of government agencies using construction managers as a middle man in order to avoid requirements under the Differing Site Conditions law and the Retainage and Public Bonding Acts.
HB 6173 requires expanded definitions, including that of construction managers. According to the bill, “at-risk” construction managers would be required to furnish the same performance and payment bonds required of a traditional prime contractor.
HB 6174 tightens the contractual chain between the owner and the contractor by including construction managers in the requirements of the Differing Site Conditions statute.
HB 6175 makes significant changes to PA 524 of 1980—the Retainage Act. Included in this bill is an amendment to require public agencies to pay reasonable interest upon improperly withheld funds. It would also require public owners to reduce retainage to 1 percent when 90 percent of the project is complete, thus increasing the cash flow to the private sector. These and other changes should have a major impact on a retainage law that is nearly 30 years old.
HB 6176 expands the current Builders Trust Fund to include public works projects. This change should effectively ensure the free-flow of contract funds to contractors performing work on both public and private projects.
MITA gave in-depth testimony at the House Regulatory Reform Committee. Local government groups expressed concerns with various parts of the proposal. MITA has agreed to participate in work group discussions to ensure that various issues have been addressed. The legislation is not expected to make progress until after summer recess has concluded.
To review details of the legislation or review the bills, click here.