PRINTER'S NO. 4023
No. 2895 Session of 1998
INTRODUCED BY ARGALL, GEIST, KENNEY, PETRONE, HENNESSEY,
FICHTER, THOMAS, SEMMEL, WILT, BARRAR, YOUNGBLOOD AND HARHAI,
OCTOBER 13, 1998
REFERRED TO COMMITTEE ON TRANSPORTATION, OCTOBER 13, 1998
AN ACT
1 Amending Title 62 (Procurement) of the Pennsylvania Consolidated
2 Statutes, providing for Department of Transportation
3 contracts.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Title 62 of the Pennsylvania Consolidated
7 Statutes is amended by adding a chapter to read:
8 CHAPTER 40
9 CONTRACTS FOR DEPARTMENT OF TRANSPORTATION
10 Subchapter
11 A. Preliminary Provisions
12 B. General Provisions
13 SUBCHAPTER A
14 PRELIMINARY PROVISIONS
15 Sec.
16 4001. Definitions.
17 § 4001. Definitions.
1 The following words and phrases when used in this chapter
2 shall have the meanings given to them in this section unless the
3 context clearly indicates otherwise:
4 "Contract." A Department of Transportation contract
5 exceeding $25,000 for construction as defined in section 103
6 (relating to definitions).
7 "Design professional." Persons performing professional
8 services as defined in section 901 (relating to definitions).
9 "Government agency." Includes any State-aided institutions.
10 "Material." The rental of equipment used in the prosection
11 of work provided for in the contract.
12 SUBCHAPTER B
13 GENERAL PROVISIONS
14 Sec.
15 4011. Bonds for protection.
16 4012. Enforcement of payment.
17 4013. Release of payments.
18 4014. Payment to subcontractor within 30 days.
19 4015. Enforcement of right to payment on bond.
20 § 4011. Bonds for protection.
21 (a) General rule.--Before any contract exceeding $25,000 in
22 amount for the construction of any public building or public
23 work of any government agency as defined in section 4001
24 (relating to definitions) is awarded to any bidder, except a
25 design professional, as defined in section 4001, that bidder
26 shall furnish to the government agency a bond in the amount of
27 the contract which shall be binding upon the award of the
28 contract to that bidder, with a surety or sureties satisfactory
29 to the officer awarding the contract, for the protection of
30 persons supplying labor or materials in the prosecution of the
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1 work provided for in the contract for the use of each person,
2 provided no bond shall be required to be furnished in relation
3 to any general bid in which the total estimated cost of labor
4 and materials under the contract with respect to which the
5 general bid is submitted is less than $25,000 or in relation to
6 any subbid in which the total estimated cost of labor and
7 materials under the contract with respect to which the subbid is
8 submitted is less than $50,000.
9 (b) Performance.--Nothing in this act shall be construed to
10 limit the authority of any contracting officer to require a
11 performance bond or other security in addition to the bond,
12 except that no officer shall require a performance bond in
13 relation to any general bid in which the total estimated cost of
14 labor and materials under the contract with respect to which
15 general bid is submitted is less than $25,000 or in relation to
16 any subbid in which the total estimated cost of labor and
17 materials under the contract with respect to which subbid is
18 submitted is less than $50,000.
19 § 4012. Enforcement of payment.
20 (a) General rule.--When any public work is awarded by a
21 contract for which a payment bond is required, the contract for
22 the public work shall contain the following provisions:
23 (1) A requirement that the general contractor, within 30
24 days after payment to the contractor by the State or a
25 municipality, pay the amounts due any subcontractor, whether
26 for labor performed or materials furnished, when the labor or
27 materials have been included in a requisition submitted by
28 the contractor and paid by the State or municipality.
29 (2) A requirement that the general contractor shall
30 include in each of its subcontracts a provision requiring
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1 each subcontractor to pay any amount due any of its
2 subcontractors, whether for labor performed or materials
3 furnished, within 30 days after the subcontractor receives a
4 payment from the general contractor which encompasses labor
5 or materials furnished by the subcontractor.
6 (b) Default provision.--If payment is not made by the
7 general contractor or any of its subcontractors in accordance
8 with the requirements contained in subsection (a), the
9 subcontractor shall set forth his claim against the general
10 contractor and the subcontractor of a subcontractor shall set
11 forth its claim against the subcontractor through notice by
12 registered or certified mail. Ten days after the receipt of that
13 notice, the general contractor shall be liable to its
14 subcontractor, and the subcontractor shall be liable to its
15 subcontractor for interest on the amount due and owing at the
16 rate of 1% per month. In addition, the general contractor, upon
17 written demand of its subcontractor, or the subcontractor, upon
18 written demand of its subcontractor, shall be required to place
19 funds in the amount of the claim, plus interest of 1%, in an
20 interest-bearing escrow account in a bank in this Commonwealth,
21 provided the general contractor or subcontractor may refuse to
22 place the funds in escrow on the grounds that the subcontractor
23 has not substantially performed the work according to the terms
24 of his or its employment. In the event that the general
25 contractor or subcontractor refuses to place funds in escrow and
26 the party making a claim under this section is found to have
27 substantially performed its work in accordance with the terms of
28 its employment in any arbitration or litigation to determine the
29 validity of the claim, the general contractor or subcontractor
30 shall pay the attorney fees of the party.
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1 (c) Dispute provision.--No payment may be withheld from a
2 subcontractor for work performed because of a dispute between
3 the general contractor and another contractor or subcontractor.
4 (d) Progress payments.--This section shall not be construed
5 to prohibit progress payments prior to final payment of the
6 contract and is applicable to all subcontractors for material or
7 labor whether they have contracted directly with the general
8 contractor or with some other subcontractor on the work.
9 § 4013. Release of payments.
10 When any public work is awarded by a contract for which a
11 payment bond is required and the contract contains a provision
12 requiring the general or prime contractor under the contract to
13 furnish a performance bond in the full amount of the contract
14 price, the awarding authority if:
15 (1) the authority is the Commonwealth, shall be
16 prohibited from withholding more than 2.5% from any periodic
17 or final payment which is otherwise properly due to the
18 general or prime contractor under the terms of the contract,
19 and any general or prime contractor shall be prohibited from
20 withholding more than 2.5% from any periodic or final payment
21 which is otherwise due to any subcontractor; and
22 (2) the authority is a municipality, shall be prohibited
23 from withholding more than 5% from any periodic or final
24 payment which is otherwise properly due to the general or
25 prime contractor under the terms of the contract, and any
26 general or prime contractor shall be prohibited from
27 withholding more than 5% from any periodic or final payment
28 which is otherwise due to any subcontractor.
29 § 4014. Payment to subcontractor within 30 days.
30 Any person contracting with the State shall make payment to
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1 any subcontractor employed by the contractor within 30 days of
2 payment by the State to the contractor for any work performed or
3 for materials furnished by the subcontractor, provided the
4 contractor may withhold the payment if the contractor has a bona
5 fide reason for withholding and if the contractor notifies the
6 affected subcontractor in writing of his reasons for withholding
7 the payment and provides the State board, commission,
8 department, office, institution, council or other agency through
9 which the contractor had made the contract with a copy of the
10 notice within the 30-day period.
11 § 4015. Enforcement of right to payment on bond.
12 (a) General rule.--Every person who has furnished labor or
13 material in the prosecution of work provided for in a contract
14 with respect to which a payment bond is furnished under the
15 provisions of section 4011 (relating to bonds for protection)
16 and who has not been paid in full before the expiration of a
17 period of 90 days after the day on which the last of the labor
18 was done or performed by him, or material was furnished or
19 supplied by him for which the claim is made, may enforce his
20 right to payment under the bond by serving a notice of claim
21 within 180 days after the date on which he performed the last of
22 the labor or furnished the last of the material for which the
23 claim is made on the surety that issued the bond. A copy of the
24 notice shall also be served on the contractor named as principal
25 in the bond. The notice of claim shall state with substantial
26 accuracy the amount claimed, the name of the party for whom the
27 labor was performed or to whom the materials were furnished and
28 shall provide a detailed description of the bonded public
29 project for which the labor or materials were provided. Within
30 90 days after service of the notice of claim, the surety shall
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1 make payment under the bond and satisfy the claim, or any
2 portion of the claim which is not subject to a good faith
3 dispute, and shall serve a notice on the claimant denying
4 liability for any unpaid portion of the claim. The notices
5 required under this section shall be served by registered or
6 certified mail, postage prepaid, in envelopes addressed to any
7 office at which the surety, principal or claimant conducts his
8 business or in any manner in which civil process may be served.
9 An action to recover on a payment bond under this section shall
10 be privileged with respect to assignment for trial. The court
11 shall not consolidate for trial any action brought under this
12 section with any other action brought on the same bond unless
13 the court finds that a substantial portion of the evidence to be
14 adduced, other than the fact that the claims sought to be
15 consolidated arise under the same general contract, is common to
16 such actions and that consolidation will not result in excessive
17 delays to any claimant whose action was instituted at a time
18 significantly prior to the motion to consolidate. In any such
19 proceeding, the court shall award the prevailing party the costs
20 for bringing the proceeding and allow interest at the rate of
21 interest specified in the labor or materials contract under
22 which the claim arises or, if no interest rate is specified in
23 the contract, at the rate of interest as provided in section
24 4011 upon the amount recovered, computed from the date of
25 service of the notice of claim, provided for any portion of the
26 claim which the court finds was due and payable after the date
27 of service of the notice of claim, interest shall be computed
28 from the date that portion became due and payable. The court may
29 award reasonable attorney fees to either party if, upon
30 reviewing the entire record, it appears that either the original
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1 claim, the surety's denial of liability or the defense
2 interposed to the claim is without substantial basis in fact or
3 law. Any person having a direct contractual relationship with a
4 subcontractor but no contractual relationship express or implied
5 with the contractor furnishing the payment bond shall have a
6 right of action upon the payment bond upon giving written notice
7 of claim as provided in this section.
8 (b) Bringing action.--Every suit instituted under this
9 section shall be brought in the name of the person suing, in the
10 court of common pleas for the judicial district where the
11 contract was to be performed, irrespective of the amount in
12 controversy in the suit. No suit under this section may be
13 commenced after the expiration of one year after the day on
14 which the last of the labor was performed or material was
15 supplied by the claimant.
16 Section 2. This act shall take effect in 90 days.
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