PRINTER'S NO. 1556
No. 1348 Session of 1989
INTRODUCED BY COLAFELLA, OLIVER, TRELLO, BATTISTO, EVANS,
McVERRY, VAN HORNE, NAHILL, COLAIZZO, REBER, GIGLIOTTI,
PISTELLA, WOZNIAK, HOWLETT, BUSH, DOMBROWSKI, VEON, TIGUE,
HERMAN, WAMBACH, MORRIS, G. SNYDER, FOSTER, HALUSKA, KASUNIC,
NOYE, B. SMITH AND ROBINSON, APRIL 26, 1989
REFERRED TO COMMITTEE ON STATE GOVERNMENT, APRIL 26, 1989
AN ACT
1 Amending the act of November 26, 1978 (P.L.1309, No.317),
2 entitled "An act regulating the awarding and execution of
3 certain public contracts; providing for contract provisions
4 relating to the retention, interest, and payment of funds
5 payable under the contracts; and repealing inconsistent
6 acts," providing for a prompt payment schedule; creating a
7 special fund for payments to contractors where bond
8 authorization is unavailable; providing for electronic funds
9 transfers; and making an appropriation.
10 The General Assembly of the Commonwealth of Pennsylvania
11 hereby enacts as follows:
12 Section 1. Section 1 of the act of November 26, 1978
13 (P.L.1309, No.317), referred to as the Public Works Contract
14 Regulation Law, is amended by adding a definition to read:
15 Section 1. Definitions.
16 The following words and phrases, when used in this section,
17 shall have the following meanings unless the context clearly
18 indicates otherwise:
19 * * *
20 "Design professional." An architect licensed under the act
1 of December 14, 1982 (P.L.1227, No.281), known as the
2 "Architects Licensure Law," a professional engineer or
3 professional land surveyor licensed under the act of May 23,
4 1945 (P.L.913, No.367), known as the "Professional Engineers
5 Registration Law," or a landscape architect licensed under the
6 act of January 24, 1966 (1965 P.L.1527, No.535), known as the
7 "Landscape Architects' Registration Law."
8 * * *
9 Section 2. Section 5 of the act, amended November 23, 1982
10 (P.L.694, No.200), is amended to read:
11 Section 5. Contract provision for retainage.
12 [(a)] A public contract may include a provision for the
13 retainage of a portion of the amount due the contractor to
14 insure the proper performance of the contract, except that the
15 sum or sums withheld by the contracting body from the contractor
16 shall not exceed 10% of the amount due the contractor until 50%
17 of the contract is completed. When the contract is 50%
18 completed, one-half of the amount retained by the contracting
19 body shall be returned to the contractor: Provided, That the
20 architect or engineer approves the application for payment: And
21 provided further, That the contractor is making satisfactory
22 progress and there is no specific cause for greater withholding.
23 The sum or sums withheld by the contracting body from the
24 contractor after the contract is 50% completed shall not exceed
25 5% of the value of completed work based on monthly progress
26 payment requests: Provided, however, That in the event a dispute
27 arises between the contracting body and any prime contractor,
28 which dispute is based upon increased costs claimed by one prime
29 contractor occasioned by delays or other actions of another
30 prime contractor, additional retainage in the sum of one and
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1 one-half times the amount of any possible liability may be
2 withheld until such time as a final resolution is agreed to by
3 all parties directly or indirectly involved, unless the
4 contractor causing the additional claim furnishes a bond
5 satisfactory to the contracting body to indemnify such
6 contracting body against the claim. However, all such moneys
7 retained by the contracting body may be withheld from the
8 contractor until substantial completion of the contract.
9 [(b) Notwithstanding subsection (a), when the Department of
10 General Services is the contracting body, the department's
11 public contract may include a provision for the retainage of a
12 portion of the amount due the contractor to insure the proper
13 performance of the contract, except that the sum or sums
14 withheld by the department from the contractor shall not exceed
15 6% of the then total estimates until 50% of the contract is
16 satisfactorily completed. The sum or sums withheld by the
17 department from the contractor after the contract is 50%
18 satisfactorily completed shall not exceed 3% of the original
19 contract amount.]
20 Section 3. The act is amended by adding sections to read:
21 Section 9.1. Prompt payment schedule.
22 (a) On all public works projects, except those administered
23 by the Department of Transportation or the Pennsylvania Turnpike
24 Commission, the contracting body, design professionals, prime
25 contractors, subcontractors and sub-subcontractors shall be
26 required to make payments on all contracts in accordance with
27 the following schedule:
28 (1) The contracting body shall make payment to prime
29 contractors and design professionals within 28 days of the
30 date the application for payment is received.
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1 (2) Prime contractors shall make payment to each of the
2 subcontractors or suppliers no more than seven days after
3 receipt of payment from the contracting body.
4 (3) Each of the subcontractors shall make payment to
5 each of the sub-subcontractors or suppliers no more than
6 seven days after receipt of their payment.
7 (b) Withholding of payments shall be under the following
8 conditions:
9 (1) If the contracting body withholds payment from a
10 prime contractor or design professional for a cause, it must
11 notify the prime contractor or design professional of the
12 deficiency prior to the due date for payment.
13 (2) If a prime contractor withholds payment from
14 subcontractors or suppliers for cause, it must notify the
15 subcontractor or supplier and the contracting body of the
16 deficiency prior to the due date for payment.
17 (c) Upon failure of any entity listed in subsection (a) to
18 make payment within the time specified, that entity, in addition
19 to the amount due, shall pay to prime contractors, design
20 professionals, subcontractors or sub-subcontractors or suppliers
21 one and one-half times the current commercial prime rate of
22 interest on the amount due, compounded every 30 days, including
23 all direct costs incurred in recovering late payments.
24 Collection efforts may be commenced immediately following the
25 day any payment due was not paid.
26 (d) Retainage, when the Department of General Services is
27 the contracting body, shall be limited as follows:
28 (1) Notwithstanding the provisions of section 5, when
29 the Department of General Services is the contracting body,
30 no retainage shall be withheld from prime contractors or
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1 design professionals as long as they maintain a timely
2 progress schedule. If a prime contractor or design
3 professional fails to maintain the progress schedule and
4 falls behind by more than 10%, the contracting body may
5 withhold 5% retainage until such time as the project is back
6 on schedule or it is determined that it was not the fault of
7 the prime contractor or design professional.
8 (2) A prime contractor shall not withhold retainage from
9 subcontractors or suppliers if they meet the requirements of
10 paragraph (1). If the contracting body withholds retainage
11 from a prime contractor for failing to maintain a timely
12 progress schedule, the prime contractor may withhold
13 retainage from the subcontractors or suppliers who are
14 directly responsible in causing the delay.
15 (e) For contracts administered by the Department of
16 Transportation or the Pennsylvania Turnpike Commission, upon
17 failure to make payment to the contractor within the time
18 specified in subsection (d), the contracting body, in addition
19 to the amount due, shall pay to the contractor one and one-half
20 times the current commercial prime rate of interest, compounded
21 every 30 days, on the amount due, including all direct costs
22 incurred in recovering late payments. The contractor shall not
23 be required to undertake collection efforts beyond the
24 submission of the estimate.
25 Section 9.2. Contractor Emergency Fund.
26 (a) There is hereby established in the Department of General
27 Services a special fund to be known as the Contractor Emergency
28 Fund.
29 (b) The fund established in subsection (a) shall be used to
30 pay any contractor, design professional or vendor involved in a
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1 public works project where the contracting body is the
2 Department of General Services and the contractor, design
3 professional or vendor has performed services or supplied goods,
4 materials or equipment and has not been paid due to the failure
5 of the General Assembly to enact a bond authorization related to
6 such project.
7 Section 9.3. Electronic funds transfers.
8 If a project exceeds $2,000,000, the contracting body, upon
9 written notice by the contractor or design professional, shall
10 arrange for electronic transfer of funds due the contractor or
11 design professional whenever the contracting body has the
12 capability to perform such transfers or to cause them to be
13 performed. Written notice shall include designation of the
14 financial institution and account to which funds are to be
15 transferred. Written notice may be submitted by the contractor
16 at any time following the opening of bids. Once established,
17 electronic transfer arrangements shall remain in effect for
18 future contracts until canceled or altered by the contractor. No
19 more than one payment may be handled by manual methods by the
20 contracting body following a contractor's written notice.
21 Electronic transfer arrangements shall not alter the prompt
22 payment schedule set forth in section 9.1 to the detriment of
23 the contractor.
24 Section 4. The sum of $12,000,000 is hereby appropriated to
25 the Department of General Services to be placed in the
26 Contractor Emergency Fund for the purposes stated in section 9.2
27 of the act.
28 Section 5. This act shall take effect in 60 days.
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