PRINTER'S NO. 2333
No. 1914 Session of 1993
INTRODUCED BY LESCOVITZ, MARKOSEK, FAJT, LaGROTTA, M. N. WRIGHT,
COLAFELLA, CLARK, VAN HORNE, KREBS, WOZNIAK, CAPPABIANCA,
D. W. SNYDER, ROONEY, RAYMOND, DeLUCA, FAIRCHILD, KENNEY,
STISH, PRESTON, GODSHALL, LEVDANSKY, ACOSTA AND RUBLEY,
JUNE 23, 1993
REFERRED TO COMMITTEE ON BUSINESS AND ECONOMIC DEVELOPMENT,
JUNE 23, 1993
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," further providing for prompt payment schedules.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 Section 1. Section 1 of the act of November 26, 1978
10 (P.L.1309, No.317), referred to as the Public Works Contract
11 Regulation Law, is amended by adding definitions to read:
12 Section 1. Definitions.
13 The following words and phrases, when used in this section,
14 shall have the following meanings unless the context clearly
15 indicates otherwise:
16 * * *
17 "Contractor." A person who enters into a public contract
18 with a contracting body.
1 "Design professional." An architect licensed under the act
2 of December 14, 1982 (P.L.1227, No.281), known as the
3 "Architects Licensure Law," a professional engineer or
4 professional land surveyor licensed under the act of May 23,
5 1945 (P.L.913, No.367), known as the "Professional Engineers and
6 Professional Land Surveyors Registration Law," or a landscape
7 architect licensed under the act of January 24, 1966 (1965
8 P.L.1527, No.535), known as the "Landscape Architects'
9 Registration Law."
10 "Local government unit." Any county, city, borough,
11 incorporated town, township, school district, vocational school
12 district, county institution, local authority or any joint or
13 cooperative body of local government units or any
14 instrumentality, authority or corporation thereof which has
15 authority to enter into a public contract.
16 * * *
17 "Subcontractor." A person who has contracted to furnish
18 labor or materials to, or has performed labor for, a contractor
19 or another subcontractor in connection with a public contract.
20 * * *
21 Section 2. The act is amended by adding sections to read:
22 Section 6.1. Performance by contractor or subcontractor.
23 (a) Performance by a contractor in accordance with the
24 provisions of a public contract shall entitle the contractor to
25 payment by the contracting body.
26 (b) Performance by a subcontractor in accordance with the
27 provisions of a contract shall entitle the subcontractor to
28 payment from the contractor with whom the subcontractor has
29 contracted.
30 Section 6.2. Contracting body's payment obligations.
19930H1914B2333 - 2 -
1 (a) The contracting body shall pay the contractor or design
2 professional strictly in accordance with the terms of the public
3 contract.
4 (b) If the public contract does not contain a term governing
5 payment, the contractor or design professional shall be entitled
6 to make application for payment from the contracting body for
7 progress payments and the contracting body shall make payment to
8 the contractor or design professional within 30 calendar days of
9 the date the application for payment is received.
10 (c) Except as otherwise agreed by the parties, if any
11 progress payment is not made to a contractor or design
12 professional by the due date established in the contract or in
13 subsection (b), the contracting body shall pay to the contractor
14 or design professional, in addition to the amount due, one and
15 one-half times the current commercial prime rate of interest on
16 the amount due, compounded every 30 days.
17 (d) In the event that the public contract does not contain a
18 grace period and if a contractor or design professional is not
19 paid by the payment date required by subsection (b), no interest
20 penalty payment required under this section shall be paid if
21 payment is made on or before the 15th calendar day after the
22 payment date required under this act.
23 Section 6.3. Contractors' and subcontractors' payment
24 obligations.
25 (a) Performance by a subcontractor in accordance with the
26 provisions of the contract shall entitle the subcontractor to
27 payment from the party with whom the subcontractor has
28 contracted.
29 (b) A contractor or subcontractor shall disclose to a
30 subcontractor, before a subcontract is executed, the due date
19930H1914B2333 - 3 -
1 for receipt of progress payments from the contracting body.
2 Notwithstanding any other provisions of this act, if a
3 contractor or a subcontractor fails to accurately disclose the
4 due date to a subcontractor, the contractor or subcontractor
5 shall be obligated to pay the subcontractor as though the due
6 dates established in subsection (c) were met by the contracting
7 body.
8 (c) When a subcontractor has performed in accordance with
9 the provisions of the contract, a contractor shall pay to the
10 subcontractor, and each subcontractor shall in turn pay to its
11 subcontractors, the full or proportional amount received for
12 each such subcontractor's work and material, based on work
13 completed or services provided under the subcontract, 14 days
14 after receipt of a progress payment.
15 (d) If any progress payment is not made to a subcontractor
16 by the due date established in the contract or in subsection
17 (c), the contractor shall pay to the subcontractor, in addition
18 to the amount due, one and one-half times the current commercial
19 prime rate of interest on the amount due, compounded every 30
20 days.
21 (e) In the event that the contract does not contain a grace
22 period and if a subcontractor is not paid by the payment date
23 required by subsection (c), no interest penalty payment required
24 under this section shall be paid if payment is made on or before
25 the 15th calendar day after the payment date required under this
26 act.
27 Section 6.4. Withholding of payment for good faith claims.
28 The contracting body may withhold payment for deficiency
29 items in accordance with the terms of the public contract:
30 Provided, however, That all other items appearing on the
19930H1914B2333 - 4 -
1 application for payment will be paid as per the schedule. If the
2 contracting body withholds payment from a contractor or design
3 professional pursuant to this section, it must notify the
4 contractor or design professional of the deficiency within seven
5 calendar days of the date that the application for payment is
6 received. If a contractor withholds payment from subcontractors
7 or suppliers pursuant to this section, it must notify the
8 subcontractor or supplier and the contracting body of the reason
9 within seven calendar days of the date the application for
10 payment is received.
11 Section 6.5. Penalty and attorney fees.
12 (a) If arbitration or litigation is commenced to recover
13 payment due under this act and it is determined that the
14 contracting body, contractor or subcontractor has failed to
15 comply with the payment of terms of this act, the arbitrator or
16 court shall award, in addition to all other damages due, a
17 penalty equal to 1% per month of the amount that was wrongfully
18 withheld. An amount shall not be deemed to have been wrongfully
19 withheld to the extent it was withheld pursuant to section 6.4.
20 (b) Notwithstanding any agreement to the contrary, the
21 substantially prevailing party in any proceeding to recover any
22 payment under this act shall be awarded a reasonable attorney
23 fee in an amount to be determined by the court or arbitrator,
24 together with expenses.
25 Section 6.6. Public contracts involving Federal aid.
26 If any provision of this act conflicts with a Federal statute
27 or regulation or with conditions attached to the receipt of
28 Federal aid, this act shall not operate to prevent receipt of
29 the Federal aid in accordance with any Federal statute or
30 regulation.
19930H1914B2333 - 5 -
1 Section 6.7. Certain provisions unenforceable.
2 A provision in the public contract making it subject to the
3 laws of another state or requiring that any litigation,
4 arbitration or other dispute resolution process on the contract
5 occurs in another state shall be unenforceable.
6 Section 6.8. Applicability.
7 (a) This act shall apply to public contracts bid on or after
8 the effective date of this act.
9 (b) Section 6.2 shall not apply when a local government
10 unit's nonpayment on a particular project is caused by failure
11 of the Federal or State government to pay funds designated for
12 the specific project. Nothing in this act shall be construed to
13 require payment of interest penalties by the Federal or State
14 government.
15 (c) This act shall not apply to any of the following:
16 (1) A municipality determined to be distressed under the
17 act of July 10, 1987 (P.L.246, No.47), known as the
18 "Municipalities Financial Recovery Act."
19 (2) A school district which has been determined to be a
20 distressed school district under section 691 of the act of
21 March 10, 1949 (P.L.30, No.14), known as the "Public School
22 Code of 1949."
23 Section 3. This act shall take effect in 60 days.
E14L62JAM/19930H1914B2333 - 6 -