SF 1121

1st Engrossment - 89th Legislature (2015 - 2016) Posted on 08/21/2015 03:44pm

A bill for an act
relating to government contracting; clarifying the responsible contractor law;
amending Minnesota Statutes 2014, section 16C.285, subdivisions 1, 2, 3, 4, 5, 6.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2014, section 16C.285, subdivision 1, is amended to read:

Subdivision 1.

Definitions.

(a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.

(b) "Construction contract" means a contract or subcontract of any tier for work on
a project.

(c) "Contractor" means a prime contractor or subcontractor, and does not include
a new text begin design professional or a new text end material supplier. new text begin A "design professional" is a business or
natural person retained to perform services on the project for which licensure is required
by section 326.02. A "material supplier" is a business or natural person that supplies
materials, equipment, or supplies to a subcontractor or contractor on a project, including
performing delivery or unloading services in connection with the supply of materials,
equipment, or supplies; provided, however, that a material supplier does not include
a natural person or business that delivers mineral aggregate such as sand, gravel, or
stone that is incorporated into the work under the contract by depositing the material
substantially in place, directly or through spreaders, from the transporting vehicle.
new text end

(d) "Contracting authority" means a state agency, the Minnesota State Colleges and
Universities, the University of Minnesota, the Metropolitan Council, the Metropolitan
Airports Commission, or a municipality that enters into a construction contract or
authorizes or directs entering into a construction contract.

(e) "Municipality" means a county, town, home rule charter or statutory city, school
district, housing and redevelopment authority, port authority, economic development
authority, sports facilities authority, joint powers board or organization created under
section 471.59 or other statute, special district, instrumentality, drainage authority,
watershed district, destination medical center corporation, or other municipal corporation
or political subdivision of the state authorized by law to enter into contracts.

(f) "Prime contractor" means a vendor that submits a bid or proposal or otherwise
responds to a solicitation document of a contracting authority for work on a project or is
awarded a construction contract by a contracting authority for work on a project. A prime
contractor includes a construction manager for purposes of this section.

(g) "Principal" means an owner holding at least a 25 percent ownership interest
in a business.

(h) "Project" means building, erection, construction, alteration, remodeling,
demolition, or repair of buildings, real property, highways, roads, bridges, or other
construction work performed pursuant to a construction contract.

(i) "Related entity" means:

(1) a firm, partnership, corporation, joint venture, or other legal entity substantially
under the control of a contractor or vendor;

(2) a predecessor corporation or other legal entity having one or more of the same
principals as the contractor or vendor;

(3) a subsidiary of a contractor or vendor;

(4) one or more principals of a contractor or vendor; and

(5) a person, firm, partnership, corporation, joint venture, or other legal entity that
substantially controls a contractor or vendor.

(j) "Solicitation document" means an invitation to bid, bid specifications, request for
proposals, request for qualifications, or other solicitation of contractors for purposes of
a construction contract.

(k) "Subcontractor" means a vendor that seeks to enter into a subcontract or enters
into a subcontract for work on a project.

(l) "Vendor" means a business, including a construction contractor or a natural
person, and includes both if the natural person is engaged in a business.

Sec. 2.

Minnesota Statutes 2014, section 16C.285, subdivision 2, is amended to read:

Subd. 2.

Responsible contractor required.

(a) A contractor must meet the
minimum criteria in subdivision 3 to be eligible to be awarded a construction contract
as the lowest responsible bidder or the vendor or contractor offering the best value as
provided in section 16C.28, 103D.811, 103E.505, 116A.13, 123B.52, 160.17, 160.262,
161.32, 161.3206, 161.3209, 161.38, 162.17, 365.37, 374.13, 375.21, 383C.094, 412.311,
429.041, 458D.21, 469.015, 469.068, 469.101, 471.345, 473.4057, 473.523, 473.652,
473.756, 473J.11, or any of their successor provisions.

(b) This section applies to publicly owned or financed projects where the contracting
authority's construction contract with the prime contractor is estimated to exceed $50,000
and is awarded pursuant to a lowest responsible bidder selection method or a best value
selection method new text begin as provided in paragraph (a). The amount of any tax increment financing
must be excluded in determining whether a construction contract exceeds $50,000 new text end . A
subcontractor must meet the minimum criteria in subdivision 3 to be eligible to be awarded
a subcontract on a project regardless of the value of the subcontract.

(c) If only one prime contractor responds to a solicitation document, a contracting
authority may award a construction contract to the responding prime contractor even if the
minimum criteria in subdivision 3 are not met.

Sec. 3.

Minnesota Statutes 2014, section 16C.285, subdivision 3, is amended to read:

Subd. 3.

Minimum criteria.

"Responsible contractor" means a contractor that
conforms to the responsibility requirements in the solicitation document for its portion of
the work on the project and verifies that it meets the following minimum criteria:

(1) the contractor:

(i) is in compliance with workers' compensation and unemployment insurance
requirements;

(ii) is currently registered with the Department of Revenue and the Department of
Employment and Economic Development if it has employees;

(iii) has a valid federal tax identification number or a valid Social Security number if
an individual; and

(iv) has filed a certificate of authority to transact business in Minnesota with the
secretary of state if a foreign corporation or cooperative;

(2) the contractor or related entity is in compliance with and, during the three-year
period before submitting the verification, has not violated section 177.24, 177.25, 177.41
to 177.44, 181.13, 181.14, or 181.722, and has not violated United States Code, title 29,
sections 201 to 219, or United States Code, title 40, sections 3141 to 3148. For purposes
of this clause, a violation occurs when a contractor or related entity:

(i) repeatedly fails to pay statutorily required wages or penalties on one or more
separate projects for a total underpayment of $25,000 or more within the three-year period new text begin ,
provided that a failure to pay is "repeated" only if it involves two or more separate and
distinct occurrences of underpayment during the three-year period new text end ;

(ii) has been issued an order to comply by the commissioner of labor and industry
that has become final;

(iii) has been issued at least two determination letters within the three-year period by
the Department of Transportation finding an underpayment by the contractor or related
entity to its own employees;

(iv) has been found by the commissioner of labor and industry to have repeatedly or
willfully violated any of the sections referenced in this clause pursuant to section 177.27;

(v) has been issued a ruling or findings of underpayment by the administrator of the
Wage and Hour Division of the United States Department of Labor that have become final
or have been upheld by an administrative law judge or the Administrative Review Board; or

(vi) has been found liable for underpayment of wages or penalties or misrepresenting
a construction worker as an independent contractor in an action brought in a court having
jurisdiction.

Provided that, if the contractor or related entity contests a determination of underpayment
by the Department of Transportation in a contested case proceeding, a violation does not
occur until the contested case proceeding has concluded with a determination that the
contractor or related entity underpaid wages or penalties;

(3) the contractor or related entity is in compliance with and, during the three-year
period before submitting the verification, has not violated section 181.723 or chapter
326B. For purposes of this clause, a violation occurs when a contractor or related entity
has been issued a final administrative or licensing order;

(4) the contractor or related entity has not, more than twice during the three-year
period before submitting the verification, had a certificate of compliance under section
363A.36 revoked or suspended based on the provisions of section 363A.36, with
the revocation or suspension becoming final because it was upheld by the Office of
Administrative Hearings or was not appealed to the office;

(5) the contractor or related entity has not received a final determination assessing a
monetary sanction from the Department of Administration or Transportation for failure
to meet targeted group business, disadvantaged business enterprise, or veteran-owned
business goals, due to a lack of good faith effort, more than once during the three-year
period before submitting the verification;

(6) the contractor or related entity is not currently suspended or debarred by the
federal government or the state of Minnesota or any of its departments, commissions,
agencies, or political subdivisions new text begin that have authority to debar a contractor new text end ; and

(7) all subcontractors that the contractor intends to use to perform project work have
verified to the contractor through a signed statement under oath by an owner or officer that
they meet the minimum criteria listed in clauses (1) to (6).

Any violations, suspensions, revocations, or sanctions, as defined in clauses (2) to
(5), occurring prior to July 1, 2014, shall not be considered in determining whether a
contractor or related entity meets the minimum criteria.

Sec. 4.

Minnesota Statutes 2014, section 16C.285, subdivision 4, is amended to read:

Subd. 4.

Verification of compliance.

A contractor responding to a solicitation
document of a contracting authority shall submit to the contracting authority a signed
statement under oath by an owner or officer verifying compliance with each of the
minimum criteria in subdivision 3 new text begin , with the exception of clause (7), new text end at the time that it
responds to the solicitation document. A contracting authority may accept a sworn
statement as sufficient to demonstrate that a contractor is a responsible contractor and
shall not be held liable for awarding a contract in reasonable reliance on that statement.
deleted text begin Failure deleted text end new text begin A contractor or subcontractor that fails new text end to verify compliance with any one of
the new text begin required new text end minimum criteria or new text begin makes new text end a false statement under oath in a verification
of compliance shall deleted text begin render the prime contractor or subcontractor that makes the false
statement deleted text end new text begin be new text end ineligible to be awarded a construction contract on the project for which the
verification was submitted. A false statement under oath verifying compliance with any of
the minimum criteria may result in termination of a construction contract that has already
been awarded to a prime contractor or subcontractor that submits a false statement. A
contracting authority shall not be liable for declining to award a contract or terminating
a contract based on a reasonable determination that the contractor failed to verify
compliance with the minimum criteria or falsely stated that it meets the minimum criteria. new text begin
A verification of compliance need not be notarized. A typed electronic signature on a
verification of compliance shall be acceptable to the same extent as a handwritten signature.
new text end

Sec. 5.

Minnesota Statutes 2014, section 16C.285, subdivision 5, is amended to read:

Subd. 5.

Subcontractor verification.

A prime contractor or subcontractor shall
include in its verification of compliance under subdivision 4 a list of all of its first-tier
subcontractors that it intends to retain for work on the project. new text begin Prior to execution of a
construction contract, and as a condition precedent to a construction contract, the apparent
successful prime contractor shall submit to the contracting authority a supplemental
verification under oath confirming compliance with subdivision 3, clause (7). Each
contractor or subcontractor shall obtain from all subcontractors with which it will have
a direct contractual relationship a signed statement under oath by an owner or officer
verifying that they meet all of the minimum criteria in subdivision 3 prior to execution of
a construction contract with each subcontractor. new text end If a prime contractor or any subcontractor
retains additional subcontractors on the project after submitting its verification of
compliance, the prime contractor or subcontractor shall obtain verifications of compliance
from each additional subcontractor with which it has a direct contractual relationship and
shall submit a supplemental verification confirming compliance with subdivision 3, clause
(7), within 14 days of retaining the additional subcontractors. A prime contractor shall
submit to the contracting authority upon request copies of the signed verifications of
compliance from all subcontractors of any tier pursuant to subdivision 3, clause (7). A
prime contractor and subcontractors shall not be responsible for the false statements of
any subcontractor with which they do not have a direct contractual relationship. A prime
contractor and subcontractors shall be responsible for false statements by their first-tier
subcontractors with which they have a direct contractual relationship only if they accept
the verification of compliance with actual knowledge that it contains a false statement.

Sec. 6.

Minnesota Statutes 2014, section 16C.285, subdivision 6, is amended to read:

Subd. 6.

Additional criteria.

Nothing in this section shall restrict the discretion of a
contracting authority to establish additional criteria for defining a responsible contractor new text begin
under other law or legal authority new text end .

Sec. 7. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 6 are effective the day following final enactment for contracts for
which requests for bids or proposals are issued after enactment.
new text end