HF 1984

3rd Engrossment - 88th Legislature (2013 - 2014) Posted on 04/29/2014 04:59pm

A bill for an act
relating to state government; providing for enhancement of accountability and
transparency in public construction; establishing a requirement for a definition
of responsible contractor; proposing coding for new law in Minnesota Statutes,
chapter 16C.

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

Section 1.

new text begin [16C.285] RESPONSIBLE CONTRACTOR REQUIREMENT
DEFINED.
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms
have the meanings given.
new text end

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

new text begin (c) "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. A contractor
includes a construction manager but does not include a material supplier.
new text end

new text begin (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.
new text end

new text begin (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, 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.
new text end

new text begin (f) "Prime contractor" means a contractor awarded a construction contract by a
contracting authority for work on a project.
new text end

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

new text begin (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.
new text end

new text begin (i) "Related entity" means:
new text end

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

new text begin (2) a predecessor corporation or other legal entity having one or more of the same
principals as the contractor or vendor;
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new text begin (3) a subsidiary of a contractor or vendor;
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new text begin (4) one or more principals of a contractor or vendor; and
new text end

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

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

new text begin (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.
new text end

new text begin Subd. 2. new text end

new text begin Responsible contractor required. new text end

new text begin (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 sections 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, or 473J.11, or any of their successor provisions.
new text end

new text begin (b) This section applies to 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. A
subcontractor must meet the minimum criteria in subdivision 3 to be eligible to be awarded
a subcontract on such a project regardless of the value of the subcontract.
new text end

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

new text begin Subd. 3. new text end

new text begin Minimum criteria. new text end

new text begin "Responsible contractor" means a contractor or
subcontractor 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:
new text end

new text begin (1) the contractor or subcontractor is in compliance with workers' compensation
and unemployment insurance requirements; is currently registered with the Department
of Revenue and the Department of Employment and Economic Development if it has
employees; has a valid federal tax identification number or a valid Social Security number
if an individual; and has filed a certificate of authority to transact business in Minnesota
with the secretary of state if a foreign corporation or cooperative;
new text end

new text begin (2) the contractor, subcontractor, 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, subcontractor,
or related entity 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; has been issued an order to comply by the commissioner of labor and industry or
authorized designee or representative; has been issued at least two determination letters
within the three-year period by the Department of Transportation finding an underpayment
by the contractor, subcontractor, or related entity to its own employees; has been found
by the commissioner of labor and industry to have repeatedly or willfully violated any
section of Minnesota Statutes referenced in this clause pursuant to section 177.27; or
has been found liable in an action brought in a court having jurisdiction. Provided that,
if the contractor, subcontractor, or related entity contests an order to comply issued by
the commissioner of labor and industry or a determination of underpayment by the
Department of Transportation in a contested case proceeding, a violation does not occur
until the contested case proceeding and any appeals have concluded with a determination
that the contractor, subcontractor, or related entity underpaid wages or penalties;
new text end

new text begin (3) the contractor, subcontractor, 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,
subcontractor, or related entity has been issued a final administrative or licensing order;
new text end

new text begin (4) the contractor, subcontractor, or related entity has no current federal or state tax
liens or current federal or state delinquent tax liabilities;
new text end

new text begin (5) the contractor, subcontractor, or related entity is not currently debarred by the
federal government or the state and is currently not ineligible to be awarded a construction
contract by a contracting authority or perform work under a construction contract on a
project covered under subdivision 4;
new text end

new text begin (6) the contractor, subcontractor, 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, with the revocation or suspension becoming
final because it was upheld by the Office of Administrative Hearings or was not appealed
to the office;
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new text begin (7) the contractor, subcontractor, or related entity has not received a final
determination assessing a sanction for failure to meet targeted group business,
disadvantaged business enterprise, or veteran-owned business goals more than once during
the three-year period before submitting the verification; and
new text end

new text begin (8) all subcontractors the contractor or subcontractor intends to use to perform project
work have verified to the contractor or subcontractor through a signed statement under
oath by an owner or officer that they meet the minimum criteria listed in clauses (1) to (7).
new text end

new text begin Subd. 4. new text end

new text begin Verification of compliance. new text end

new text begin 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 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 such a statement. Failure to verify compliance with any one of
the minimum criteria shall render a contractor or subcontractor ineligible to be awarded
a construction contract. A false statement under oath verifying compliance with any of
the minimum criteria may result in termination of the construction contract awarded to
a contractor or subcontractor that submits such a false statement. If a false statement is
made under oath in a verification of compliance with knowledge that it is false or with
reckless disregard for whether it is true or false, such a false statement shall render
that contractor or subcontractor not responsible and therefore ineligible to be awarded
a construction contract by a contracting authority on projects covered by this section or
allowed to perform work on projects covered by this section under a construction contract,
as defined in subdivision 1, for a period of three years. The period of ineligibility due
to a false statement under oath in a verification of compliance may be reduced by the
commissioner of administration in the event of an emergency.
new text end

new text begin Subd. 5. new text end

new text begin Subcontractor verifications. new text end

new text begin A 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. If the 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 (8). The 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 (8). The 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. The 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
knowledge that it contains a false statement or with reckless disregard for whether the
statement is true or false.
new text end

new text begin Subd. 6. new text end

new text begin Additional criteria. new text end

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

new text begin Subd. 7. new text end

new text begin Implementation. new text end

new text begin The definition of responsible contractor, as defined in
subdivision 3, shall be included in the solicitation document for all projects covered by
this section. The solicitation document for any project shall state that any contractor or
subcontractor that does not meet the minimum criteria in subdivision 3 is not a responsible
contractor and is not eligible to be awarded a construction contract for the project or to
perform work on the project. The solicitation document shall provide that a false statement
under oath verifying compliance under subdivision 4 with any of the minimum criteria
may result in termination of the contract awarded to the contractor or subcontractor that
submits a false statement. The solicitation document shall provide that if a false statement
is made under oath in a verification of compliance with knowledge that it is false or with
reckless disregard for whether it is true or false, such a false statement shall render
that contractor or subcontractor not responsible and therefore ineligible to be awarded
a construction contract by a contracting authority on projects covered by this section or
allowed to perform work on projects covered by this section under a construction contract,
as defined in subdivision 1, for a period of three years. The solicitation document shall
state the obligations in subdivision 5, including the obligation that the 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 (8).
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2015, and shall apply to
all construction contracts entered into based on solicitation documents issued on or after
that date.
new text end