HF 1984

4th Engrossment - 88th Legislature (2013 - 2014) Posted on 05/13/2014 03:07pm

A bill for an act
relating to state government; providing for enhancement of accountability
and transparency in public construction; establishing a requirement for and 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 terms defined in this
subdivision have the meanings given them.
new text end

new text begin (b) "Construction contract" means a contract or subcontract of any tier for work on
a project.
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new text begin (c) "Contractor" means a prime contractor or subcontractor, and does not include
a material supplier.
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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, 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.
new text end

new text begin (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.
new text end

new text begin (g) "Principal" means an owner holding at least a 25 percent ownership interest
in a business.
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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:
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new text begin (1) a firm, partnership, corporation, joint venture, or other legal entity substantially
under the control of a contractor or vendor;
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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
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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.
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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.
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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 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.
new text end

new text begin (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. 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.
new text end

new text begin (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.
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 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:
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new text begin (i) is in compliance with workers' compensation and unemployment insurance
requirements;
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new text begin (ii) is currently registered with the Department of Revenue and the Department of
Employment and Economic Development if it has employees;
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new text begin (iii) has a valid federal tax identification number or a valid Social Security number if
an individual; and
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new text begin (iv) has filed a certificate of authority to transact business in Minnesota with the
secretary of state if a foreign corporation or cooperative;
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new text begin (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:
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new text begin (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;
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new text begin (ii) has been issued an order to comply by the commissioner of labor and industry
that has become final;
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new text begin (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;
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new text begin (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;
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new text begin (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
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new text begin (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.
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new text begin 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;
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new text begin (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;
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new text begin (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;
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new text begin (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;
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new text begin (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; and
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new text begin (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).
new text end

new text begin 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.
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 that statement. Failure to verify compliance with any one of the
minimum criteria or a false statement under oath in a verification of compliance shall
render the prime contractor or subcontractor that makes the false statement 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 end

new text begin Subd. 5. new text end

new text begin Subcontractor verification. new text end

new text begin 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. 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.
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, or a statement that the term responsible contractor as used in the
solicitation document means a 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 prime contractor or subcontractor that does
not meet the minimum criteria in subdivision 3 or fails to verify that it meets those
criteria 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 with any of the
minimum criteria shall render the prime contractor or subcontractor that makes the false
statement ineligible to be awarded a construction contract on the project and may result in
termination of a contract awarded to a prime contractor or subcontractor that submits a
false statement. The solicitation document shall state that 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).
new text end

new text begin Subd. 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