SF 3212

as introduced - 89th Legislature (2015 - 2016) Posted on 03/25/2016 09:59am

A bill for an act
relating to state government; making changes to responsible contractor
requirements; amending Minnesota Statutes 2014, section 16C.285, as amended.

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

Section 1.

Minnesota Statutes 2014, section 16C.285, as amended by Laws 2015,
chapter 64, sections 1 to 8, is amended to read:

16C.285 RESPONSIBLE CONTRACTOR REQUIREMENT DEFINED.

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 or motor carrier, and
does not include a design professional or a material supplier. 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.

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

(e) "Motor carrier" means a business or natural person providing for-hire
transportation of materials, equipment, or supplies for a project.

deleted text begin (f) "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.
deleted text end

deleted text begin (g) deleted text end new text begin (f) new text end "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.

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

deleted text begin (i) deleted text end new text begin (h) new text end "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.

deleted text begin (j) deleted text end new text begin (i) new text end "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.

deleted text begin (k) deleted text end new text begin (j) new text end "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.

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

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

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 as provided in paragraph (a). The amount of any tax increment financing
must be excluded in determining whether a construction contract exceeds $50,000. A
subcontractor or motor carrier must meet the minimum criteria in subdivision 3 to be
eligible to be awarded a subcontract on a project deleted text begin regardless of the value of the subcontract deleted text end new text begin
for work in excess of $10,000 new text end .

(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.

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 in compliance with Department of Revenue and Department of Employment
and Economic Development registration requirements 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 deleted text begin violated deleted text end new text begin made total underpayments of
$50,000 or more on a single project for violations of new text end section 177.24, 177.25, 177.41 to
177.44, 181.13, 181.14, or 181.722, deleted text begin and has not violated deleted text end new text begin or new text end 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:

deleted 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,
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;
deleted text end

deleted text begin (ii) deleted text end new text begin (i) new text end has been issued an order to comply by the commissioner of labor and industry
that has become final;

deleted text begin (iii) deleted text end new text begin (ii) new text end 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;

deleted text begin (iv) deleted text end new text begin (iii) new text end 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;

deleted text begin (v) deleted text end new text begin (iv) new text end 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

deleted text begin (vi) deleted text end new text begin (v) new text end 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 that have authority to debar a contractor; and

(7) all subcontractors and motor carriers 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. new text begin In addition, any violation as
defined in clauses (2) to (5) and occurring after July 1, 2014, shall not be considered in
determining whether a contractor or related entity meets the minimum criteria unless a
state or federal court determines after all appeals have been exhausted that the violation
was the result of a deliberate and intentional disregard of the law.
new text end

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 deleted text begin , with the exception of clause (7), at the time that it
responds to the solicitation document deleted text end new text begin prior to contract award or before work commences new text end .
A contracting authority may accept a signed statement under oath 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. A prime contractor,
subcontractor, or motor carrier that fails to verify compliance with any one of the required
minimum criteria or makes a false statement under oath in a verification of compliance
shall be 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 or motor carrier 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. A verification of compliance need not be notarized. An electronic verification
of compliance made and submitted as part of an electronic bid shall be an acceptable
verification of compliance under this section, provided that it contains an electronic
signature as defined in section 325L.02, paragraph (h).

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
deleted text begin subcontractors deleted text end new text begin subcontractor bidders over $10,000 new text end that it intends to retain for work on
the project new text begin bidding over $10,000 new text end . Prior to execution of a construction contract, and as a
condition precedent to the execution of 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. 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.

Subd. 5a.

Motor carrier verification.

A prime contractor or subcontractor shall
obtain annually from all motor carriers 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 motor carrier. A prime contractor or subcontractor shall require each such motor
carrier to provide it with immediate written notification in the event that the motor carrier
no longer meets one or more of the minimum criteria in subdivision 3 after submitting
its annual verification. A motor carrier shall be ineligible to perform work on a project
covered by this section if it does not meet all the minimum criteria in subdivision 3. Upon
request, a prime contractor or subcontractor shall submit to the contracting authority the
signed verifications of compliance from all motor carriers providing for-hire transportation
of materials, equipment, or supplies for a project.

deleted text begin Subd. 6. deleted text end

deleted text begin Additional criteria. deleted text end

deleted text begin Nothing in this section shall restrict the discretion of a
contracting authority to establish additional factors for defining contractor responsibility.
This subdivision is not an independent grant of authority to a contracting authority to
establish additional minimum criteria pursuant to subdivision 3.
deleted text end

Subd. 7.

Implementation.

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 or motor carrier 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 or motor carrier 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 or motor carrier 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 and motor carriers, pursuant to subdivision 3, clause (7).

Subd. 8.

Effective date.

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.