HF 805

as introduced - 93rd Legislature (2023 - 2024) Posted on 01/25/2023 12:44pm

A bill for an act
relating to state contracts; permitting uncollectible judgments against prime
contractors to be paid from contract retainage; requiring direct payments to
subcontractors under certain circumstances; amending Minnesota Statutes 2022,
section 16A.1245.

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

Section 1.

Minnesota Statutes 2022, section 16A.1245, is amended to read:

16A.1245 PROMPT PAYMENT TO SUBCONTRACTORS.

new text begin (a) new text end Each state agency contract must require the prime contractor to pay any subcontractor
within ten days of the prime contractor's receipt of payment from the state for undisputed
services provided by the subcontractor. The contract must require the prime contractor to
pay interest of 1-1/2 percent per month or any part of a month to the subcontractor on any
undisputed amount not paid on time to the subcontractor. The minimum monthly interest
penalty payment for an unpaid balance of $100 or more is $10. For an unpaid balance of
less than $100, the prime contractor shall pay the actual penalty due to the subcontractor.
A subcontractor who prevails in a civil action to collect interest penalties from a prime
contractor must be awarded its costs and disbursements, including attorney's fees, incurred
in bringing the action. new text begin If the judgment is uncollectible because the prime contractor has
gone out of business or declared bankruptcy, and the state agency has contract retainage
funds, the state agency is authorized to pay a subcontractor who prevailed, up to the principal
amount of the work performed by the subcontractor, from the retainage. If the retainage is
insufficient to pay one or more subcontractors, the state agency is authorized to dispense
pro rata shares of the retainage to subcontractors, based on the principal amounts due and
owing.
new text end

new text begin (b) If a state agency does not require a performance and payment bond, letter of credit,
or other financial mechanism to assure that a prime contractor will pay subcontractors, the
state agency must pay all subcontractors directly during the term of the contract, upon
satisfactory completion of work under the contract.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for contracts entered into on or after July
1, 2023.
new text end