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A01194 Summary:

BILL NOA01194
 
SAME ASSAME AS S06855
 
SPONSORBraunstein (MS)
 
COSPNSRWoerner, Steck, Paulin, Brabenec
 
MLTSPNSRTague
 
Amd §139-f, St Fin L; amd §106-b, Gen Muni L; amd §756-c, Gen Bus L
 
Prohibits the retention of any amount of payment due and owing for materials delivered and accepted for a public or private construction project.
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A01194 Actions:

BILL NOA01194
 
01/13/2023referred to governmental operations
01/03/2024referred to governmental operations
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A01194 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A1194
 
SPONSOR: Braunstein (MS)
  TITLE OF BILL: An act to amend the state finance law and the general municipal law, in relation to requiring full payment for delivered and accepted materials pertaining to public work projects; and to amend the general business law, in relation to prohibiting the retention of any payment due and owing a material supplier for a construction project   PURPOSE: This bill amends the state finance and general municipal laws, in relation to requiring full payment for delivered materials pertaining to public works projects; and to amend the general business law, in relation to prohibiting the retention of any payment due and owing a material supplier for a construction project.   SUMMARY OF PROVISIONS: Section 1: Amends the state finance law to clarify that materialmen are not subject to retainage. Section 2: Amends the general municipal law to clarify that materialmen are not subject to retainage. Section 3: Amends the current law to clarify that an owner, contractor, or subcontractor may not retain any portion of any payment due to a material supplier, except as set forth in subsection one of the law. Section 4: Sets the effective date.   JUSTIFICATION: Currently, retainage is withheld on construction jobs to ensure that the owner is happy with the finished product. Retainage is withheld by the owner from the contractor, who, as a result of not receiving funds from the owner, withholds payment from the subcontractors and materialmen. Once a material supplier has delivered its goods and has been accepted by the contractor or subcontractor, the supplier has completed its job and should not be held liable for subsequent work performance. This legislation would remove materialmen from inclusion under current retainage laws.   LEGISLATIVE HISTORY: 2016: A.10275/S.7652 - Referred to Governmental Operations. 2017-2018: A.358/S.4467 - Ordered to Third Reading. 2019-2020: A.574/S.5498 - Ordered to Third Reading. 2021-2022: A.494/S.1387 - Referred to Governmental Operations.   FISCAL IMPLICATIONS: None to the State.   EFFECTIVE DATE: This act shall take effect on the thirtieth day after it shall become law and shall apply to materials deliver on or after such date.
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A01194 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          1194
 
                               2023-2024 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 13, 2023
                                       ___________
 
        Introduced by M. of A. BRAUNSTEIN, WOERNER, STECK, PAULIN -- Multi-Spon-
          sored by -- M.  of A. TAGUE -- read once and referred to the Committee
          on Governmental Operations
 
        AN  ACT to amend the state finance law and the general municipal law, in
          relation to requiring full payment for delivered and accepted  materi-
          als pertaining to public work projects; and to amend the general busi-
          ness  law, in relation to prohibiting the retention of any payment due
          and owing a material supplier for a construction project
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1. Subdivisions 1 and 2 of section 139-f of the state finance
     2  law, subdivision 1 as amended by chapter 128 of the  laws  of  2021  and
     3  subdivision  2  as amended by section 16 of part MM of chapter 57 of the
     4  laws of 2008, are amended to read as follows:
     5    1. Payment by public owners to contractors. The contractor shall peri-
     6  odically, in accordance with the terms of the contract,  submit  to  the
     7  public owner and/or [his] its agent a requisition for a progress payment
     8  for  the  work  performed  and/or materials furnished to the date of the
     9  requisition, less any amount previously  paid  to  the  contractor.  The
    10  public  owner shall in accordance with the terms of the contract approve
    11  and promptly pay the requisition for the progress payment less an amount
    12  necessary to satisfy any claims, liens or judgments against the contrac-
    13  tor which have not been suitably discharged and less any retained amount
    14  as hereafter described. The public owner shall retain not more than five
    15  per centum of each progress payment, not including any payment for mate-
    16  rials pertinent to the project which have been delivered,  accepted  and
    17  are  covered  by  a  manufacturer's warranty, and/or are graded to  meet
    18  industry  standards,  to the contractor except that the public owner may
    19  retain in excess of five per centum but not more than ten per centum  of
    20  each progress payment, not including any payment for materials pertinent
    21  to  the project which have been delivered, accepted and are covered by a
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD01209-01-3

        A. 1194                             2
 
     1  manufacturer's warranty, and/or are graded to meet  industry  standards,
     2  to  the contractor provided that there are no requirements by the public
     3  owner for the contractor to provide a performance bond and a  labor  and
     4  material  bond both in the full amount of the contract. The public owner
     5  shall pay in full, upon requisition from the contractor, for all materi-
     6  als pertinent to the project which have been delivered to  the  site  or
     7  off-site  by the contractor and/or subcontractor and suitably stored and
     8  secured as required by the public owner and  the  contractor  [provided,
     9  the  public  owner  may  limit such payment to materials in short and/or
    10  critical supply and materials specially fabricated for the project  each
    11  as  defined in the contract]. When the work or major portions thereof as
    12  contemplated by the terms of the contract are  substantially  completed,
    13  the contractor shall submit to the public owner and/or [his] its agent a
    14  requisition for payment of the remaining amount of the contract balance.
    15  Upon  receipt  of  such  requisition  the public owner shall approve and
    16  promptly pay the remaining amount of the contract balance less two times
    17  the value of any remaining items to be completed and an amount necessary
    18  to satisfy any claims, liens or judgments against the  contractor  which
    19  have  not  been  suitably discharged. As the remaining items of work are
    20  satisfactorily completed or corrected, the public owner  shall  promptly
    21  pay,  upon  receipt  of a requisition, for these remaining items less an
    22  amount necessary to satisfy any claims, liens or judgments  against  the
    23  contractor  which  have  not been suitably discharged. Any claims, liens
    24  and judgments referred to in this section shall pertain to  the  project
    25  and  shall  be  filed  in  accordance  with  the terms of the applicable
    26  contract and/or applicable laws.
    27    2. Payment by contractors to  subcontractors.  Within  seven  calendar
    28  days of the receipt of any payment from the public owner, the contractor
    29  shall  pay each of [his] its subcontractors and materialmen the proceeds
    30  from the payment representing the value of  the  work  performed  and/or
    31  materials furnished by the subcontractor and/or materialman and reflect-
    32  ing  the  percentage  of  the  subcontractor's  work  completed  or  the
    33  materialman's material supplied in the requisition approved by the owner
    34  and based upon the actual value of the  subcontract  or  purchase  order
    35  less  an  amount  necessary  to  satisfy  any claims, liens or judgments
    36  against the subcontractor or materialman which have  not  been  suitably
    37  discharged  and, with regard to subcontractors, less any retained amount
    38  as hereafter described. Failure by the contractor to pay any subcontrac-
    39  tor or materialman within seven calendar days  of  the  receipt  of  any
    40  payment  from  the  public  owner  shall  result in the commencement and
    41  accrual of interest on amounts due to such subcontractor or  materialman
    42  for the period beginning on the day immediately following the expiration
    43  of  such  seven  calendar  day  period  and  ending on the date on which
    44  payment is made by the contractor to such subcontractor or  materialman.
    45  Such  interest  payment shall be the sole responsibility of the contrac-
    46  tor, and shall be paid at the rate of interest in  effect  on  the  date
    47  payment  is made by the contractor.  Notwithstanding any other provision
    48  of law to the contrary, interest shall be computed at  the  rate  estab-
    49  lished  in  paragraph  (b)  of  subdivision one of section seven hundred
    50  fifty-six-b of the general business law. The contractor shall retain not
    51  more than five per centum of each payment to the  subcontractor  [and/or
    52  materialman] except that the contractor may retain in excess of five per
    53  centum  but  not more than ten per centum of each payment to the subcon-
    54  tractor provided that prior to entering  into  a  subcontract  with  the
    55  contractor,  the  subcontractor  is  unable  or  unwilling  to provide a
    56  performance bond and a labor and material bond, both in the full  amount

        A. 1194                             3
 
     1  of  the  subcontract,  at the request of the contractor.  The contractor
     2  shall pay in full, upon payment by the public owner, for  all  materials
     3  pertinent  to  the  project which have been delivered to and accepted at
     4  the  site  or off-site by a materialman and are covered by a manufactur-
     5  er's warranty, and/or are graded to meet  industry  standards.  However,
     6  except  in the case of a materialman who is also contracted to install a
     7  product he/she delivered, the contractor shall retain nothing from those
     8  payments representing proceeds owed the subcontractor and/or materialman
     9  from the public owner's payments to the  contractor  for  the  remaining
    10  amounts  of  the contract balance as provided in subdivision one of this
    11  section. If the contractor  has  failed  to  submit  a  requisition  for
    12  payment  of  the remaining amounts of the contract balance within ninety
    13  days of substantial completion as provided in subdivision  one  of  this
    14  section,  then  any clause in the subcontract between the contractor and
    15  the subcontractor or  materialman  which  states  that  payment  by  the
    16  contractor  to  such  subcontractor  or  materialman  is contingent upon
    17  payment by the owner to the contractor shall be deemed  invalid.  Within
    18  seven  calendar  days of the receipt of payment from the contractor, the
    19  subcontractor and/or materialman shall pay each of [his] its subcontrac-
    20  tors and materialmen in the same manner as the contractor has  paid  the
    21  subcontractor,  including  interest  as  herein  provided above. Nothing
    22  provided herein shall create any obligation on the part  of  the  public
    23  owner to pay or to see to the payment of any moneys to any subcontractor
    24  or  materialman  from  any contractor nor shall anything provided herein
    25  serve to create any relationship in contract or  otherwise,  implied  or
    26  expressed,  between  the  subcontractor  or  materialman  and the public
    27  owner.
    28    § 2. Paragraph (a) of subdivision 1 and subdivision 2 of section 106-b
    29  of the general municipal law, paragraph (a) of subdivision 1 as  amended
    30  by  chapter  128  of  the  laws  of 2021 and subdivision 2 as amended by
    31  section 15 of part MM of chapter 57 of the laws of 2008, are amended  to
    32  read as follows:
    33    (a) The contractor shall periodically, in accordance with the terms of
    34  the contract, submit to the public owner and/or [his] its agent a requi-
    35  sition  for  a  progress payment for the work performed and/or materials
    36  furnished to the date of the requisition less any amount previously paid
    37  to the contractor. The public owner shall in accordance with  the  terms
    38  of  the  contract  approve  and  promptly  pay  the  requisition for the
    39  progress payment less an amount necessary to satisfy any  claims,  liens
    40  or  judgments  against  the  contractor  which  have  not  been suitably
    41  discharged and less any retained  amount  as  hereafter  described.  The
    42  public owner shall retain not more than five per centum of each progress
    43  payment,  not  including  any  payment  for  materials  pertinent to the
    44  project which have  been  delivered,  accepted  and  are  covered  by  a
    45  manufacturer's  warranty,  and/or are graded to meet industry standards,
    46  to the contractor except that the public owner may retain in  excess  of
    47  five  per  centum  but  not  more  than  ten per centum of each progress
    48  payment, not including  any  payment  for  materials  pertinent  to  the
    49  project  which  have  been  delivered,  accepted  and  are  covered by a
    50  manufacturer's warranty, and/or are graded to meet  industry  standards,
    51  to  the contractor provided that there are no requirements by the public
    52  owner for the contractor to provide a performance bond and a  labor  and
    53  material  bond both in the full amount of the contract. The public owner
    54  shall pay in full, upon requisition from the contractor, for all materi-
    55  als pertinent to the project which have been delivered to  the  site  or
    56  off-site  by the contractor and/or subcontractor and suitably stored and

        A. 1194                             4
 
     1  secured as required by the public owner and  the  contractor  [provided,
     2  the  public  owner  may  limit such payment to materials in short and/or
     3  critical supply and materials specially fabricated for the project  each
     4  as  defined in the contract]. When the work or major portions thereof as
     5  contemplated by the terms of the contract are  substantially  completed,
     6  the contractor shall submit to the public owner and/or [his] its agent a
     7  requisition for payment of the remaining amount of the contract balance.
     8  Upon  receipt  of  such  requisition  the public owner shall approve and
     9  promptly pay the remaining amount of the contract balance less two times
    10  the value of any remaining items to be completed and an amount necessary
    11  to satisfy any claims, liens or judgments against the  contractor  which
    12  have  not  been  suitably discharged. As the remaining items of work are
    13  satisfactorily completed or corrected, the public owner  shall  promptly
    14  pay,  upon  receipt  of  a  requisition,  for these items less an amount
    15  necessary to satisfy any claims, liens or judgments against the contrac-
    16  tor which have not been suitably discharged. Any claims, liens and judg-
    17  ments referred to in this section shall pertain to the project and shall
    18  be filed in accordance with the terms of the applicable contract  and/or
    19  applicable  laws.  Where  the public owner is other than the city of New
    20  York, the term "promptly pay" shall mean  payment  within  thirty  days,
    21  excluding  legal  holidays,  of  receipt  of the requisition unless such
    22  requisition is not approvable  in  accordance  with  the  terms  of  the
    23  contract. Notwithstanding the foregoing, where the public owner is other
    24  than  the city of New York and is a municipal corporation which requires
    25  an elected official to approve progress payments, "promptly  pay"  shall
    26  mean  payment  within  forty-five  days,  excluding  legal  holidays, of
    27  receipt of the requisition unless such requisition is not approvable  in
    28  accordance with the terms of the contract.
    29    2.  Payment  by  contractors  to subcontractors. Within seven calendar
    30  days of the receipt of any payment from the public owner, the contractor
    31  shall pay each of [his] its subcontractors and materialmen the  proceeds
    32  from  the  payment  representing  the value of the work performed and/or
    33  materials furnished by the subcontractor and/or materialman and reflect-
    34  ing  the  percentage  of  the  subcontractor's  work  completed  or  the
    35  materialman's material supplied in the requisition approved by the owner
    36  and  based  upon  the  actual value of the subcontract or purchase order
    37  less an amount necessary to  satisfy  any  claims,  liens  or  judgments
    38  against  the  subcontractor  or materialman which have not been suitably
    39  discharged and, with regard to subcontractors, less any retained  amount
    40  as  hereafter  described. Failure by the contractor to make any payment,
    41  including any remaining amounts of the contract balance  as  hereinafter
    42  described,  to  any  subcontractor  or materialman within seven calendar
    43  days of the receipt of any payment from the public owner shall result in
    44  the commencement and accrual of interest on amounts due to such  subcon-
    45  tractor  or  materialman for the period beginning on the day immediately
    46  following the expiration of such seven calendar day period and ending on
    47  the date on which payment is made by the contractor to such  subcontrac-
    48  tor  or  materialman.  Such interest shall be the sole responsibility of
    49  the contractor, and shall be paid at the rate of interest in  effect  on
    50  the  date  payment  is made by the contractor. Notwithstanding any other
    51  provision of law to the contrary, interest shall be computed at the rate
    52  established in paragraph (b) of subdivision one of section seven hundred
    53  fifty-six-b of the general business law. The contractor shall retain not
    54  more than five per centum of each payment to the  subcontractor  [and/or
    55  materialman] except that the contractor may retain in excess of five per
    56  centum  but  not more than ten per centum of each payment to the subcon-

        A. 1194                             5
 
     1  tractor provided that prior to entering  into  a  subcontract  with  the
     2  contractor,  the  subcontractor  is  unable  or  unwilling  to provide a
     3  performance bond and a labor and material bond both in the  full  amount
     4  of  the  subcontract  at  the  request of the contractor. The contractor
     5  shall pay in full, upon payment by the public owner, for  all  materials
     6  pertinent  to  the  project which have been delivered to and accepted at
     7  the site or off-site by a materialman and are covered by  a  manufactur-
     8  er's  warranty,  and/or  are graded to meet industry standards. However,
     9  except in the case of a materialman who is also contracted to install  a
    10  product he/she delivered, the contractor shall retain nothing from those
    11  payments representing proceeds owed the subcontractor and/or materialman
    12  from  the  public  owner's  payments to the contractor for the remaining
    13  amounts of the contract balance as provided in subdivision one  of  this
    14  section.  If  the  contractor  has  failed  to  submit a requisition for
    15  payment of the remaining amounts of the contract balance  within  ninety
    16  days  of  substantial  completion as provided in subdivision one of this
    17  section, then any clause in the subcontract between the  contractor  and
    18  the  subcontractor  or  materialman  which  states  that  payment by the
    19  contractor to such  subcontractor  or  materialman  is  contingent  upon
    20  payment  by  the owner to the contractor shall be deemed invalid. Within
    21  seven calendar days of the receipt of payment from the  contractor,  the
    22  subcontractor and/or materialman shall pay each of [his] its subcontrac-
    23  tors  and  materialmen in the same manner as the contractor has paid the
    24  subcontractor, including interest as herein  provided  above.    Nothing
    25  provided  herein  shall  create any obligation on the part of the public
    26  owner to pay or to see to the payment of any moneys to any subcontractor
    27  or materialman from any contractor nor shall  anything  provided  herein
    28  serve  to  create  any relationship in contract or otherwise, implied or
    29  expressed, between the  subcontractor  or  materialman  and  the  public
    30  owner.
    31    §  3.  Section  756-c of the general business law, as added by chapter
    32  127 of the laws of 2002, is amended to read as follows:
    33    § 756-c. Retention. 1. By mutual agreement of the relevant parties  an
    34  owner may retain a reasonable amount of the contract sum as retainage. A
    35  contractor  or  subcontractor  may  also  retain a reasonable amount for
    36  retainage so long as the amount does not exceed  the  actual  percentage
    37  retained  by  the owner. Retainage shall be released by the owner to the
    38  contractor no later than thirty days after the  final  approval  of  the
    39  work  under a construction contract. In the event that an owner fails to
    40  release retainage as required by this  article,  or  the  contractor  or
    41  subcontractor  fails  to  release a proportionate amount of retainage to
    42  the relevant parties after receipt of  retainage  from  the  owner,  the
    43  owner,  contractor,  or  subcontractor,  as  the  case  may be, shall be
    44  subject to the payment of interest at the rate of one percent per  month
    45  on the date retention was due and owing.
    46    2.  Notwithstanding the provisions of subdivision one of this section,
    47  no portion of any payment due and owing to a material supplier for mate-
    48  rials which have been delivered, accepted and are covered by a  manufac-
    49  turer's  warranty,  and/or  graded  to  meet industry standards shall be
    50  retained by an owner, contractor or subcontractor.
    51    § 4. This act shall take effect on the thirtieth day  after  it  shall
    52  have become a law and shall apply to materials delivered and accepted on
    53  or after such effective date.
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