S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 980--A

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

Introduced  by  Sens.  LIBOUS,  GRIFFO, HANNON -- read twice and ordered
  printed, and when printed to be committed to the Committee on  Finance
  --  recommitted  to the Committee on Finance in accordance with Senate
  Rule  6,  sec.  8  --  committee  discharged,  bill  amended,  ordered
  reprinted as amended and recommitted to said committee

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:

  Section  1. Subdivisions 1 and 2 of section 139-f of the state finance
law, subdivision 1 as added by chapter 769  of  the  laws  of  1978  and
subdivision  2  as amended by section 16 of part MM of chapter 57 of the
laws of 2008, are amended to read as follows:
  1. Payment by public owners to contractors. The contractor shall peri-
odically, in accordance with the terms of the contract,  submit  to  the
public owner and/or [his] ITS agent a requisition for a progress payment
for  the  work  performed  and/or materials furnished to the date of the
requisition, less any amount previously  paid  to  the  contractor.  The
public  owner shall in accordance with the terms of the contract approve
and promptly pay the requisition for the progress payment less an amount
necessary to satisfy any claims, liens or judgments against the contrac-
tor which have not been suitably discharged and less any retained amount
as hereafter described. The public owner shall retain not more than five
per centum of each progress payment, NOT INCLUDING ANY PAYMENT FOR MATE-
RIALS PERTINENT TO THE PROJECT WHICH HAVE BEEN DELIVERED,  ACCEPTED  AND
ARE  COVERED  BY  A  MANUFACTURER'S  WARRANTY, AND/OR ARE GRADED TO MEET
INDUSTRY STANDARDS, to the contractor except that the public  owner  may

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
              

                                                           LBD04256-03-4

S. 980--A                           2

retain  in excess of five per centum but not more than ten per centum of
each progress payment, NOT INCLUDING ANY PAYMENT FOR MATERIALS PERTINENT
TO THE PROJECT WHICH HAVE BEEN DELIVERED, ACCEPTED AND ARE COVERED BY  A
MANUFACTURER'S  WARRANTY,  AND/OR ARE GRADED TO MEET INDUSTRY STANDARDS,
to the contractor provided that there are no requirements by the  public
owner  for  the contractor to provide a performance bond and a labor and
material bond both in the full amount of the contract. The public  owner
shall pay IN FULL, upon requisition from the contractor, for ALL materi-
als  pertinent  to  the project which have been delivered to the site or
off-site by the contractor and/or subcontractor and suitably stored  and
secured  as  required  by the public owner and the contractor [provided,
the public owner may limit such payment to  materials  in  short  and/or
critical  supply and materials specially fabricated for the project each
as defined in the contract]. When the work or major portions thereof  as
contemplated  by  the terms of the contract are substantially completed,
the contractor shall submit to the public owner and/or [his] ITS agent a
requisition for payment of the remaining amount of the contract balance.
Upon receipt of such requisition the  public  owner  shall  approve  and
promptly pay the remaining amount of the contract balance less two times
the value of any remaining items to be completed and an amount necessary
to  satisfy  any claims, liens or judgments against the contractor which
have not been suitably discharged. As the remaining items  of  work  are
satisfactorily  completed  or corrected, the public owner shall promptly
pay, upon receipt of a requisition, for these remaining  items  less  an
amount  necessary  to satisfy any claims, liens or judgments against the
contractor which have not been suitably discharged.  Any  claims,  liens
and  judgments  referred to in this section shall pertain to the project
and shall be filed in  accordance  with  the  terms  of  the  applicable
contract and/or applicable laws.
  2.  Payment  by  contractors  to subcontractors. Within seven calendar
days of the receipt of any payment from the public owner, the contractor
shall pay each of [his] ITS subcontractors and materialmen the  proceeds
from  the  payment  representing  the value of the work performed and/or
materials furnished by the subcontractor and/or materialman and reflect-
ing  the  percentage  of  the  subcontractor's  work  completed  or  the
materialman's material supplied in the requisition approved by the owner
and  based  upon  the  actual value of the subcontract or purchase order
less an amount necessary to  satisfy  any  claims,  liens  or  judgments
against  the  subcontractor  or materialman which have not been suitably
discharged and, WITH REGARD TO SUBCONTRACTORS, less any retained  amount
as hereafter described. Failure by the contractor to pay any subcontrac-
tor  or  materialman  within  seven  calendar days of the receipt of any
payment from the public owner  shall  result  in  the  commencement  and
accrual  of interest on amounts due to such subcontractor or materialman
for the period beginning on the day immediately following the expiration
of such seven calendar day period  and  ending  on  the  date  on  which
payment  is made by the contractor to such subcontractor or materialman.
Such interest payment shall be the sole responsibility of  the  contrac-
tor,  and  shall  be  paid at the rate of interest in effect on the date
payment is made by the contractor.  Notwithstanding any other  provision
of  law  to  the contrary, interest shall be computed at the rate estab-
lished in paragraph (b) of subdivision  one  of  section  seven  hundred
fifty-six-b of the general business law. The contractor shall retain not
more  than  five per centum of each payment to the subcontractor [and/or
materialman] except that the contractor may retain in excess of five per
centum but not more than ten per centum of each payment to  the  subcon-

S. 980--A                           3

tractor  provided  that  prior  to  entering into a subcontract with the
contractor, the subcontractor  is  unable  or  unwilling  to  provide  a
performance  bond and a labor and material bond, both in the full amount
of  the  subcontract,  at the request of the contractor.  THE CONTRACTOR
SHALL PAY IN FULL, UPON PAYMENT BY THE PUBLIC OWNER, FOR  ALL  MATERIALS
PERTINENT  TO  THE  PROJECT WHICH HAVE BEEN DELIVERED TO AND ACCEPTED AT
THE SITE OR OFF-SITE BY A MATERIALMAN AND ARE COVERED BY  A  MANUFACTUR-
ER'S  WARRANTY,  AND/OR  ARE GRADED TO MEET INDUSTRY STANDARDS. However,
EXCEPT IN THE CASE OF A MATERIALMAN WHO IS ALSO CONTRACTED TO INSTALL  A
PRODUCT HE/SHE DELIVERED, the contractor shall retain nothing from those
payments representing proceeds owed the subcontractor and/or materialman
from  the  public  owner's  payments to the contractor for the remaining
amounts of the contract balance as provided in subdivision one  of  this
section.  If  the  contractor  has  failed  to  submit a requisition for
payment of the remaining amounts of the contract balance  within  ninety
days  of  substantial  completion as provided in subdivision one of this
section, then any clause in the subcontract between the  contractor  and
the  subcontractor  or  materialman  which  states  that  payment by the
contractor to such  subcontractor  or  materialman  is  contingent  upon
payment  by  the owner to the contractor shall be deemed invalid. Within
seven calendar days of the receipt of payment from the  contractor,  the
subcontractor and/or materialman shall pay each of [his] ITS subcontrac-
tors  and  materialmen in the same manner as the contractor has paid the
subcontractor, including interest  as  herein  provided  above.  Nothing
provided  herein  shall  create any obligation on the part of the public
owner to pay or to see to the payment of any moneys to any subcontractor
or materialman from any contractor nor shall  anything  provided  herein
serve  to  create  any relationship in contract or otherwise, implied or
expressed, between the  subcontractor  or  materialman  and  the  public
owner.
  S 2. Paragraph (a) of subdivision 1 and subdivision 2 of section 106-b
of  the general municipal law, paragraph (a) of subdivision 1 as amended
by chapter 98 of the laws of  1995  and  subdivision  2  as  amended  by
section  15 of part MM of chapter 57 of the laws of 2008, are amended to
read as follows:
  (a) The contractor shall periodically, in accordance with the terms of
the contract, submit to the public owner and/or [his] ITS agent a requi-
sition for a progress payment for the work  performed  and/or  materials
furnished to the date of the requisition less any amount previously paid
to  the  contractor. The public owner shall in accordance with the terms
of the contract  approve  and  promptly  pay  the  requisition  for  the
progress  payment  less an amount necessary to satisfy any claims, liens
or judgments  against  the  contractor  which  have  not  been  suitably
discharged  and  less  any  retained  amount as hereafter described. The
public owner shall retain not more than five per centum of each progress
payment, NOT INCLUDING  ANY  PAYMENT  FOR  MATERIALS  PERTINENT  TO  THE
PROJECT  WHICH  HAVE  BEEN  DELIVERED,  ACCEPTED  AND  ARE  COVERED BY A
MANUFACTURER'S WARRANTY, AND/OR ARE GRADED TO MEET  INDUSTRY  STANDARDS,
to  the  contractor except that the public owner may retain in excess of
five per centum but not more  than  ten  per  centum  of  each  progress
payment,  NOT  INCLUDING  ANY  PAYMENT  FOR  MATERIALS  PERTINENT TO THE
PROJECT WHICH HAVE  BEEN  DELIVERED,  ACCEPTED  AND  ARE  COVERED  BY  A
MANUFACTURER'S  WARRANTY,  AND/OR ARE GRADED TO MEET INDUSTRY STANDARDS,
to the contractor provided that there are no requirements by the  public
owner  for  the contractor to provide a performance bond and a labor and
material bond both in the full amount of the contract. The public  owner

S. 980--A                           4

shall pay IN FULL, upon requisition from the contractor, for ALL materi-
als  pertinent  to  the project which have been delivered to the site or
off-site by the contractor and/or subcontractor and suitably stored  and
secured  as  required  by the public owner and the contractor [provided,
the public owner may limit such payment to  materials  in  short  and/or
critical  supply and materials specially fabricated for the project each
as defined in the contract]. When the work or major portions thereof  as
contemplated  by  the terms of the contract are substantially completed,
the contractor shall submit to the public owner and/or [his] ITS agent a
requisition for payment of the remaining amount of the contract balance.
Upon receipt of such requisition the  public  owner  shall  approve  and
promptly pay the remaining amount of the contract balance less two times
the value of any remaining items to be completed and an amount necessary
to  satisfy  any claims, liens or judgments against the contractor which
have not been suitably discharged. As the remaining items  of  work  are
satisfactorily  completed  or corrected, the public owner shall promptly
pay, upon receipt of a requisition,  for  these  items  less  an  amount
necessary to satisfy any claims, liens or judgments against the contrac-
tor which have not been suitably discharged. Any claims, liens and judg-
ments referred to in this section shall pertain to the project and shall
be  filed in accordance with the terms of the applicable contract and/or
applicable laws. Where the public owner is other than the  city  of  New
York,  the  term  "promptly  pay" shall mean payment within thirty days,
excluding legal holidays, of receipt  of  the  requisition  unless  such
requisition  is  not  approvable  in  accordance  with  the terms of the
contract. Notwithstanding the foregoing, where the public owner is other
than the city of New York and is a municipal corporation which  requires
an  elected  official to approve progress payments, "promptly pay" shall
mean payment  within  forty-five  days,  excluding  legal  holidays,  of
receipt  of the requisition unless such requisition is not approvable in
accordance with the terms of the contract.
  2. Payment by contractors to  subcontractors.  Within  seven  calendar
days of the receipt of any payment from the public owner, the contractor
shall  pay each of [his] ITS subcontractors and materialmen the proceeds
from the payment representing the value of  the  work  performed  and/or
materials furnished by the subcontractor and/or materialman and reflect-
ing  the  percentage  of  the  subcontractor's  work  completed  or  the
materialman's material supplied in the requisition approved by the owner
and based upon the actual value of the  subcontract  or  purchase  order
less  an  amount  necessary  to  satisfy  any claims, liens or judgments
against the subcontractor or materialman which have  not  been  suitably
discharged  and, WITH REGARD TO SUBCONTRACTORS, less any retained amount
as hereafter described. Failure by the contractor to make  any  payment,
including  any  remaining amounts of the contract balance as hereinafter
described, to any subcontractor or  materialman  within  seven  calendar
days of the receipt of any payment from the public owner shall result in
the  commencement and accrual of interest on amounts due to such subcon-
tractor or materialman for the period beginning on the  day  immediately
following the expiration of such seven calendar day period and ending on
the  date on which payment is made by the contractor to such subcontrac-
tor or materialman. Such interest shall be the  sole  responsibility  of
the  contractor,  and shall be paid at the rate of interest in effect on
the date payment is made by the contractor.  Notwithstanding  any  other
provision of law to the contrary, interest shall be computed at the rate
established in paragraph (b) of subdivision one of section seven hundred
fifty-six-b of the general business law. The contractor shall retain not

S. 980--A                           5

more  than  five per centum of each payment to the subcontractor [and/or
materialman] except that the contractor may retain in excess of five per
centum but not more than ten per centum of each payment to  the  subcon-
tractor  provided  that  prior  to  entering into a subcontract with the
contractor, the subcontractor  is  unable  or  unwilling  to  provide  a
performance  bond  and a labor and material bond both in the full amount
of the subcontract at the request  of  the  contractor.  THE  CONTRACTOR
SHALL  PAY  IN FULL, UPON PAYMENT BY THE PUBLIC OWNER, FOR ALL MATERIALS
PERTINENT TO THE PROJECT WHICH HAVE BEEN DELIVERED TO  AND  ACCEPTED  AT
THE  SITE  OR OFF-SITE BY A MATERIALMAN AND ARE COVERED BY A MANUFACTUR-
ER'S WARRANTY, AND/OR ARE GRADED TO MEET  INDUSTRY  STANDARDS.  However,
EXCEPT  IN THE CASE OF A MATERIALMAN WHO IS ALSO CONTRACTED TO INSTALL A
PRODUCT HE/SHE DELIVERED, the contractor shall retain nothing from those
payments representing proceeds owed the subcontractor and/or materialman
from the public owner's payments to the  contractor  for  the  remaining
amounts  of  the contract balance as provided in subdivision one of this
section. If the contractor  has  failed  to  submit  a  requisition  for
payment  of  the remaining amounts of the contract balance within ninety
days of substantial completion as provided in subdivision  one  of  this
section,  then  any clause in the subcontract between the contractor and
the subcontractor or  materialman  which  states  that  payment  by  the
contractor  to  such  subcontractor  or  materialman  is contingent upon
payment by the owner to the contractor shall be deemed  invalid.  Within
seven  calendar  days of the receipt of payment from the contractor, the
subcontractor and/or materialman shall pay each of [his] ITS subcontrac-
tors and materialmen in the same manner as the contractor has  paid  the
subcontractor,  including  interest  as herein provided above.   Nothing
provided herein shall create any obligation on the part  of  the  public
owner to pay or to see to the payment of any moneys to any subcontractor
or  materialman  from  any contractor nor shall anything provided herein
serve to create any relationship in contract or  otherwise,  implied  or
expressed,  between  the  subcontractor  or  materialman  and the public
owner.
  S 3. Section 756-c of the general business law, as  added  by  chapter
127 of the laws of 2002, is amended to read as follows:
  S  756-c. Retention. 1. By mutual agreement of the relevant parties an
owner may retain a reasonable amount of the contract sum as retainage. A
contractor or subcontractor may also  retain  a  reasonable  amount  for
retainage  so  long  as the amount does not exceed the actual percentage
retained by the owner. Retainage shall be released by the owner  to  the
contractor  no  later  than  thirty days after the final approval of the
work under a construction contract. In the event that an owner fails  to
release  retainage  as  required  by  this article, or the contractor or
subcontractor fails to release a proportionate amount  of  retainage  to
the  relevant  parties  after  receipt  of retainage from the owner, the
owner, contractor, or subcontractor,  as  the  case  may  be,  shall  be
subject  to the payment of interest at the rate of one percent per month
on the date retention was due and owing.
  2. NOTWITHSTANDING THE PROVISIONS OF SUBDIVISION ONE OF THIS  SECTION,
NO PORTION OF ANY PAYMENT DUE AND OWING TO A MATERIAL SUPPLIER FOR MATE-
RIALS  WHICH HAVE BEEN DELIVERED, ACCEPTED AND ARE COVERED BY A MANUFAC-
TURER'S WARRANTY, AND/OR GRADED TO  MEET  INDUSTRY  STANDARDS  SHALL  BE
RETAINED BY AN OWNER, CONTRACTOR OR SUBCONTRACTOR.
  S  4.  This  act shall take effect on the thirtieth day after it shall
have become a law and shall apply to materials delivered and accepted on
or after such effective date.