Relates to payment in construction contracts

Title of bill

An act to amend the state finance law and the general municipal law, in relation to payment in construction contracts

Purpose

To clarify the meaning of substantial completion and to ensure a timely correspondence and finish of construction projects.

Summary of provisions

Section 1 - Amends subdivision 1 of section 139-f of the state finance law, as added by chapter 769 of the laws of 1978.

Section 2 - Renumbers subdivision 1-a of section 139-f of the state finance law to 1-b and adds a new subdivision 1-a.

Section 3 - Amends subdivision 1 of section 106-b of the general municipal law, as amended by chapter 661 of the laws of 1992, paragraphs (a) and (c) as amended by chapter 98 of the laws of 1995.

Section 4 - Effective Date.

Justification

Under the current law relative to payment for public work, contractors and subcontractors are often required to wait a long period of time, sometimes as long as a year, following occupancy of a construction project, before retainage is released. The amount of that retainage can be as much as 5% of the contract.

The ambiguity in existing law relative to the definition of completion and release of retainage leads to unnecessary disputes, thereby delaying, the release of final retainage payments. More importantly, this ambiguity creates undue economic hardships for contractors and subcontractors many of which are Minority and Women Owned businesses that have completed the work required by the contract.

This bill would establish a new comprehensive definition of "substantial Completion" for public construction projects under State Finance Law and General Municipal Law. This bill would define substantial completion as when the work required by the contractor with the public owner is sufficiently completed so that the public owner may occupy or utilize the work for its intended use.

This bill would reform the contract payment process of retainage for owners, contractors, and subcontractors by establishing new procedures and timelines to clearly define all remaining items to be completed by the contractor and subcontractor. Within 14 days, the public owner shall submit to the contractor a written list describing all remaining items required to be completed by the contractor. No later than 7 days, the contractor shall submit to each subcontractor a written list of all remaining items to be completed by the subcontractor.

By establishing a new comprehensive definition of substantial completion of public construction projects and reforming the contract payment process of retainage, needless disputes and delays between owners and contractors would be greatly diminished.

Legislative history

New bill.

Fiscal implications

None to the State.

Effective date

This act shall take effect immediately and shall apply to contracts entered into on and after such effective date.