2013 -- S 0690

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LC01306

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO PUBLIC PROPERTY AND WORKS

     Introduced By: Senators Gallo, Lynch, P Fogarty, Lombardo, and Lombardi

     Date Introduced: March 06, 2013

     Referred To: Senate Labor

It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 37-13 of the General Laws entitled "Labor and Payment of Debts

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by Contractors" is hereby amended by adding thereto the following section:

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     37-13-4.1. Method of payment to subcontractors under certain public works

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contracts; deposit of amounts in dispute; Proceedings to enforce claims to amounts on

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deposit.-- (a) Every contract awarded under title 37 shall contain the following language:

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     (1) Forthwith after the general contractor receives payment on account of periodic

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estimate, the general contractor shall pay to each subcontractor the amount paid for the labor

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performed and the materials furnished by that subcontractor, less any amount specified in any

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court proceedings barring such payment and also less any amount claimed due from the

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subcontractor by the general contractor.

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     (2) Not later than the sixty-fifth (65th) day after each subcontractor substantially

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completes his/her work in accordance with the plans and specifications, the entire balance due

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under the subcontract, less amounts retained by the awarding authority as the estimated cost of

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completing the incomplete and unsatisfactory items of works, shall be due the subcontractor; and

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the awarding authority shall pay that amount to the general contractor. The general contractor

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shall forthwith pay to the subcontractor the full amount received from the awarding authority less

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any amount specified in any court proceedings barring such payment and also less any amount

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claimed due from the subcontractor by the general contractor.

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     (3) Each payment made by the awarding authority to the general contractor pursuant to

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subdivisions (a)(1) and (a)(2) of this section for the labor performed and the materials furnished

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by a subcontractor shall be made to the general contractor for the account of that subcontractor;

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and the awarding authority shall take reasonable steps to compel the general contractor to make

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each such payment to each subcontractor. If the awarding authority has received a demand for the

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direct payment from a subcontractor for any amount which has already been included in a

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payment to the general contractor or which is to be included in a payment to the general

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contractor for payment to the subcontractor as provided in subdivisions (a)(1) and (a)(2), the

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awarding authority shall act upon the demand as provided in this section.

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     (4) If, within seventy (70) days after the subcontractor has substantially completed the

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subcontract work, the subcontractor has not received from the general contractor the balance due

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under the subcontract including any amount due for extra labor and materials furnished to the

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general contractor, less any amount retained by the awarding authority as the estimated cost of

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completing the incomplete and unsatisfactory items of work, the subcontractor may demand

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direct payment of that balance from the awarding authority. The demand shall be by a sworn

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statement delivered to or sent by certified mail to the general contractor at the same time. The

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demand shall contain a detailed breakdown of the balance due under the subcontract and also a

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statement of the status of completion of the subcontract work shall be valid even if delivered or

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mailed prior to the seventieth (70th) day after the subcontractor has substantially completed the

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subcontractor work. Within ten (10) days after the subcontractor has delivered or so mailed the

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demand to the awarding authority and delivered or so mailed a copy to the general contractor, the

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general contractor may reply to the demand. The reply shall be by a sworn statement delivered to

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or sent by certified mail to the awarding authority and a copy shall be delivered to or sent by

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certified mail to the subcontractor at the same time. The reply shall contain a detailed breakdown

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of the balance due under the subcontract including any amount due for extra labor and materials

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furnished to the general contractor and of the amount due for each claim made by the general

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contractor against the subcontractor.

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     (5) Within fifteen (15) days after the receipt of the demand by the awarding authority, but

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in no event prior to the seventieth (70th) day after substantial completion of the subcontract work,

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the awarding authority shall make direct payment to the subcontractor of the balance due under

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the subcontract including any amount due for extra labor and materials furnished to the general

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contractor, less any amount: (i) Retained by the awarding authority as the estimated cost of

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completing the incomplete or unsatisfactory items of work; (ii) Specified in any court

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proceedings barring such payment; (iii) Disputed by the general contractor in the sworn reply;

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provided, that the awarding authority shall not deduct from a direct payment any amount as

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provided in part; or (iv) if the reply is not sworn to, or for which the sworn reply does not contain

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the detailed breakdown required by subdivision (a)(4). The awarding authority shall make further

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direct payments to the subcontractor forthwith after the removal of the basis for deductions from

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direct payments made as provided in paragraphs (i) and (ii) of this subsection.

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     (6) The awarding authority shall forthwith deposit the amount deducted from a direct

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payment as provided in paragraph (iii) subdivision (a)(5) in an interest-bearing joint account in

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the names of the general contractor and the subcontractor in a bank in Rhode Island selected by

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the awarding authority or agreed upon by the general contractor and the subcontractor and shall

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notify the general contractor and the subcontractor of the date of the deposit and the bank

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receiving the deposit. The bank shall pay the amount in the account, including accrued interest, as

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provided in an agreement between the general contractor and the subcontractor or as determined

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by decree of a court of competent jurisdiction.

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     (7) All direct payments and all deductions from demands for direct payments deposited in

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an interest-bearing account or accounts in a bank pursuant to subdivision (a)(6) shall be made out

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of amounts payable to the general contractor at the time of receipt of a demand for direct payment

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from a subcontractor and out of amounts which later become payable to the general contractor

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and in the order of receipt of such demands from subcontractors. All direct payments shall

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discharge the obligation of the awarding authority to the general contractor to the extent of such

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payment.

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     (8) The awarding authority shall deduct from payments to a general contractor amounts

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which, together with the deposits in interest-bearing accounts pursuant to subdivision (a)(6), are

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sufficient to satisfy all unpaid balances of demands for direct payment received from

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subcontractors. All such amounts shall be earmarked for such direct payments, and the

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subcontractors shall have a right in such deductions prior to any claims against such amounts by

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creditors of the general contractor.

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     (9) If the subcontractor does not receive payment as provided in subdivision (a)(1) or if

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the general contractor does not submit a periodic estimate for the value of the labor or materials

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performed or furnished by the subcontractor and the subcontractor does not receive payment for

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same when due less the deduction provided for in subdivision (a)(1), the subcontractor may

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demand direct payment by following the procedure in subdivision (a)(4) and the general

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contractor may file a sworn reply as provided in that same subdivision. A demand made after the

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first day of the month following that for which the subcontractor performed or furnished the labor

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and materials for which the subcontractor seeks payment shall be valid even if delivered or

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mailed prior to the time payment was due on a periodic estimate from the general contractor.

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Thereafter the awarding authority shall proceed as provided in subdivisions (a)(5) through (8).

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     (b) Any assignment by a subcontractor of the rights under this section to a surety

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company furnishing a bond under provisions of this title shall be invalid. The assignment and

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subrogation rights of the surety to amounts included in a demand for direct payment which are in

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the possession of the awarding authority or which are on deposit shall be subordinate to the rights

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of all subcontractors who are entitled to be paid under this section and who have not been paid in

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full.

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     (c) "Subcontractor" means, as used in subdivision (a)(9) for contracts awarded, a person

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who files a sub-bid and receives a subcontract as a result of that filed sub-bid or who is approved

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by the awarding authority in writing as a person performing labor or both performing labor and

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furnishing materials pursuant to a contract with the general contractor to supply materials used or

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employed in public works project for a price in excess of five thousand dollars ($5,000).

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     (d) A general contractor or a subcontractor shall enforce a claim to any portion of the

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amount of a demand for direct payment deposited by a petition in equity in the superior court

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against the other and the bank shall not be a necessary party. A subcontractor shall enforce a

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claim for direct payment or a right to require a deposit by a petition in equity in the superior court

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against the awarding authority and the general contractor shall not be a necessary party. Upon

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motion of any party the court shall advance for speedy trial any petition filed as provided in this

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paragraph. The court shall enter an interlocutory decree upon which execution shall issue for any

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part of a claim found due and, upon motion of any party, shall advance for speedy trial the

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petition to collect the remainder of the claim. Any party aggrieved by such interlocutory decree

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shall have the right to appeal therefrom as from a final decree. The court shall not consolidate for

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trial the petition of any subcontractor with the petition of one or more subcontractors or the same

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general contractor unless the court finds that a substantial portion of the evidence of the same

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events during the course of construction (other than the fact the claims sought to be consolidated

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arise under the same general contract) is applicable to the petitions sought to be consolidated and

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that such consolidation will prevent unnecessary duplication of evidence. A decree in any such

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proceeding shall not include interest on the disputed amount deposited in excess of the interest

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direct earned for the period of any such deposit. No person except a subcontractor filing a

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demand for direct payment for which no funds due the general contractor are available for direct

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payment shall have a right to file a petition in a court of equity against the awarding authority

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claiming a demand for direct payment premature and such subcontractor must file the petition

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before the awarding authority has made a direct payment to the subcontractor and has made a

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deposit of the disputed portion.

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     (e) In any petition to collect any claim for which a subcontractor has filed a demand for

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direct payment the court shall, upon motion of the general contractor, reduce by the amount of

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any deposit of a disputed amount by the awarding authority and any amount held under a trustee

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writ of pursuant to a restraining order or injunction.

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     SECTION 2. This act shall take effect upon passage.

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LC01306

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PUBLIC PROPERTY AND WORKS

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     This act would provide for procedures to assist and facilitate payment to subcontractors

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involved in public works contracts.

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     This act would take effect upon passage.

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LC01306

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