A 7098: Relates to payment by public owners to contractors and subcontractors.

  
  STATE OF NEW YORK ________________________________________________________________________ 7098 2025-2026 Regular Sessions  IN ASSEMBLY March 20, 2025 ___________ Introduced by M. of A. BICHOTTE HERMELYN, HYNDMAN, SEAWRIGHT, WALKER -- 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 payment by public owners to contractors and subcontractors The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The opening paragraph and subdivisions 1 and 2 of section 2 139-f of the state finance law, the opening paragraph as added by chap- 3 ter 769 of the laws of 1978, subdivision 1 as amended by chapter 128 of 4 the laws of 2021 and subdivision 2 as amended by section 16 of part MM 5 of chapter 57 of the laws of 2008, are amended to read as follows: 6 Notwithstanding the provisions of any other law to the contrary, 7 except the provisions of section thirty-eight of the highway law, all 8 contracts made and awarded by the state, or by any public department, or 9 by any public benefit corporation or by any public corporation or offi- 10 cial thereof, hereafter referred to as the public owner, for 11 construction, reconstruction or alteration of any public work project 12 shall provide for payment by the public owner to the contractor and 13 [payment by the contractor] to the subcontractor or subcontractors in 14 accordance with the following: 15 1. Payment by public owners to contractors. The contractor shall peri- 16 odically, in accordance with the terms of the contract, submit to the 17 public owner and/or [his] the public owner's agent a requisition for a 18 progress payment for the work performed and/or materials furnished to 19 the date of the requisition by the contractor and all subcontractors, 20 less any amount previously paid to the contractor or subcontractors. The 21 public owner shall in accordance with the terms of the contract approve 22 and promptly pay the requisition for the progress payment less an amount 23 necessary to satisfy any claims, liens or judgments against the contrac- 24 tor or subcontractors which have not been suitably discharged and less 25 any retained amount as hereafter described. The public owner shall EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD10966-01-5 
 A. 7098 2 1 retain not more than five per centum of each progress payment to the 2 contractor and subcontractors, except that the public owner may retain 3 in excess of five per centum but not more than ten per centum of each 4 progress payment to the contractor provided that there are no require- 5 ments by the public owner for the contractor to provide a performance 6 bond and a labor and material bond both in the full amount of the 7 contract. The public owner shall pay, upon requisition from the contrac- 8 tor, for materials pertinent to the project which have been delivered to 9 the site or off-site by the contractor [and/or subcontractor] and suit- 10 ably stored and secured as required by the public owner and the contrac- 11 tor provided, the public owner may limit such payment to materials in 12 short and/or critical supply and materials specially fabricated for the 13 project each as defined in the contract, including balances owed to 14 subcontractors. When the work or major portions thereof as contemplated 15 by the terms of the contract are substantially completed, the contractor 16 shall submit to the public owner and/or [his] the public owner's agent a 17 requisition for payment of the remaining amount of the contract balance. 18 Upon receipt of such requisition the public owner shall approve and 19 promptly pay the remaining amount of the contract balance less two times 20 the value of any remaining items to be completed and an amount necessary 21 to satisfy any claims, liens or judgments against the contractor which 22 have not been suitably discharged. As the remaining items of work are 23 satisfactorily completed or corrected, the public owner shall promptly 24 pay, upon receipt of a requisition, for these remaining items less an 25 amount necessary to satisfy any claims, liens or judgments against the 26 contractor which have not been suitably discharged. Any claims, liens 27 and judgments referred to in this section shall pertain to the project 28 and shall be filed in accordance with the terms of the applicable 29 contract and/or applicable laws. 30 2. Payment by [contractors] public owners to subcontractors. [Within 31 seven calendar days of the receipt] (a) Each subcontractor shall period- 32 ically, in accordance with the terms of the contract, submit to the 33 public owner and/or the public owner's agent and to the contractor 34 and/or the contractor's agent a requisition for a progress payment for 35 the work performed and/or materials furnished to the date of the requi- 36 sition, less any amount previously paid to the contractor. At the time 37 of any payment [from] by the public owner[,] to the contractor as 38 provided in subdivision one of this section, the public owner shall pay 39 each of [his] the subcontractors and materialmen the proceeds from the 40 payment representing the value of the work performed and/or materials 41 furnished by the subcontractor and/or materialman and reflecting the 42 percentage of the subcontractor's work completed or the materialman's 43 material supplied in the requisition approved by the owner and based 44 upon the actual value of the subcontract or purchase order less an 45 amount necessary to satisfy any claims, liens or judgments against the 46 subcontractor or materialman which have not been suitably discharged and 47 less any retained amount as hereafter described. [Failure by the 48 contractor to pay any subcontractor or materialman within seven calendar 49 days of the receipt of any payment from the public owner shall result in 50 the commencement and accrual of interest on amounts due to such subcon- 51 tractor or materialman for the period beginning on the day immediately 52 following the expiration of such seven calendar day period and ending on 53 the date on which payment is made by the contractor to such subcontrac- 54 tor or materialman. Such interest payment shall be the sole responsibil- 55 ity of the contractor, and shall be paid at the rate of interest in 56 effect on the date payment is made by the contractor. Notwithstanding 
 A. 7098 3 1 any other provision of law to the contrary, interest shall be computed 2 at the rate established in paragraph (b) of subdivision one of section 3 seven hundred fifty-six-b of the general business law. The contractor 4 shall retain not more than five per centum of each payment to the 5 subcontractor and/or materialman except that the contractor may retain 6 in excess of five per centum but not more than ten per centum of each 7 payment to the subcontractor provided that prior to entering into a 8 subcontract with the contractor, the subcontractor is unable or unwill- 9 ing to provide a performance bond and a labor and material bond, both in 10 the full amount of the subcontract, at the request of the contractor. 11 However, the contractor shall retain nothing from those payments repres- 12 enting proceeds owed the subcontractor and/or materialman from the 13 public owner's payments to the contractor for the remaining amounts of 14 the contract balance as provided in subdivision one of this section. If 15 the contractor has failed to submit a requisition for payment of the 16 remaining amounts of the contract balance within ninety days of substan- 17 tial completion as provided in subdivision one of this section, then any 18 clause in the subcontract between the contractor and the subcontractor 19 or materialman which states that payment by the contractor to such 20 subcontractor or materialman is contingent upon payment by the owner to 21 the contractor shall be deemed invalid. Within seven calendar days of 22 the receipt of payment from the contractor, the subcontractor and/or 23 materialman shall pay each of his subcontractors and materialmen in the 24 same manner as the contractor has paid the subcontractor, including 25 interest as herein provided above. Nothing provided herein shall create 26 any obligation on the part of the public owner to pay or to see to the 27 payment of any moneys to any subcontractor or materialman from any 28 contractor nor shall anything provided herein serve to create any 29 relationship in contract or otherwise, implied or expressed, between the 30 subcontractor or materialman and the public owner.] The public owner 31 shall retain not more than five per centum of each progress payment to 32 the subcontractor except that the public owner may retain in excess of 33 five per centum but not more than ten per centum of each progress 34 payment to the subcontractor provided that there are no requirements by 35 the public owner for the subcontractor to provide a performance bond and 36 a labor and material bond both in the full amount of the contract. The 37 public owner shall pay, upon requisition from the contractor as provided 38 in subdivision one of this section, for materials pertinent to the 39 project which have been delivered to the site or off-site by the subcon- 40 tractor and suitably stored and secured as required by the public owner 41 and the subcontractor provided, the public owner may limit such payment 42 to materials in short and/or critical supply and materials specially 43 fabricated for the project each as defined in the contract. When the 44 work or major portions thereof as contemplated by the terms of the 45 contract are substantially completed, the subcontractor shall submit to 46 the contractor and/or the contractor's agent a requisition for payment 47 of the remaining amount of the contract balance. The contractor shall 48 submit a contract requisition containing all requisitions from subcon- 49 tractors to the public owner. Upon receipt of such requisition the 50 public owner shall approve and promptly pay the remaining amount of the 51 contract balance less two times the value of any remaining items to be 52 completed and an amount necessary to satisfy any claims, liens or judg- 53 ments against the subcontractor which have not been suitably discharged. 54 As the remaining items of work are satisfactorily completed or 55 corrected, the public owner shall promptly pay, upon receipt of a requi- 56 sition, for these remaining items less an amount necessary to satisfy 
 A. 7098 4 1 any claims, liens or judgments against the subcontractor which have not 2 been suitably discharged. Any claims, liens and judgments referred to in 3 this section shall pertain to the project and shall be filed in accord- 4 ance with the terms of the applicable contract and/or applicable laws. 5 (b) As used in this section, "subcontractor" means only those subcon- 6 tractors that report directly to the main contractor with whom the 7 public owner has entered into the contract, and does not include subcon- 8 tractors of subcontractors. 9 § 2. The opening paragraph and subdivisions 1 and 2 of section 106-b 10 of the general municipal law, the opening paragraph as amended by chap- 11 ter 661 of the laws of 1992, subdivision 1 as amended by chapter 128 of 12 the laws of 2021 and subdivision 2 as amended by section 15 of part MM 13 of chapter 57 of the laws of 2008, are amended to read as follows: 14 Notwithstanding the provisions of any other law to the contrary, all 15 contracts made and awarded by the appropriate officer, board or agency 16 of a political subdivision or of any district therein, hereafter 17 referred to as the public owner, for construction, reconstruction or 18 alteration of any public work project shall provide for payment by the 19 public owner to the contractor and [payment by the contractor] to the 20 subcontractor or subcontractors in accordance with the following: 21 1. Payment by public owners to contractors. (a) The contractor shall 22 periodically, in accordance with the terms of the contract, submit to 23 the public owner and/or [his] the public owner's agent a requisition for 24 a progress payment for the work performed and/or materials furnished to 25 the date of the requisition by the contractor and all subcontractors 26 less any amount previously paid to the contractor or subcontractors. The 27 public owner shall in accordance with the terms of the contract approve 28 and promptly pay the requisition for the progress payment less an amount 29 necessary to satisfy any claims, liens or judgments against the contrac- 30 tor or subcontractors which have not been suitably discharged and less 31 any retained amount as hereafter described. The public owner shall 32 retain not more than five per centum of each progress payment to the 33 contractor or subcontractors except that the public owner may retain in 34 excess of five per centum but not more than ten per centum of each 35 progress payment to the contractor provided that there are no require- 36 ments by the public owner for the contractor to provide a performance 37 bond and a labor and material bond both in the full amount of the 38 contract. The public owner shall pay, upon requisition from the contrac- 39 tor, for materials pertinent to the project which have been delivered to 40 the site or off-site by the contractor [and/or subcontractor] and suit- 41 ably stored and secured as required by the public owner and the contrac- 42 tor provided, the public owner may limit such payment to materials in 43 short and/or critical supply and materials specially fabricated for the 44 project each as defined in the contract. When the work or major portions 45 thereof as contemplated by the terms of the contract are substantially 46 completed, the contractor shall submit to the public owner and/or [his] 47 the public owner's agent a requisition for payment of the remaining 48 amount of the contract balance, including balances owed to subcontrac- 49 tors. Upon receipt of such requisition the public owner shall approve 50 and promptly pay the remaining amount of the contract balance less two 51 times the value of any remaining items to be completed and an amount 52 necessary to satisfy any claims, liens or judgments against the contrac- 53 tor which have not been suitably discharged. As the remaining items of 54 work are satisfactorily completed or corrected, the public owner shall 55 promptly pay, upon receipt of a requisition, for these items less an 56 amount necessary to satisfy any claims, liens or judgments against the 
 A. 7098 5 1 contractor which have not been suitably discharged. Any claims, liens 2 and judgments referred to in this section shall pertain to the project 3 and shall be filed in accordance with the terms of the applicable 4 contract and/or applicable laws. Where the public owner is other than 5 the city of New York, the term "promptly pay" shall mean payment within 6 thirty days, excluding legal holidays, of receipt of the requisition 7 unless such requisition is not approvable in accordance with the terms 8 of the contract. Notwithstanding the foregoing, where the public owner 9 is other than the city of New York and is a municipal corporation which 10 requires an elected official to approve progress payments, "promptly 11 pay" shall mean payment within forty-five days, excluding legal holi- 12 days, of receipt of the requisition unless such requisition is not 13 approvable in accordance with the terms of the contract. 14 (b) Not later than forty-five business days after the date when the 15 project has reached substantial completion, as such term is defined in 16 the contract or as it is contemplated by the terms of the contract, the 17 public owner shall submit to the contractor a written list describing 18 all remaining items to be completed by the contractor. Not later than 19 five business days after receiving a written list describing all remain- 20 ing items to be completed by the contractor, the contractor shall submit 21 to each subcontractor from whom the contractor is withholding retainage 22 a written list of all remaining items required to be completed by the 23 subcontractor. Such list may include items in addition to those items on 24 the public owner's list. 25 (c) Each public owner other than the city of New York which is 26 required to make a payment from public funds pursuant to a contract and 27 which does not make such contract payment by the required payment date 28 shall make an interest payment to the contractor on the amount of the 29 contract payment which is due unless failure to make such contract 30 payment is the result of a lien, attachment, or other legal process 31 against the money due said contractor, or unless the amount of the 32 interest payment as computed in accordance with the provisions set forth 33 hereinafter is less than ten dollars. Interest payments on amounts due 34 to a contractor pursuant to this paragraph shall be paid to the contrac- 35 tor for the period beginning on the day after the required payment date 36 and ending on the payment date for those payments required according to 37 this section and shall be paid at the rate of interest in effect on the 38 date when the interest payment is made. Notwithstanding any other 39 provision of law to the contrary, interest shall be computed at the rate 40 equal to the overpayment rate set by the commissioner of taxation and 41 finance pursuant to subsection (e) of section one thousand ninety-six of 42 the tax law. A pro rata share of such interest shall be paid by the 43 contractor or subcontractor, as the case may be, to subcontractors and 44 materialmen in a proportion equal to the percentage of their pro rata 45 share of the contract payment. Such pro rata share of interest shall be 46 due to such subcontractors and materialmen only for those payments which 47 are not paid to such subcontractors and materialmen prior to the date 48 upon which interest begins to accrue between the public owner and the 49 contractor. Such pro rata shares of interest shall be computed daily 50 until such payments are made to the subcontractors and materialmen. 51 (d) For projects of a public owner other than the city of New York, if 52 state funds directly related to and which have been budgeted for the 53 construction of the project for which the payment is due have not been 54 received prior to the expiration of the thirty or forty-five days speci- 55 fied in paragraph (a) of this subdivision, the interest provided for in 56 paragraph (c) of this subdivision shall not begin to accrue and payment 
 A. 7098 6 1 shall not be due, until ten days after receipt of the state funds. Noth- 2 ing in this paragraph shall prevent the public owner from approving the 3 requisition, subject to receipt of the state funds. State funds shall 4 mean monies provided to the public owner by the state, its officers, 5 boards, departments, commissions, or a public authority and public bene- 6 fit corporation, a majority of the members of which have been appointed 7 by the governor or who serve as members by virtue of holding a civil 8 office of the state, or a combination thereof. 9 2. Payment by [contractors] public owners to subcontractors. [Within 10 seven calendar days of the receipt] (a) Each subcontractor shall period- 11 ically, in accordance with the terms of the contract, submit to the 12 public owner and/or the public owner's agent and to the contractor 13 and/or the contractor's agent a requisition for a progress payment for 14 the work performed and/or materials furnished to the date of the requi- 15 sition, less any amount previously paid to the contractor. At the time 16 of any payment [from] by the public owner[,] to the contractor as 17 provided in subdivision one of this section, the public owner shall pay 18 each of [his] the subcontractors and materialman the proceeds from the 19 payment representing the value of the work performed and/or materials 20 furnished by the subcontractor and/or materialmen and reflecting the 21 percentage of the subcontractor's work completed or the materialmen's 22 material supplied in the requisition approved by the owner and based 23 upon the actual value of the subcontract or purchase order less an 24 amount necessary to satisfy any claims, liens or judgments against the 25 subcontractor or materialman which have not been suitably discharged and 26 less any retained amount as hereafter described. [Failure by the 27 contractor to make any payment, including any remaining amounts of the 28 contract balance as hereinafter described, to any subcontractor or 29 materialman within seven calendar days of the receipt of any payment 30 from the public owner shall result in the commencement and accrual of 31 interest on amounts due to such subcontractor or materialman for the 32 period beginning on the day immediately following the expiration of such 33 seven calendar day period and ending on the date on which payment is 34 made by the contractor to such subcontractor or materialman. Such inter- 35 est shall be the sole responsibility of the contractor, and shall be 36 paid at the rate of interest in effect on the date payment is made by 37 the contractor. Notwithstanding any other provision of law to the 38 contrary, interest shall be computed at the rate established in para- 39 graph (b) of subdivision one of section seven hundred fifty-six-b of the 40 general business law. The contractor shall retain not more than five per 41 centum of each payment to the subcontractor and/or materialman except 42 that the contractor may retain in excess of five per centum but not more 43 than ten per centum of each payment to the subcontractor provided that 44 prior to entering into a subcontract with the contractor, the subcon- 45 tractor is unable or unwilling to provide a performance bond and a labor 46 and material bond both in the full amount of the subcontract at the 47 request of the contractor. However, the contractor shall retain nothing 48 from those payments representing proceeds owed the subcontractor and/or 49 materialman from the public owner's payments to the contractor for the 50 remaining amounts of the contract balance as provided in subdivision one 51 of this section. If the contractor has failed to submit a requisition 52 for payment of the remaining amounts of the contract balance within 53 ninety days of substantial completion as provided in subdivision one of 54 this section, then any clause in the subcontract between the contractor 55 and the subcontractor or materialman which states that payment by the 56 contractor to such subcontractor or materialman is contingent upon 
 A. 7098 7 1 payment by the owner to the contractor shall be deemed invalid. Within 2 seven calendar days of the receipt of payment from the contractor, the 3 subcontractor and/or materialman shall pay each of his subcontractors 4 and materialmen in the same manner as the contractor has paid the 5 subcontractor, including interest as herein provided above. Nothing 6 provided herein shall create any obligation on the part of the public 7 owner to pay or to see to the payment of any moneys to any subcontractor 8 or materialman from any contractor nor shall anything provided herein 9 serve to create any relationship in contract or otherwise, implied or 10 expressed, between the subcontractor or materialman and the public 11 owner.] The public owner shall retain not more than five per centum of 12 each progress payment to the subcontractor except that the public owner 13 may retain in excess of five per centum but not more than ten per centum 14 of each progress payment to the subcontractor provided that there are no 15 requirements by the public owner for the subcontractor to provide a 16 performance bond and a labor and material bond both in the full amount 17 of the contract. The public owner shall pay, upon requisition from the 18 contractor as provided in subdivision one of this section, for materials 19 pertinent to the project which have been delivered to the site or off- 20 site by the subcontractor and suitably stored and secured as required by 21 the public owner and the subcontractor provided, the public owner may 22 limit such payment to materials in short and/or critical supply and 23 materials specially fabricated for the project each as defined in the 24 contract. When the work or major portions thereof as contemplated by the 25 terms of the contract are substantially completed, the subcontractor 26 shall submit to the contractor and/or the contractor's agent a requisi- 27 tion for payment of the remaining amount of the contract balance. The 28 contractor shall submit a contract requisition containing all requi- 29 sitions from subcontractors to the public owner. Upon receipt of such 30 requisition the public owner shall approve and promptly pay the remain- 31 ing amount of the contract balance less two times the value of any 32 remaining items to be completed and an amount necessary to satisfy any 33 claims, liens or judgments against the subcontractor which have not been 34 suitably discharged. As the remaining items of work are satisfactorily 35 completed or corrected, the public owner shall promptly pay, upon 36 receipt of a requisition, for these remaining items less an amount 37 necessary to satisfy any claims, liens or judgments against the subcon- 38 tractor which have not been suitably discharged. Any claims, liens and 39 judgments referred to in this section shall pertain to the project and 40 shall be filed in accordance with the terms of the applicable contract 41 and/or applicable laws. 42 (b) As used in this section, "subcontractor" means only those subcon- 43 tractors that report directly to the main contractor with whom the 44 public owner has entered into the contract, and does not include subcon- 45 tractors of subcontractors. 46 § 3. This act shall take effect immediately. Effective immediately 47 the addition, amendment and/or repeal of any rule or regulation neces- 48 sary for the implementation of this act on its effective date are 49 authorized to be made and completed on or before such date.