 |
ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
public works; contracts; payment
Purpose
Outlines requirements for payment of contractors and subcontractors for changed or additional work in public construction contracts with certain government entities.
Background
Statute outlines requirements for the Arizona Department of Transportation (ADOT) to contract with a contractor for highway construction projects and for state agencies subject to the Arizona Procurement Code, counties, cities, towns and certain special taxing districts (government entities) to contract with a contractor for public construction contracts. The Director of ADOT administers all highway and maintenance work, directs the preparation of all plans and specifications and supervises construction for work on state highways (A.R.S. § 28-6922).
For highway construction projects with ADOT or public construction contracts with government entities, progress payments may be made to the contractor based on duly certified and approved estimates of work performed during a preceding period of time. In the case of public construction contracts between technical registrants and a county, city, town or special taxing district that are for projects over $500,000 and for more than 90 days, progress payments are required to be made. An estimate of work submitted by a contractor is deemed approved 7 days after submission, unless ADOT or the government entity submits a written finding detailing items in the estimate that are not approved. ADOT or the government entity may withhold an amount sufficient to pay expenses reasonably expected to incur in correcting deficiencies outlined in the written finding. Progress payments are required to be paid within 14 days of certification and approval of the work estimate.
The contractor and subcontractors in a highway construction contract with ADOT or a public construction contract with a government entity are required to pay their subcontractors, design professionals and material suppliers within 7 days of receiving each progress payment, unless otherwise agreed in writing. Any diversion by a contractor or subcontractor of payments received for work performed on a contract or failure to reasonably account for the application of those payments constitutes grounds for disciplinary action by the Registrar of Contractors. A contractor or subcontractor may withhold payments to subcontractors, design professionals or material suppliers for certain statutorily authorized reasons, including unsatisfactory job progress, defective construction work or disputed work or materials (A.R.S. §§ 28-6924; 34-221; 34-609; and 41-2577).
The Arizona Procurement Code
The Arizona
Procurement Code regulates the buying, purchasing, renting, leasing and
acquiring of materials, services and construction services by Arizona using
public monies. The procurement process is overseen by the Arizona Department of
Administration (ADOA), with the Director of ADOA acting as the Central Procurement
Officer of Arizona (A.R.S.
§ 41-2511). Certain public bodies, including the Arizona Board of Regents
(ABOR) and the legislative and judicial branches, are exempt from requirements
of the Arizona Procurement Code. ABOR and the judicial branch must adopt rules
prescribing procurement policies and procedures (A.R.S.
§ 41-2501). Additionally, the State Board of Education is required to adopt
rules for procurement practices for all school districts in Arizona (A.R.S.
§ 15-213).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires construction project procurement rules adopted by the following entities to comply with statutory prompt payment and payment for changed or additional work requirements:
a) the State Board of Education for school districts;
b) ABOR for themselves and institutions under their jurisdiction; and
c) the judicial branch for themselves and institutions under their jurisdiction.
2. Allows a contractor directed to perform changed or additional work by ADOT or a government entity, pending a final determination of the total cost to be paid, to request payment for the changed or additional work that the contractor completed during the preceding calendar month in monthly pay estimates based on the costs incurred by the contractor.
3. Allows a subcontractor, pending a final determination of the total cost to be paid, to request payment for changed or additional work that the subcontractor completed during the preceding calendar month in monthly pay estimates based on the costs incurred by the subcontractor, if:
a) ADOT or a government entity directs the contractor to perform changed or additional work in accordance with the public construction contract; and
b) the contractor directs the subcontractor to perform the changed or additional work in accordance with an agreement between the contractor and subcontractor.
4. Requires the person designated in the public construction contract to certify and approve the monthly payment estimate to:
a) make an interim determination for approval for payment of the costs of changed or additional work; and
b) certify the amount the person determines to be reasonably justified.
5. Allows a party to disagree with the interim determination and assert a claim in accordance with the terms of the public construction contract or the agreement between the contractor and subcontractor.
6. Requires reasonable attorney fees to be awarded to the successful party in any action or arbitration relating to progress payments or payments for changed or additional work.
7. Defines construction contract, contractor, subcontractor and work relating to public construction contracts with government entities.
8. Makes technical and conforming changes.
9. Becomes effective on the general effective date.
Prepared by Senate Research
February 6, 2020
MH/kja