34-221

34-221. Contract with successful bidder;
payments to contractor; security; recovery of damages by contractor
for delay; progress payments

A. The agent shall enter into a contract with the lowest responsible bidder whose
proposal is satisfactory, except that in determining the lowest responsible bidder under
this section, the board of supervisors may consider, for no more than five projects, the
time of completion proposed by the bidder, the value over time of completed services and
facilities and the value over time of interrupted services if the board determines that
this procedure will serve the public interest by providing a substantial fiscal benefit
or that the use of the traditional awarding of contracts is not practicable for meeting
desired construction standards or delivery schedules and if the formula for considering
the time of completion is specifically stated in the bidding information.

B. In determining the lowest responsible bidder for a horizontal construction
project using the design-bid-build project delivery method, an agent may consider the
time of completion proposed by the bidder if the agent determines that this procedure
will serve the public interest by providing a substantial fiscal benefit or that the use
of the traditional awarding of contracts is not practicable for meeting desired
construction standards or delivery schedules and if the formula for considering the time
of completion is specifically stated in the bidding information.

C. The terms of a contract entered into pursuant to subsection A shall include the
following items:

1. A surety company bond or bonds as required under this article.

2. The owner by mutual agreement may make progress payments on contracts of less
than ninety days and shall make monthly progress payments on all other contracts as
provided for in this paragraph. Payment to the contractor on the basis of a duly
certified and approved estimate of the work performed during the preceding calendar month
under such contract may include payment for material and equipment, but to insure the
proper performance of such contract, the owner shall retain ten per cent of the amount of
each estimate until final completion and acceptance of all material, equipment and work
covered by the contract. An estimate of the work submitted shall be deemed approved and
certified for payment after seven days from the date of submission unless before that
time the owner or owner's agent prepares and issues a specific written finding setting
forth those items in detail in the estimate of the work that are not approved for payment
under the contract. The owner may withhold an amount from the progress payment sufficient
to pay the expenses the owner reasonably expects to incur in correcting the deficiency
set forth in the written finding. The progress payments shall be paid on or before
fourteen days after the estimate of the work is certified and approved. The estimate of
the work shall be deemed received by the owner on submission to any person designated by
the owner for the submission, review or approval of the estimate of the work.

3. When the contract is fifty per cent completed, one-half of the amount retained
including any securities substituted under paragraph 5 shall be paid to the contractor
upon the contractor's request provided the contractor is making satisfactory progress on
the contract and there is no specific cause or claim requiring a greater amount to be
retained. After the contract is fifty per cent completed, no more than five per cent of
the amount of any subsequent progress payments made under the contract may be retained
providing the contractor is making satisfactory progress on the project, except that if
at any time the owner determines satisfactory progress is not being made ten per cent
retention shall be reinstated for all progress payments made under the contract
subsequent to the determination.

4. Upon completion and acceptance of each separate building, public work or other
division of the contract on which the price is stated separately in the contract, except
as qualified in paragraph 5, payment may be made in full, including retained percentages
thereon, less authorized deductions. In preparing estimates, the material and equipment
delivered on the site to be incorporated in the job shall be taken into consideration in
determining the estimated value by the architect or engineer.

5. Ten per cent of all estimates shall be retained by the agent as a guarantee for
complete performance of the contract, to be paid to the contractor within sixty days
after completion or filing notice of completion of the contract. Retention of payments
by a purchasing agency longer than sixty days after final completion and acceptance
requires a specific written finding by the purchasing agency of the reasons justifying
the delay in payment. No purchasing agency may retain any monies after sixty days which
are in excess of the amount necessary to pay the expenses the purchasing agency
reasonably expects to incur in order to pay or discharge the expenses determined by the
purchasing agency in the finding justifying the retention of monies. In lieu of the
retention provided in this section, the agent, at the option of the contractor, shall
accept as a substitute an assignment of time certificates of deposit of banks licensed by
this state, securities of or guaranteed by the United States of America, securities of
this state, securities of counties, municipalities and school districts within this state
or shares of savings and loan associations authorized to transact business in this state,
in an amount equal to ten per cent of all estimates which shall be retained by the agent
as a guarantee for complete performance of the contract. In the event the agent accepts
substitute security as described in this paragraph for the ten per cent retention, the
contractor shall be entitled to receive all interest or income earned by such security as
it accrues and all such security in lieu of retention shall be returned to the contractor
by the agent within sixty days after final completion and acceptance of all material,
equipment and work covered by the contract if the contractor has furnished the agent
satisfactory receipts for all labor and material billed and waivers of liens from any and
all persons holding claims against the work. In no event shall the agent accept a time
certificate of deposit of a bank or shares of a savings and loan association in lieu of
the retention specified unless accompanied by a signed and acknowledged waiver of the
bank or savings and loan association of any right or power to setoff against either the
agent or the contractor in relationship to the certificates or shares assigned.

6. In any instance where the agent has accepted substitute security as provided in
paragraph 5, any subcontractor undertaking to perform any part of such public work shall
be entitled to provide substitute security to the contractor upon terms and conditions
similar to those described in paragraph 5, and such security shall be in lieu of any
retention under the subcontract.

D. No contract for construction may materially alter the rights of any contractor,
subcontractor or material supplier to receive prompt and timely payment required to be
included in the contract under subsection C.

E. The contract shall be signed by the agent and the contractor.

F. A contract for the procurement of construction shall include a provision which
provides for negotiations between the agent and the contractor for the recovery of
damages related to expenses incurred by the contractor for a delay for which the agent is
responsible, which is unreasonable under the circumstances and which was not within the
contemplation of the parties to the contract. This section shall not be construed to
void any provision in the contract which requires notice of delays, provides for
arbitration or other procedure for settlement or provides for liquidated damages.

G. The contractor shall pay to the contractor's subcontractors or material
suppliers and each subcontractor shall pay to the subcontractor's subcontractor or
material supplier, within seven days of receipt of each progress payment, unless
otherwise agreed in writing by the parties, the respective amounts allowed the contractor
or subcontractor on account of the work performed by subordinate subcontractors, to the
extent of each such subcontractor's interest therein, except that no contract for
construction may materially alter the rights of any contractor, subcontractor or material
supplier to receive prompt and timely payment as provided under this section. Such
payments to subcontractors or material suppliers shall be based on payments received
pursuant to this section. Any diversion by the contractor or subcontractor of payments
received for work performed on a contract, or failure to reasonably account for the
application or use of such payments, constitutes grounds for disciplinary action by the
registrar of contractors. The subcontractor or material supplier shall notify the
registrar of contractors and the purchasing agency in writing of any payment less than
the amount or percentage approved for the class or item of work as set forth in this
section.

H. A subcontractor may notify the purchasing agency in writing requesting that the
subcontractor be notified by the purchasing agency in writing within five days from
payment of each progress payment made to the contractor. The subcontractor's request
remains in effect for the duration of the subcontractor's work on the project.

I. Nothing in this chapter prevents the contractor or subcontractor, at the time of
application and certification to the owner or contractor, from withholding such
application and certification to the owner or contractor for payment to the subcontractor
or material supplier for unsatisfactory job progress, defective construction work or
materials not remedied, disputed work or materials, third party claims filed or
reasonable evidence that a claim will be filed, failure of a subcontractor to make timely
payments for labor, equipment and materials, damage to the contractor or another
subcontractor, reasonable evidence that the subcontract cannot be completed for the
unpaid balance of the subcontract sum or a reasonable amount for retention that does not
exceed the actual percentage retained by the owner.

J. If any payment to a contractor is delayed after the date due interest shall be
paid at the rate of one per cent per month or fraction of a month on such unpaid balance
as may be due.

K. If any periodic or final payment to a subcontractor is delayed by more than
seven days after receipt of the periodic or final payment by the contractor or
subcontractor, the contractor or subcontractor shall pay a subordinate subcontractor or
material supplier interest, beginning on the eighth day, at the rate of one per cent per
month or a fraction of a month on such unpaid balance as may be due.