34-609

34-609. Contracts for
construction-manager-at-risk, design-build and
job-order-contracting construction services; payments to
contractor; security; recovery of damages by contractor for delay;
progress payments

A. An agent shall enter into a contract with the selected person or firm for
construction-manager-at-risk construction services, design-build construction services or
job-order-contracting construction services.

B. 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 by this chapter.

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 the contract may include payment for material and equipment, but to ensure the
proper performance of the 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 on
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 after the
determination.

4. On 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,
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, engineer or other person, as specified
in the contract.

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 an agent longer than sixty days after final completion and acceptance requires a
specific written finding by the agent of the reasons justifying the delay in payment. No
agent may retain any monies after sixty days that are in excess of the amount necessary
to pay the expenses the agent reasonably expects to incur in order to pay or discharge
the expenses determined by the agent 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 that
are retained by the agent as a guarantee for complete performance of the contract. If the
agent accepts substitute security as described in this paragraph for the ten per cent
retention, the contractor is entitled to receive all interest or income earned by this
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 this public work is
entitled to provide substitute security to the contractor on terms and conditions similar
to those described in paragraph 5, and this security is in lieu of any retention under
the subcontract.

7. Notwithstanding paragraphs 1 through 6, any other provision of this section and
any other law, there is no retention for job-order-contracting construction services
contracts and the agent may elect to have no retention for construction-manager-at-risk
and design-build construction services contracts.

C. No contract for construction services 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 B.

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

E. A contract for the procurement of construction services shall include a
provision that 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, that is unreasonable under the circumstances and that was not
within the contemplation of the parties to the contract. This section shall not be
construed to void any provision in the contract that requires notice of delays, provides
for arbitration or other procedures for settlement or provides for liquidated damages.

F. 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 the subcontractors, to the extent of
each subcontractor's interest, except that no contract for construction services may
materially alter the rights of any contractor, subcontractor or material supplier to
receive prompt and timely payment as provided under this section. The 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
those payments, constitutes grounds for disciplinary action by the registrar of
contractors. The subcontractor or material supplier shall notify the registrar of
contractors and the agent 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.

G. A subcontractor may notify the agent in writing requesting that the
subcontractor be notified by the agent 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.

H. Nothing in this chapter prevents the contractor or subcontractor, at the time of
application and certification to the owner or contractor, from withholding the
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.

I. 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 the unpaid balance
as may be due.

J. 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 the subcontractor or material
supplier interest, beginning on the eighth day, at the rate of one per cent per month or
fraction of a month on the unpaid balance as may be due.

K. Notwithstanding anything to the contrary in this section, this section applies
only to amounts payable in a construction services contract for construction and does not
apply to amounts payable in a construction services contract for design services,
preconstruction services, finance services, maintenance services, operations services and
other related services.