41-2577. Progress payments
A. Progress payments may be made by this state to the contractor on the basis of a
duly certified and approved estimate of the work performed during a preceding period of
time as set by rule, except that a percentage of all estimates shall be retained as
provided in section 41-2576. 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. An estimate of the
work submitted under this section shall be deemed approved and certified 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 detailing those items in the estimate of the work
that are not approved and certified 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. On completion and
acceptance of separate divisions of the contract on which the price is stated separately
in the contract, payment may be made in full including retained percentages, less
deductions, unless a substitute security has been provided pursuant to section
41-2576. 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.
B. 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 contractor's or subcontractor's
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. These 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.
C. 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.
D. 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.
E. 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 a fraction of the month on such unpaid
balance as may be due.
F. If any periodic or final payment to a subcontractor is delayed by more than
seven days after receipt of periodic or final payment by the contractor or subcontractor,
the contractor or subcontractor shall pay the contractor's or subcontractor's
subcontractor or material supplier interest, beginning on the eighth day, at the rate of
one per cent per calendar month or a fraction of a calendar month on such unpaid balance
as may be due.
G. 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 or
any other related services included in the contract.
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