§103-10.5  Prompt payment.  (a)  Anymoney paid to a contractor shall be disbursed to subcontractors within ten daysafter receipt of the money in accordance with the terms of the subcontract;provided that the subcontractor has met all the terms and conditions of thesubcontract and there are no bona fide disputes on which the procurementofficer has withheld payment.

(b)  Upon final payment to the contractor, fullpayment to the subcontractor, including retainage, shall be made within tendays after receipt of the money; provided there are no bona fide disputes overthe subcontractor's performance under the subcontract.

(c)  Where a subcontractor has providedevidence to the contractor of satisfactorily completing all work under theirsubcontract and has provided a properly documented final payment request asdescribed in subsection (d) of this section, and:

(1)  Has provided to the contractor an acceptableperformance and payment bond for the project executed by a surety companyauthorized to do business in the State, as provided in section 103-32.1; or

(2)  The following has occurred:

(A)  A period of ninety days after theday on which the last of the labor was done or performed and the last of thematerial was furnished or supplied has elapsed without written notice of aclaim given to contractor and the surety, as provided for in section 103D-324;and

(B)  The subcontractor has provided tothe contractor:

(i)  An acceptable release of retainage bond,executed by a surety company authorized to do business in the State, in anamount of not more than two times the amount being retained or withheld by thecontractor;

(ii)  Any other bond acceptable to thecontractor; or

(iii)  Any other form of mutually acceptablecollateral,

all sums retained or withheld from a subcontractorand otherwise due to the subcontractor for satisfactory performance under thesubcontract shall be paid by the procurement officer to the contractor andsubsequently, upon receipt from the procurement officer, by the contractor tothe subcontractor within the applicable time periods specified in subsection(b) and section 103-10.  If the procurement officer or the contractor fails topay in accordance with this section, a penalty of one and one-half per cent permonth shall be imposed upon the outstanding amounts due that were not timelypaid by the responsible party.  The penalty may be withheld from future paymentdue to the contractor, if the contractor was the responsible party.  If acontractor has violated subsection (b) three or more times within two years ofthe first violation, the contractor shall be referred by the procurementofficer to the contractor license board for action under section 444-17(14).

(d)  A properly documented final paymentrequest from a subcontractor, as required by subsection (c), shall include:

(1)  Substantiation of the amounts requested;

(2)  A certification by the subcontractor, to the bestof the subcontractor's knowledge and belief, that:

(A)  The amounts requested are only forperformance in accordance with the specifications, terms, and conditions of thesubcontract;

(B)  The subcontractor has made payments due toits subcontractors and suppliers from previous payments received under thesubcontract and will make timely payments from the proceeds of the paymentcovered by the certification, in accordance with their subcontract agreementsand the requirements of this section; and

(C)  The payment request does not include anyamounts that the subcontractor intends to withhold or retain from asubcontractor or supplier in accordance with the terms and conditions of theirsubcontract; and

(3)  The submission of documentation confirming thatall other terms and conditions required under the subcontract agreement havebeen fully satisfied.

The procurement officer shall return any finalpayment request that is defective to the contractor within seven days afterreceipt, with a statement identifying the defect.

(e)  In the case of a construction contract, apayment request made by a contractor to the procurement officer that includes arequest for sums that were withheld or retained from a subcontractor and aredue to a subcontractor may not be approved under subsection (c) unless thepayment request includes:

(1)  Substantiation of the amounts requested; and

(2)  A certification by the contractor, to the best ofthe contractor's knowledge and belief, that:

(A)  The amounts requested are only forperformance in accordance with the specifications, terms, and conditions of thecontract;

(B)  The subcontractor has made payments due toits subcontractors and suppliers from previous payments received under thecontract and will make timely payments from the proceeds of the payment coveredby the certification, in accordance with their subcontract agreements and therequirements of this section; and

(C)  The payment request does not include anyamounts that the contractor intends to withhold or retain from a subcontractoror supplier in accordance with the terms and conditions of their subcontract.

The procurement officer shall return any finalpayment request that is defective to the contractor within seven days afterreceipt, with a statement identifying the defect.

(f)  This section shall not be construed toimpair the right of a contractor or a subcontractor at any tier to negotiateand to include in their respective subcontracts provisions that provide foradditional terms and conditions that are requested to be met before thesubcontractor shall be entitled to receive final payment under subsection (c)of this section; provided that any such payments withheld shall be withheld bythe procurement officer. [L 1983, c 277, §1; am L 2000, c 164, §2; am L 2006, c291, §2]