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



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



(c)  Where a subcontractor has provided
evidence to the contractor of satisfactorily completing all work under their
subcontract and has provided a properly documented final payment request as
described in subsection (d) of this section, and:



(1)  Has provided to the contractor an acceptable
performance and payment bond for the project executed by a surety company
authorized 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 the
day on which the last of the labor was done or performed and the last of the
material was furnished or supplied has elapsed without written notice of a
claim given to contractor and the surety, as provided for in section 103D-324;
and



(B)  The subcontractor has provided to
the contractor:



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



(ii)  Any other bond acceptable to the
contractor; or



(iii)  Any other form of mutually acceptable
collateral,



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



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



(1)  Substantiation of the amounts requested;



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



(A)  The amounts requested are only for
performance in accordance with the specifications, terms, and conditions of the
subcontract;



(B)  The subcontractor has made payments due to
its subcontractors and suppliers from previous payments received under the
subcontract and will make timely payments from the proceeds of the payment
covered by the certification, in accordance with their subcontract agreements
and the requirements of this section; and



(C)  The payment request does not include any
amounts that the subcontractor intends to withhold or retain from a
subcontractor or supplier in accordance with the terms and conditions of their
subcontract; and



(3)  The submission of documentation confirming that
all other terms and conditions required under the subcontract agreement have
been fully satisfied.



The procurement officer shall return any final
payment request that is defective to the contractor within seven days after
receipt, with a statement identifying the defect.



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



(1)  Substantiation of the amounts requested; and



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



(A)  The amounts requested are only for
performance in accordance with the specifications, terms, and conditions of the
contract;



(B)  The subcontractor has made payments due to
its subcontractors and suppliers from previous payments received under the
contract and will make timely payments from the proceeds of the payment covered
by the certification, in accordance with their subcontract agreements and the
requirements of this section; and



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



The procurement officer shall return any final
payment request that is defective to the contractor within seven days after
receipt, with a statement identifying the defect.



(f)  This section shall not be construed to
impair the right of a contractor or a subcontractor at any tier to negotiate
and to include in their respective subcontracts provisions that provide for
additional terms and conditions that are requested to be met before the
subcontractor shall be entitled to receive final payment under subsection (c)
of this section; provided that any such payments withheld shall be withheld by
the procurement officer. [L 1983, c 277, §1; am L 2000, c 164, §2; am L 2006, c
291, §2]