CHAPTER 5. PROMPT PAYMENT
IC 5-17-5
Chapter 5. Prompt Payment
IC 5-17-5-1
Penalty for late payments of amounts due on public contracts
Sec. 1. (a) Except as provided in section 2 of this chapter, everystate agency and political subdivision shall pay a late paymentpenalty at a rate of one percent (1%) per month on amounts due onwritten contracts for public works, personal services, goods andservices, equipment, and travel whenever the state agency or politicalsubdivision fails to make timely payment.
(b) Except as provided in subsection (c), for the purposes of thissection, payment is timely if:
(1) a check or warrant is mailed or delivered on the datespecified for the amount specified in the applicable contractdocuments, or, if no date is specified, within thirty-five (35)days of:
(A) receipt of goods and services; or
(B) receipt of a properly completed claim.
(2) for any amount required to be withheld under state orfederal law, a check or warrant is mailed or delivered in theproper amount on the date the amount may be released underthe applicable law.
(c) For the purposes of this section, payment by a politicalsubdivision is timely if:
(1) a date for payment is not specified in an applicable contract;
(2) a claim:
(A) for payment for goods or services; and
(B) that must be approved by a local legislative body orboard;
is submitted to the body or board; and
(3) the political subdivision pays the claim within thirty-five(35) days following the first regularly scheduled meeting of thebody or board that is held at least ten (10) days after the bodyor board receives the claim.
As added by P.L.59-1983, SEC.1. Amended by P.L.52-1988, SEC.1;P.L.44-1996, SEC.1; P.L.260-1997(ss), SEC.47.
IC 5-17-5-2
Exemption; "good faith dispute" defined
Sec. 2. (a) Section 1 of this chapter does not apply to thefollowing:
(1) Interagency or intergovernmental transactions.
(2) Amounts payable to employees or prospective employees ofstate agencies or political subdivisions as reimbursement forexpenses.
(3) Claims subject to a good faith dispute, if before the date oftimely payment notice of the dispute is:
(A) sent by certified mail;
(B) personally delivered; or (C) sent in accordance with the procedure in the contract.
(4) Contracts entered into before September 1, 1983.
(5) Contracts related to highway or road construction,reconstruction, or maintenance, if:
(A) the Indiana department of transportation authorizespartial progress payments under IC 8-23-9-14; and
(B) each progress payment does not exceed five hundreddollars ($500).
(6) Claims, contracts, or projects that are to be paid forexclusively with federal funds.
(b) As used in subsection (a)(3), "good faith dispute" means:
(1) a contention by the state or political subdivision that goodsdelivered or services rendered were:
(A) of less quantity or quality than ordered or specified bycontract;
(B) faulty; or
(C) installed improperly; or
(2) any other reason giving cause for the withholding ofpayment by the state or political subdivision until such disputeis settled.
As added by P.L.59-1983, SEC.1. Amended by P.L.52-1988, SEC.2;P.L.18-1990, SEC.17.
IC 5-17-5-3
Funds for late payment penalties; accrual of late payment penalty;defective claims
Sec. 3. (a) The auditor of state shall pay a late payment penalty onbehalf of any state agency required to pay late payment penaltiesunder this chapter. The auditor of state shall pay the penalties fromfunds designated for administrative costs of the agency receiving thepublic works, personal services, goods and services, equipment, ortravel. The penalties may not be paid from other funds of the state.
(b) Any late payment penalty that remains unpaid at the end ofany thirty (30) day period shall be added to the principal amount ofthe debt and, thereafter, penalties shall accrue on that amount.
(c) In instances where a claim is filled out incorrectly, or wherethere is any defect or impropriety in a claim submitted, the auditor ofstate, any division of the Indiana department of administration thataccepts claims for payment, or a political subdivision, as appropriate,shall contact the vendor within ten (10) days. An error on thevendor's claim, if corrected within five (5) business days of being socontacted, may not result in the vendor being paid late.
As added by P.L.59-1983, SEC.1. Amended by P.L.44-1996, SEC.2.
IC 5-17-5-4
Late payment penalties to subcontractors; accrual of interest
Sec. 4. (a) This section applies to contractors receiving latepayment penalties under section 1 of this chapter.
(b) A contractor who is unable to make timely payments to asubcontractor because of a state agency or political subdivision's
failure to make timely payments to the contractor shall pay interestto the subcontractor at the rate of one percent (1%) per month on theamount due the subcontractor after the contractor receives paymentand any penalty paid under this chapter.
(c) Any interest that remains unpaid to the subcontractor at theend of any thirty (30) day period shall be added to the principalamount of the debt. After that time, interest accrues on the aggregateof the principal and unpaid interest.
As added by P.L.52-1988, SEC.3. Amended by P.L.44-1996, SEC.3.
IC 5-17-5-5
List of agencies paying late payment penalties
Sec. 5. (a) The auditor of state shall prepare a list that:
(1) identifies each state agency that has paid, or on whosebehalf the auditor of state has paid, a late payment penaltyunder this chapter; and
(2) states the sum paid by the agency or by the auditor of stateon behalf of the agency during the preceding year.
(b) The auditor of state shall submit the list prepared undersubsection (a) to:
(1) the governor; and
(2) the budget agency;
before August 1 of each year.
As added by P.L.52-1988, SEC.4. Amended by P.L.44-1996, SEC.4.