The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Governmental Oversight and Accountability
BILL: CS/SB 346
INTRODUCER: Community Affairs Committee and Senator DiCeglie
SUBJECT: Public Construction
DATE: March 28, 2023
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Hunter Ryon CA Fav/CS
2. Harmsen McVaney GO Pre-meeting
3. RC
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 346 requires each contract for construction services between a local government entity
and a contractor to include the estimated cost of each item necessary to complete the work. The
contract balance must be paid within 20 days after such list is created, subject to certain
exceptions.
The bill limits local governments’ ability to withhold certain amounts under the contract to only
those subject to a written good faith dispute or claims against public surety bonds. A state entity
must submit a payment request to the CFO on a shortened 14-day timeframe from its receipt. A
local government must pay the undisputed portions of an invoice or payment request according
to the terms of the contract or 20 days after it receives the request, whichever is sooner. A local
government must commence proceedings to resolve a disputed invoice or payment request
within 30 days after receipt and must render its final decision within 45 days from receipt.
The bill revises the definition of “public works project” to prohibit the imposition of certain
requirements on contractors for certain public construction projects that exceed $350,000, in
which either state or local funds are used.
The bill may have a negative fiscal impact on local governments; however, the impact is
indeterminate.
The bill takes effect July 1, 2023.
REVISED: BILL: CS/SB 346 Page 2
II. Present Situation:
Prompt Payments for Public Construction Contracts
Contracts between local governments and private contractors for construction of public projects
are subject to prompt payment requirements. The Local Government Prompt Payment Act
1
provides for timely payment by local governmental entities
2
to construction contractors.
3
If an
agent of the local government is not required to approve payment, then payment is due 20
business days after receipt of the payment request or invoice.
4
If local government agent approval is required, payment is due 25 business days after proper
receipt.
5
A local government must identify its agent, employee, facility, or office to which the
contractor may submit a payment request.
6
Once an agent, employee, facility, or office receives a
contractor’s payment request, it must stamp the request as received; this begins the time period
for payment or rejection of a payment request.
7
If a payment request does not meet the contract requirements, the local government must reject
the request in writing within 20 business days after its receipt. The rejection must specify both
the deficiency and its resolution.
8
If the contractor corrects the deficiency, the local government
must pay the corrected payment request or invoice on the later of 10 business days after it
received the corrected invoice, or, if the local government must approve the invoice, the first
business day after its next regularly scheduled meeting.
9
If a dispute between the local government and the contractor cannot be resolved by a local
government’s requirement for cure letter, the dispute must be resolved using the dispute
resolution procedure or applicable ordinance provided in the contract.
10
Absent a prescribed
procedure, the dispute must be resolved pursuant to a dispute resolution procedure established by
the local government.
11
If a local government disputes a portion of a payment request or an invoice, it must still timely
pay the undisputed portion.
12
A contractor who receives a local government’s payment for labor,
services, or materials must remit payments due to its subcontractors and suppliers within 10 days
1
Section 218.70, F.S.
2
A county or municipal government, school board, school district, authority, special taxing district, other political subdivision, or any
office, board, bureau, commission, department, branch, division, or institution thereof. Section 218.72(5), F.S.
3
Section 218.71, F.S. A contractor is one who contracts directly with a local government to provide construction services.
Section 218.72(3), F.S.
4
Section 218.735(1)(b), F.S.
5
Section 218.735(1)(a), F.S. Proper receipt occurs when the payment request or invoice is stamped as received on the day that it is
delivered to an agent or employee of the local government entity or of a facility or office of the local governmental entity, as provided in
s. 218.74(1), F.S.
6
Section 218.735(1)(b), F.S. This requirement must be included in the contract or provided by the local governmental in a separate written
notice, as required under the contract, no later than 10 days after the contract award or notice to proceed.
7
Section 218.735(1)(b), F.S.
8
Section 218.735(2), F.S.
9
Section 218.735(3), F.S.
10
Section 218.735(4), F.S.
11
Section 218.76(2), F.S.
12
Section 218.735(5), F.S. Payment must be made within 25 days after the payment request or invoice is properly received, or within 20
days of the submission of an invoice by a contractor (if an agent does not need to approve the payment). BILL: CS/SB 346 Page 3
after it receives payment from the local government. A subcontractor must remit payments due
to its subcontractors and suppliers within 7 days after it receives payment.
13
Deliverables List
Each local government contract for construction services must provide for the development of a
single list of items required to render complete, satisfactory, and acceptable construction services
purchased by the local governmental entity.
14
The contract must specify the process and a
reasonable time for developing the list, including the responsibilities of the local government and
the contractor in developing and reviewing the list.
15
Generally, the deliverables list (also called
a “punch list”) is required to be created after substantial completion of the construction project
and must include those projects necessary to repair or complete the project in its entirety.
16
For construction projects of less than $10 million, the list must be developed within 30 calendar
days after reaching substantial completion of construction as defined in the contract or, if not
defined, upon reaching beneficial occupancy or use.
17
The general deadline for completion of the
list for construction projects that cost $10 million or more is the same (30 days after reaching
substantial completion), but the deadline may be extended by contract to up to 60 calendar days
after reaching substantial completion of construction as defined in the contract or, if not so
defined, upon reaching beneficial occupancy or use.
18
The local government’s contract must
specify the date that the deliverables list must be given to the contractor. This date cannot be
later than 5 days after the deliverables list completion and review.
If the project relates to construction services on more than one building or structure, or involves
a multi-phased project, the same general timeframes apply for creation of a deliverables list, but
a list must be created for each building, structure, or phase of the project.
19
The final contract completion date must be at least 30 days after the deliverables list is given to
the contractor. If the list is not provided to the contractor by the agreed upon delivery date, the
contract’s completion date must be extended by the number of days the local government
exceeded the list delivery date. Damages may not be assessed against a contractor for its failure
to complete a project within the time required, unless the contractor failed to complete the
project within the contract period as extended.
20
The failure to include any corrective work or
pending items not yet completed on the list does not alter the responsibility of the contractor to
complete all the construction services purchased pursuant to the contract.
21
13
Section 218.735(6), F.S.
14
Section 218.735(7), F.S.
15
Section 218.735(7)(a), F.S.
16
See, e.g., Town of Jupiter Island, Construction General Conditions, s. 9.4, https://townofjupiterisland.com/wp-
content/uploads/2019/01/Construction-General-Conditions.pdf (last visited Mar. 27, 2023); and Monroe County, Florida,
General Conditions of the Contract for Construction, s. 9.8.2, https://www.monroecounty-
fl.gov/DocumentCenter/View/28603/General-Requirements-from-RFP_22021---DO-NOT-DELETE?bidId= (last visited
Mar. 27, 2023).
17
Section 218.735(7)(a)1., F.S.
18
Section 218.735(7)(a)2., F.S.
19
Section 218.735(7)(b), F.S.
20
Section 218.735(7)(c), F.S.
21
Section 218.735(7)(d), F.S. BILL: CS/SB 346 Page 4
Retainage
A local government can withhold up to 5 percent of each progress payment as retainage.
22
Once
a contractor has completed all items on the deliverables list, it can submit a payment request for
all remaining retainage withheld by the local government.
23
If a good faith dispute exists as to
whether one or more items on the deliverables list have been properly completed, the local
government may continue to withhold up to 150 percent of the total costs to complete such
items.
24
All items requiring correction to complete the contract and that are identified after
preparation and delivery of the list remain the contractor’s obligation as defined by the
contract.
25
Warranty items or items not included in the list may not affect the final payment of
retainage nor payment as provided in contracts between the contractor and its subcontractors and
suppliers.
26
A local government or contractor cannot withhold retainage to secure payment of
insurance premiums, and the final payment of retainage may not be delayed pending a final audit
by the local government’s or contractor’s insurance provider.
27
If a local government fails to develop the deliverables list in a timely manner, the contractor may
submit a payment request for all remaining retainage withheld by the local government and
payment of any remaining undisputed contract amounts, less any amount withheld under the
contract for incomplete or uncorrected work, which must be paid within 20 business days after
receipt of a request. If the local government gives the contractor written notice that it failed to
meet contract requirements in developing the deliverables list, then the local government need
not pay or process any payment request for retainage.
28
Improper Payment Requests and Resolution of Disputes
If a vendor submits an improper payment request, the local government must notify the vendor
that its request is improper within 10 days of its receipt. The local government’s notice must
indicate what corrective action is required.
29
If a dispute arises between a vendor and a local government concerning a payment request, the
dispute is adjudicated under the dispute resolution procedure established the local governmental
entity. Proceedings to resolve the dispute must begin within 45 days after the date the payment
request was received; the local government must render its final decision within 60 days after the
date the payment request was received. If the dispute is resolved in favor of the local
government, interest begins to accrue 15 days after the final decision. If the dispute is resolved in
favor of the vendor, interest accrual relates back to the original date the payment became due.
30
22
Section 218.735(8), F.S.
23
Section 218.735(7)(e), F.S.
24
Id.
25
Section 218.735(7)(f), F.S.
26
Section 218.735(7)(g), F.S.
27
Section 218.735(7)(h), F.S.
28
Section 218.735(7)(i), F.S.
29
Section 218.76(1), F.S.
30
Section 218.76(2)(a), F.S. BILL: CS/SB 346 Page 5
Public Entity Construction Contracts
State government public construction contracts are subject to the Florida Prompt Payment Act.
31
If a public entity
32
disputes a portion of a payment request, the undisputed portion must be timely
paid.
33
Under procedures established by the public entity, each payment request is marked as received
on the date it is delivered to the agent, employee, designated facility or office of the public entity.
If the terms under which a purchase is made allow for partial deliveries and a payment request is
submitted for a partial delivery, the time for such payment must be calculated from the time of
the partial delivery and the submission of the payment request. A public entity must submit a
payment request to the Chief Financial Officer for payment no more than 20 days after receipt.
34
Prohibited Governmental Actions Related to Public Works Projects
Except as required by federal or state law, the state or any political subdivision
35
that contracts
for a public works project
36
may not:
Prevent a certified, licensed, or registered contractor, subcontractor, or material supplier or
carrier, from participating in the bidding process based on the geographic location of the
company headquarters or offices of the contractor, subcontractor, or material supplier or
carrier submitting a bid on a public works project or the residences of employees of such
contractor, subcontractor, or material supplier or carrier;
Require a contractor, subcontractor, or material supplier or carrier engaged in the project to:
o Pay employees a predetermined amount of wages or prescribe any wage rate;
o Provide employees a specified type, amount, or rate of employee benefits;
o Control, limit, or expand staffing; or
o Recruit, train, or hire employees from a designated, restricted, or single source.
Prohibit any contractor, subcontractor, or material supplier or carrier from submitting a bid
on the project if such individual is able to perform the work described and is qualified,
licensed, or certified as required by state law.
37
The foregoing governmental actions are prohibited only for projects that:
Exceed $1 million in value;
Are paid for with any state-appropriated funds; and
31
Section 255.0705, F.S. This act expressly excludes local governments as defined in s. 218.72, F.S. Section 255.072(5), F.S.
32
The state, or any office, board, bureau, commission, department, branch, division, or institution thereof. Section 255.072(5), F.S.
33
Section 255.073(2), F.S.
34
Section 255.074, F.S.
35
“Political subdivision” means a separate agency or unit of local government created or established by law or ordinance and
the officers thereof. The term includes, but is not limited to, a county; a city, town, or other municipality; or a department,
commission, authority, school district, taxing district, water management district, board, public corporation, institution of
higher education, or other public agency or body thereof authorized to expend public funds for construction, maintenance,
repair, or improvement of public works. See s. 255.0992(1)(a), F.S.
36
“Public works project” means an activity exceeding $1 million in value that is paid for with any state-appropriated funds
and which consists of the construction, maintenance, repair, renovation, remodeling, or improvement of a building, road,
street, sewer, storm drain, water system, site development, irrigation system, reclamation project, gas or electrical distribution
system, gas or electrical substation, or other facility, project, or portion thereof that is owned in whole or in part by any
political subdivision. See s. 255.0992(1)(b), F.S.
37
Section 255.0992, F.S. BILL: CS/SB 346 Page 6
Are to construct, maintain, repair, renovate, remodel, or improve any building, road, street,
sewer, storm drain, water system, site development, irrigation system, reclamation project,
gas or electrical distribution system, gas or electrical substation, or other facility, project, or
portion thereof that is owned in whole or in part by any political subdivision.
38
Under current law, a political subdivision, for instance, may impose the otherwise prohibited
requirements on contractors for projects that are paid for entirely with local funds or, if state
funds are used, for projects up to $1 million.
III. Effect of Proposed Changes:
Prompt Pay for Public Construction
The bill amends the requirements for construction service contracts between local government
and contractors for public construction projects.
List of Deliverables
Under section 1 of the bill, a local government’s deliverables list, which evinces the projects or
goods that are required to complete the contract, must assign a dollar valuation required to
complete each item on the list. The contractor’s valuation must be reasonably determined as a
portion of the contract value.
The bill removes the local government’s ability to extend the timeframe in which a deliverables
list must be agreed upon. Therefore, parties to all contracts—whether they are valued at more or
less than $10 million—must create the list within 30 calendar days after the contractor reaches
substantial completion of the project.
If a local government fails to develop a deliverables list within 30 days of the project’s
substantial completion, then the contractor may at that time, submit a payment request for all
remaining unpaid contract sums, including the retainage, and the local government must pay it
within 20 days. Conversely, if a contractor fails to coordinate with the local government to create
a deliverables list in the required timeframe and the local government has given written notice of
the failure, then the local government may keep back 150 percent of the estimated costs required
to complete its version of the deliverables list, from its payment due to the contractor of the
remaining contract balance, which includes the retainage.
The bill adds a new requirement that the local government pay the remaining contract balance
within 20 days after the list of deliverables has been developed. This payment must include the
remaining retainage withheld, minus the estimated cost to complete the items on the list of
deliverables. The bill makes conforming, non-substantive changes to reflect that the local
government cannot withhold the retainage until the contract is fully completed, but may withhold
up to 150 percent of the amount assigned to the incomplete projects on the list of deliverables.
Once the contractor completes all items on the list of deliverables, it may submit a payment
request for all remaining contract sums that have been withheld by the local government up to
38
Section 255.0992(1)(b), F.S. BILL: CS/SB 346 Page 7
this point—which are limited to 150 percent of the value given to those incomplete projects on
the deliverables list. The local government must pay, unless a good faith dispute exists regarding
the completion of one or more items on the deliverables list, pursuant to the contract. If a good
faith dispute exists, then the local government can continue to withhold up to 150 percent of the
total cost to complete those items.
Pursuant to the bill, a local government can no longer withhold any amounts for payment or
release that are subject to a claim or demand by the local government or contractor, limiting
withholding only for good faith disputes made in writing pursuant to the contract or for certain
bond claims disputed pursuant to s. 255.05, F.S.
Payment Disputes, s. 218.76, F.S.
Section 2 of the bill reduces the time afforded for a contract dispute regarding improper
payment. A local government must begin its dispute proceeding within 30 days after it received a
contractor’s payment request. The local agency must render a final decision in the dispute within
45 days of its receipt of the payment request, versus 60 days.
Public Entity Provisions
Section 5 of the bill requires construction contracts with public entities to also require the
creation of a deliverables list with an itemized list of the costs associated with projects required
to complete the contract, consistent with changes to local government construction contracts.
If the public entity fails to coordinate to create the list of deliverables, then it must pay the
contractor all retainage withheld within 20 days of receipt of the contractor’s payment request.
However, a public entity is not required to pay or process a payment request for retainage if the
contractor did not cooperate or failed to perform its contractual duties in the development of the
deliverables list.
Section 3 of the bill requires a public entity to pay the undisputed portions of a construction
contractor’s payment request, as required under the contract or within 20 days of the request,
whichever is earlier.
Section 4 reduces the time in which a public entity must submit a payment request to the Chief
Financial Officer for payment from 20 to 14 days after its receipt of the payment request.
Section 6 of the bill clarifies that the public entity is always permitted to withhold a retainage
payment that is the subject of a good faith dispute or the subject of a claims against public surety
bonds, but can no longer withhold amounts that are subject to a claim or demand by the public
entity or the contractor.
Public Works Projects
Section 7 of the bill amends the definition of “public works project” in s. 255.0992, F.S., to
reduce the project threshold from $1 million to $350,000, for which the governmental actions BILL: CS/SB 346 Page 8
identified in s. 255.0992(2)(b)-(c), F.S., are prohibited. The bill also applies those prohibited
governmental actions to public works projects paid for with local funds.
With this change, political subdivisions,
39
cannot, for example, exclude certain contractors from
bidding on a public works project or impose certain wage and employment conditions on
contractors if the value of the project exceeds $350,000 and is paid for with any local or state-
appropriated funds.
Section 8 provides that the bill takes effect on July 1, 2023.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
Not applicable. The mandate restrictions do not apply because the bill does not require
counties and municipalities to spend funds, reduce counties’ or municipalities’ ability to
raise revenue, or reduce the percentage of state tax shared with counties and
municipalities.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None identified.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
39
“Political subdivision” means a separate agency or unit of local government created or established by law or ordinance and
the officers thereof. The term includes, but is not limited to, a county; a city, town, or other municipality; or a department,
commission, authority, school district, taxing district, water management district, board, public corporation, institution of
higher education, or other public agency or body thereof authorized to expend public funds for construction, maintenance,
repair, or improvement of public works. See s. 255.0992(1)(a), F.S. BILL: CS/SB 346 Page 9
B. Private Sector Impact:
The bill may have a positive financial impact on building contractors to the extent
payments of undisputed amounts under contracts are paid more promptly.
The change to the definition of “public works project” may result in a shift in the award
of certain construction contracts among locally-based and out of town contractors.
Preventing political subdivisions from imposing certain predetermined wage, benefit, and
staffing requirements for certain public works projects may have a positive fiscal impact
on contractors and a potential negative fiscal impact on contractor employees.
C. Government Sector Impact:
The bill may have a negative fiscal impact on local governments to the extent they must
settle construction contracts under shorter deadlines.
The change to the definition of “public works project” may increase competition and
lower costs for local public construction projects exceeding $350,000.
VI. Technical Deficiencies:
Lines 62-66 and 67-72 are made identical by the bill’s changes—they can be collapsed into one
subparagraph.
VII. Related Issues:
The timeframe required for the local government’s written notice of failure to coordinate to
create a list of deliverables is unclear. If the local government waits, in good faith, until the 30
th
day based on an expectation that the contractor has created a list, it could be surprised by a
contractor’s failure to have created one, and then by the contractor’s demand for payment on the
basis of the local government’s failure to establish a list of deliverables.
Lines 101-106 require a local government to pay a contractor the remaining contract balance
within 20 days “after the date the list is created.” There is no specific mechanism in the bill to fix
or make publicly (or even privately) known at what point the list is created. Perhaps the bill
should contemplate the date the list is agreed to between the parties in writing.
VIII. Statutes Affected:
This bill substantially amends sections 166.033, 218.735, 218.76, 255.073, 255.074, 255.077,
255.078, and 255.0992 of the Florida Statutes.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Community Affairs on March 15, 2023:
The CS removes section 1 of the bill relating to issuing development permits and orders. BILL: CS/SB 346 Page 10
As it pertains to the prompt pay provisions, the CS requires that the estimated costs to
complete all items on a construction list must be “a dollar valuation, reasonably
determined by the contractor as a portion of the contract value.” The bill as filed required
estimated costs to be calculated “using reasonable market rates.”
The CS restores the ability for political subdivisions to impose the governmental actions
identified in s. 255.0992(2)(b)-(c), F.S., for public works projects, but only for those
projects that do not exceed $350,000.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.