EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
[Brackets] indicate matter deleted from existing law.
*sb0183*
SENATE BILL 183
P2 4lr0757
(PRE–FILED) CF 4lr1565
By: Senator Bailey
Requested: September 28, 2023
Introduced and read first time: January 10, 2024
Assigned to: Finance
A BILL ENTITLED
AN ACT concerning 1
State Procurement – Prompt Payment of Suppliers 2
FOR the purpose of providing that certain provisions requiring prompt payments for State 3
procurement contracts apply to payments owed by a contractor or subcontractor to a 4
supplier; and generally relating to the prompt payment of suppliers that have 5
supplied labor or materials for work done under State procurement contracts. 6
BY repealing and reenacting, with amendments, 7
Article – State Finance and Procurement 8
Section 15–226 9
Annotated Code of Maryland 10
(2021 Replacement Volume and 2023 Supplement) 11
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 12
That the Laws of Maryland read as follows: 13
Article – State Finance and Procurement 14
15–226. 15
(a) (1) In this section[, “undisputed] THE FOLLOWING WORDS HAVE THE 16
MEANINGS INDICATED . 17
(2) “SUPPLIER” MEANS A PERSON THAT HAS SUPPLIED LABOR O R 18
MATERIALS TO A CONTR ACTOR OR SUBCONTRACT OR IN THE PROSECU TION OF 19
WORK PROVIDED FOR IN A STATE PROCUREMENT CON TRACT. 20
2 SENATE BILL 183
(3) “UNDISPUTED amount” means an amount owed by a contractor to a 1
subcontractor OR SUPPLIER for which there is no good faith dispute, including any 2
retainage withheld. 3
(b) It is the policy of the State that, for work under a State procurement contract: 4
(1) a contractor shall promptly pay to a subcontractor OR SUPPLIER any 5
undisputed amount to which the subcontractor OR SUPPLIER is entitled; and 6
(2) a subcontractor shall promptly pay to a lower tier subcontractor OR 7
SUPPLIER any undisputed amount to which the lower tier subcontractor is entitled. 8
(c) (1) A contractor shall pay a subcontractor OR SUPPLIER an undisputed 9
amount to which the subcontractor OR SUPPLIER is entitled within 10 days of receiving a 10
progress or final payment from the State. 11
(2) If a contractor withholds payment from a subcontractor OR SUPPLIER, 12
within the time period in which payment normally would be made, the contractor shall: 13
(i) notify the subcontractor OR SUPPLIER in writing and state the 14
reason why payment is being withheld; and 15
(ii) provide a copy of the notice to the procurement officer. 16
(d) (1) If a subcontractor OR SUPPLIER does not receive a payment within the 17
required time period, the subcontractor OR SUPPLIER may give written notice of the 18
nonpayment to the procurement officer. 19
(2) The notice shall: 20
(i) indicate the name of the contractor, the project under which the 21
dispute exists, and the amount in dispute; 22
(ii) provide an itemized description on which the amount is based; 23
and 24
(iii) if known, provide an explanation for any dispute concerning 25
payment by the contractor. 26
(e) (1) Within 2 business days of receipt of written notice from a subcontractor 27
OR SUPPLIER , a representative of the unit designated by the procurement officer shall 28
verbally contact the contractor to ascertain whether the amount withheld is an undisputed 29
amount. 30
(2) If the representative of the unit decides that a part or all of the amount 31
withheld is an undisputed amount, the representative of the unit shall instruct the 32 SENATE BILL 183 3
contractor to pay the subcontractor OR SUPPLIER the undisputed amount within 3 1
business days. 2
(3) The representative of the unit shall verbally communicate to the 3
subcontractor OR SUPPLIER the results of discussions with the contractor. 4
(4) If the contractor is instructed to pay the subcontractor OR SUPPLIER 5
and the subcontractor OR SUPPLIER is not paid within the time instructed under 6
paragraph (2) of this subsection, the subcontractor OR SUPPLIER may report the 7
nonpayment in writing to the procurement officer. 8
(f) (1) If the subcontractor OR SUPPLIER notifies the procurement officer 9
under subsection (e)(4) of this section that payment has not been made, the representative 10
of the unit shall schedule a meeting to discuss the dispute with the unit’s project manager, 11
the contractor, and the subcontractor OR SUPPLIER: 12
(i) at a time and location designated by the representative of the 13
unit; but 14
(ii) not later than 10 days after receiving notice from the 15
subcontractor OR SUPPLIER under subsection (e)(4) of this section. 16
(2) The purpose of the meeting is to establish why the contractor has not 17
paid the subcontractor OR SUPPLIER in the required time period. 18
(3) The representative of the unit shall require the parties to provide at the 19
meeting any information that the representative believes necessary to evaluate the dispute. 20
(4) If the representative of the unit determines that the contractor is 21
delinquent in payment of an undisputed amount to the subcontractor OR SUPPLIER , 22
further progress payments to the contractor may be withheld until the subcontractor OR 23
SUPPLIER is paid. 24
(5) If payment is not paid to the subcontractor OR SUPPLIER within 7 days 25
after the representative of the unit determines that the contractor is delinquent in paying 26
the subcontractor OR SUPPLIER under this subsection, the representative shall schedule 27
a second meeting to address the dispute: 28
(i) at a time and location designated by the representative of the 29
unit; but 30
(ii) not later than 5 days after the close of the 7–day period. 31
(6) If, at the completion of the second meeting, the representative of the 32
unit determines that the contractor continues to be delinquent in payments owed to the 33
subcontractor OR SUPPLIER, the representative: 34 4 SENATE BILL 183
(i) shall order that further payments to the contractor not be 1
processed until payment to the subcontractor is verified; 2
(ii) may order that work under the contract be suspended based on 3
the failure of the contractor to meet obligations under the contract; and 4
(iii) subject to paragraph (7) of this subsection, may require that the 5
contractor pay a penalty to the subcontractor OR SUPPLIER, in an amount not exceeding 6
$100 per day, from the date that payment was required under subsection (e)(2) of this 7
section. 8
(7) A penalty may not be imposed under paragraph (6)(iii) of this 9
subsection for any period that the representative of the unit determines the subcontractor 10
OR SUPPLIER was not diligent in reporting nonpayment to the procurement officer. 11
(g) (1) A contractor [or], a subcontractor, OR A SUPPLIER may appeal a 12
decision under subsection (f)(6) of this section to the procurement officer. 13
(2) The contractor shall comply with the procurement officer’s decision. 14
(h) An act, failure to act, or decision of a procurement officer or a representative 15
of a unit concerning a payment dispute between a contractor and subcontractor or 16
SUPPLIER, between subcontractors, OR BETWEEN A SUBCONT RACTOR AND SUPPLIER 17
under this section may not: 18
(1) affect the rights of the contracting parties under any other provision of 19
law; 20
(2) be used as evidence on the merits of a dispute between the unit and the 21
contractor [or], the contractor and subcontractor, OR CONTRACTOR OR 22
SUBCONTRACTOR AND SU PPLIER in any other proceeding; or 23
(3) result in liability against or prejudice the rights of the unit. 24
(i) A decision of a procurement officer or a representative of the unit designated 25
by the procurement officer under this section is not subject to judicial review or the 26
provisions of Part III of this subtitle. 27
(j) (1) A unit shall include in each State procurement contract a provision: 28
(i) governing prompt payment to subcontractors; and 29
(ii) requiring inclusion of a similar provision in each subcontract at 30
any tier. 31
SENATE BILL 183 5
(2) The contract provision shall establish procedures and remedies for the 1
resolution of payment disputes similar to the process and remedies prescribed in 2
subsections (c) through (g) of this section. 3
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 4
October 1, 2024. 5