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