| 1 | 1 | | 1.1 A bill for an act |
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| 2 | 2 | | 1.2 relating to state contracts; permitting uncollectible judgments against prime |
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| 3 | 3 | | 1.3 contractors to be paid from contract retainage; requiring direct payments to |
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| 4 | 4 | | 1.4 subcontractors under certain circumstances; amending Minnesota Statutes 2024, |
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| 5 | 5 | | 1.5 section 16A.1245. |
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| 6 | 6 | | 1.6BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: |
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| 7 | 7 | | 1.7 Section 1. Minnesota Statutes 2024, section 16A.1245, is amended to read: |
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| 8 | 8 | | 1.8 16A.1245 PROMPT PAYMENT TO SUBCONTRACT ORS. |
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| 9 | 9 | | 1.9 (a) Each state agency contract must require the prime contractor to pay any subcontractor |
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| 10 | 10 | | 1.10within ten days of the prime contractor's receipt of payment from the state for undisputed |
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| 11 | 11 | | 1.11services provided by the subcontractor. The contract must require the prime contractor to |
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| 12 | 12 | | 1.12pay interest of 1-1/2 percent per month or any part of a month to the subcontractor on any |
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| 13 | 13 | | 1.13undisputed amount not paid on time to the subcontractor. The minimum monthly interest |
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| 14 | 14 | | 1.14penalty payment for an unpaid balance of $100 or more is $10. For an unpaid balance of |
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| 15 | 15 | | 1.15less than $100, the prime contractor shall pay the actual penalty due to the subcontractor. |
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| 16 | 16 | | 1.16A subcontractor who prevails in a civil action to collect interest penalties from a prime |
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| 17 | 17 | | 1.17contractor must be awarded its costs and disbursements, including attorney's fees, incurred |
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| 18 | 18 | | 1.18in bringing the action. If the judgment is uncollectible because the prime contractor has |
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| 19 | 19 | | 1.19gone out of business or declared bankruptcy, and the state agency has contract retainage |
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| 20 | 20 | | 1.20funds, the state agency is authorized to pay a subcontractor who prevailed, up to the principal |
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| 21 | 21 | | 1.21amount of the work performed by the subcontractor, from the retainage. If the retainage is |
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| 22 | 22 | | 1.22insufficient to pay one or more subcontractors, the state agency is authorized to dispense |
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| 23 | 23 | | 1.23pro rata shares of the retainage to subcontractors, based on the principal amounts due and |
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| 24 | 24 | | 1.24owing. |
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| 25 | 25 | | 1Section 1. |
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| 26 | 26 | | REVISOR SGS/LJ 25-0185401/15/25 |
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| 27 | 27 | | State of Minnesota |
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| 28 | 28 | | This Document can be made available |
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| 29 | 29 | | in alternative formats upon request |
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| 30 | 30 | | HOUSE OF REPRESENTATIVES |
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| 31 | 31 | | H. F. No. 552 |
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| 32 | 32 | | NINETY-FOURTH SESSION |
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| 33 | 33 | | Authored by Quam02/13/2025 |
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| 34 | 34 | | The bill was read for the first time and referred to the Committee on Workforce, Labor, and Economic Development Finance and Policy 2.1 (b) If a state agency does not require a performance and payment bond, letter of credit, |
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| 35 | 35 | | 2.2or other financial mechanism to ensure that a prime contractor will pay subcontractors, the |
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| 36 | 36 | | 2.3state agency must pay all subcontractors directly during the term of the contract, upon |
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| 37 | 37 | | 2.4satisfactory completion of work under the contract. |
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| 38 | 38 | | 2.5 EFFECTIVE DATE.This section is effective for contracts entered into on or after July |
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| 39 | 39 | | 2.61, 2025. |
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| 40 | 40 | | 2Section 1. |
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| 41 | 41 | | REVISOR SGS/LJ 25-0185401/15/25 |
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