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