34.057. Public works contracts--prompt payment by public owner to contractor--prompt payment by contractor to subcontractor--progress payments--retainage--late payment charges--withholding of payments - Missouri Statutes

Public works contracts--prompt payment by public owner tocontractor--prompt payment by contractor tosubcontractor--progress payments--retainage--late paymentcharges--withholding of payments.

34.057. 1. Unless contrary to any federal fundingrequirements or unless funds from a state grant are not timelyreceived by the contracting public municipality butnotwithstanding any other law to the contrary, all public workscontracts made and awarded by the appropriate officer, board oragency of the state or of a political subdivision of the stateor of any district therein, including any municipality, countyand any board referred to as the public owner, for construction,reconstruction or alteration of any public works project, shallprovide for prompt payment by the public owner to the contractorand prompt payment by the contractor to the subcontractor andmaterial supplier in accordance with the following:

(1) A public owner shall make progress payments to thecontractor on at least a monthly basis as the work progresses,or, on a lump sum basis according to the terms of the lump sumcontract. Except in the case of lump sum contracts, paymentsshall be based upon estimates prepared at least monthly of workperformed and material delivered, as determined by the projectarchitect or engineer. Retainage withheld on public worksprojects shall not exceed five percent of the value of thecontract or subcontract unless the public owner and thearchitect or engineer determine that a higher rate of retainageis required to ensure performance of the contract. Retainage,however, shall not exceed ten percent of the value of thecontract or subcontract. Except as provided in subsection 4 ofthis section, the public owner shall pay the contractor theamount due, less a retainage not to exceed ten percent, withinthirty days following the latter of the following:

(a) The date of delivery of materials or constructionservices purchased;

(b) The date, as designated by the public owner, upon whichthe invoice is duly delivered to the person or place designatedby the public owner; or

(c) In those instances in which the contractor approves thepublic owner's estimate, the date upon which such notice ofapproval is duly delivered to the person or place designated bythe public owner;

(2) Payments shall be considered received within thecontext of this section when they are duly posted with theUnited States Postal Service or other agreed upon deliveryservice or when they are hand-delivered to an authorized personor place as agreed to by the contracting parties;

(3) If, in the discretion of the owner and the projectarchitect or engineer and the contractor, it is determined thata subcontractor's performance has been completed and thesubcontractor can be released prior to substantial completion ofthe public works contract without risk to the public owner, thecontractor shall request such adjustment in retainage, if any,from the public owner as necessary to enable the contractor topay the subcontractor in full. The public owner may reduce oreliminate retainage on any contract payment if, in the publicowner's opinion, the work is proceeding satisfactorily. Ifretainage is released and there are any remaining minor items tobe completed, an amount equal to two hundred percent of thevalue of each item as determined by the public owner's dulyauthorized representative shall be withheld until such item oritems are completed;

(4) The public owner shall pay the retainage, less anyoffsets or deductions authorized in the contract or otherwiseauthorized by law, to the contractor after substantialcompletion of the contract work and acceptance by the publicowner's authorized contract representative, or as may otherwisebe provided by the contract specifications for state highway,road or bridge projects administered by the state highways andtransportation commission. Such payment shall be made withinthirty days after acceptance, and the invoice and all otherappropriate documentation and certifications in complete andacceptable form are provided, as may be required by the contractdocuments. If at that time there are any remaining minor itemsto be completed, an amount equal to two hundred percent of thevalue of each item as determined by the public owner'srepresentative shall be withheld until such items are completed;

(5) All estimates or invoices for supplies and servicespurchased, approved and processed, or final payments, shall bepaid promptly and shall be subject to late payment chargesprovided in this section. Except as provided in subsection 4 ofthis section, if the contractor has not been paid within thirtydays as set forth in subdivision (1) of subsection 1 of thissection, the contracting agency shall pay the contractor, inaddition to the payment due him, interest at the rate of one andone-half percent per month calculated from the expiration of thethirty-day period until fully paid;

(6) When a contractor receives any payment, the contractorshall pay each subcontractor and material supplier in proportionto the work completed by each subcontractor and materialsupplier his application less any retention not to exceed tenpercent. If the contractor receives less than the full paymentdue under the public construction contract, the contractor shallbe obligated to disburse on a pro rata basis those fundsreceived, with the contractor, subcontractors and materialsuppliers each receiving a prorated portion based on the amountof payment. When, however, the public owner does not releasethe full payment due under the contract because there arespecific areas of work or materials he is rejecting or becausehe has otherwise determined such areas are not suitable forpayment then those specific subcontractors or suppliers involvedshall not be paid for that portion of the work rejected ordeemed not suitable for payment and all other subcontractors andsuppliers shall be paid in full;

(7) If the contractor, without reasonable cause, fails tomake any payment to his subcontractors and material supplierswithin fifteen days after receipt of payment under the publicconstruction contract, the contractor shall pay to hissubcontractors and material suppliers, in addition to thepayment due them, interest in the amount of one and one-halfpercent per month, calculated from the expiration of thefifteen-day period until fully paid. This subdivision shallalso apply to any payments made by subcontractors and materialsuppliers to their subcontractors and material suppliers and toall payments made to lower tier subcontractors and materialsuppliers throughout the contracting chain;

(8) The public owner shall make final payment of all moneysowed to the contractor, less any offsets or deductionsauthorized in the contract or otherwise authorized by law,within thirty days of the due date. Final payment shall beconsidered due upon the earliest of the following events:

(a) Completion of the project and filing with the owner ofall required documentation and certifications, in complete andacceptable form, in accordance with the terms and conditions ofthe contract;

(b) The project is certified by the architect or engineerauthorized to make such certification on behalf of the owner ashaving been completed, including the filing of all documentationand certifications required by the contract, in complete andacceptable form; or

(c) The project is certified by the contracting authorityas having been completed, including the filing of alldocumentation and certifications required by the contract, incomplete and acceptable form.

2. Nothing in this section shall prevent the contractor orsubcontractor, at the time of application or certification tothe public owner or contractor, from withholding suchapplications or certifications to the owner or contractor forpayment to the subcontractor or material supplier. Amountsintended to be withheld shall not be included in suchapplications or certifications to the public owner orcontractor. Reasons for withholding such applications orcertifications shall include, but not be limited to, thefollowing: unsatisfactory job progress; defective constructionwork or material not remedied; disputed work; failure to complywith other material provisions of the contract; third partyclaims filed or reasonable evidence that a claim will be filed;failure of the subcontractor to make timely payments for labor,equipment and materials; damage to a contractor or anothersubcontractor or material supplier; reasonable evidence that thecontract can not be completed for the unpaid balance of thesubcontract sum or a reasonable amount for retention, not toexceed the initial percentage retained by the owner.

3. Should the contractor determine, after application orcertification has been made and after payment has been receivedfrom the public owner, or after payment has been received by acontractor based upon the public owner's estimate of materialsin place and work performed as provided by contract, that all ora portion of the moneys needs to be withheld from a specificsubcontractor or material supplier for any of the reasonsenumerated in this section, and such moneys are withheld fromsuch subcontractor or material supplier, then such undistributedamounts shall be specifically identified in writing and deductedfrom the next application or certification made to the publicowner or from the next estimate by the public owner of paymentdue the contractor, until a resolution of the matter has beenachieved. Disputes shall be resolved in accordance with theterms of the contract documents. Upon such resolution theamounts withheld by the contractor from the subcontractor ormaterial supplier shall be included in the next application orcertification made to the public owner or the next estimate bythe public owner and shall be paid promptly in accordance withthe provisions of this section. This subsection shall alsoapply to applications or certifications made by subcontractorsor material suppliers to the contractor and throughout thevarious tiers of the contracting chain.

4. The contracts which provide for payments to thecontractor based upon the public owner's estimate of materialsin place and work performed rather than applications orcertifications submitted by the contractor, the public ownershall pay the contractor within thirty days following the dateupon which the estimate is required by contract to be completedby the public owner, the amount due less a retainage not toexceed five percent. All such estimates by the public ownershall be paid promptly and shall be subject to late paymentcharges as provided in this subsection. After the thirtieth dayfollowing the date upon which the estimate is required bycontract to be completed by the public owner, the contractingagency shall pay the contractor, in addition to the payment duehim, interest at a rate of one and one-half percent per monthcalculated from the expiration of the thirty-day period untilfully paid.

5. Nothing in this section shall prevent the owner fromwithholding payment or final payment from the contractor, or asubcontractor or material supplier. Reasons for withholdingpayment or final payment shall include, but not be limited to,the following: liquidated damages; unsatisfactory job progress;defective construction work or material not remedied; disputedwork; failure to comply with any material provision of thecontract; third party claims filed or reasonable evidence that aclaim will be filed; failure to make timely payments for labor,equipment or materials; damage to a contractor, subcontractor ormaterial supplier; reasonable evidence that a subcontractor ormaterial supplier cannot be fully compensated under its contractwith the contractor for the unpaid balance of the contract sum;or citation by the enforcing authority for acts of thecontractor or subcontractor which do not comply with anymaterial provision of the contract and which result in aviolation of any federal, state or local law, regulation orordinance applicable to that project causing additional costs ordamages to the owner.

6. Notwithstanding any other provisions in this section tothe contrary, no late payment interest shall be due and owingfor payments which are withheld in good faith for reasonablecause pursuant to subsections 2 and 5 of this section. If it isdetermined by a court of competent jurisdiction that a paymentwhich was withheld pursuant to subsections 2 and 5 of thissection was not withheld in good faith for reasonable cause, thecourt may impose interest at the rate of one and one-halfpercent per month calculated from the date of the invoice andmay, in its discretion, award reasonable attorney fees to theprevailing party. In any civil action or part of a civil actionbrought pursuant to this section, if a court determines after ahearing for such purpose that the cause was initiated, or adefense was asserted, or a motion was filed, or any proceedingtherein was done frivolously and in bad faith, the court shallrequire the party who initiated such cause, asserted suchdefense, filed such motion, or caused such proceeding to be hadto pay the other party named in such action the amount of thecosts attributable thereto and reasonable expenses incurred bysuch party, including reasonable attorney fees.

(L. 1990 S.B. 808 & 672 § 1)