House Study Bill 245
HOUSE FILE
BY (PROPOSED COMMITTEE ON
STATE GOVERNMENT BILL
BY CHAIRPERSON ELGIN)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act concerning payment of retained funds on public
2 improvements.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
4 TLSB 2153YC 81
5 ec/gg/14
PAG LIN
1 1 Section 1. Section 573.14, Code 2005, is amended to read
1 2 as follows:
1 3 573.14 RETENTION OF UNPAID FUNDS.
1 4 1. The fund provided for in section 573.13 shall be
1 5 retained by the public corporation for a period of thirty days
1 6 after the completion and final acceptance date of the
1 7 improvement. If at the end of the thirty=day period claims
1 8 are on file as provided or minor items of work remain
1 9 incomplete, the public corporation shall continue to retain
1 10 from the unpaid funds a sum equal to double the total amount
1 11 of all claims on file and the value of all minor items of work
1 12 that remain incomplete. The remaining balance of the unpaid
1 13 fund, or if no claims are on file and no minor items of work
1 14 remain incomplete, the entire unpaid fund, shall be released
1 15 and paid to the contractor.
1 16 2. For purposes of this section:
1 17 a. "Completion date" means the earlier of the following:
1 18 (1) The date of the completion and final acceptance of the
1 19 improvement indicating that all work under the contract has
1 20 been completed and all required materials, certifications, and
1 21 other documentations required to be submitted by the
1 22 contractor and specified by the contract have been furnished
1 23 to the awarding public corporation by the contractor.
1 24 (2) Except for board of regents' public improvements, the
1 25 date when substantial completion of the improvement has
1 26 occurred.
1 27 b. "Substantial completion of the improvement" means the
1 28 date the first of any of the following occurs:
1 29 (1) The date the public improvement has been substantially
1 30 completed in general accordance with the terms and provisions
1 31 of the contract.
1 32 (2) The date the public corporation beneficially uses or
1 33 occupies the public improvement, except in the case where the
1 34 public improvement involves renovation or alteration of an
1 35 existing facility in which the public corporation maintains
2 1 beneficial use or occupancy during the course of the public
2 2 improvement.
2 3 (3) The date the public improvement is approved or
2 4 certified for use or occupancy by the applicable public
2 5 corporation.
2 6 (4) The date the public improvement is certified as having
2 7 been substantially completed by the architect or engineer
2 8 authorized to make such certification.
2 9 (5) The date the public improvement is certified as having
2 10 been substantially completed by the contracting authority
2 11 representing the public corporation.
2 12 3. The public corporation shall order payment of any
2 13 amount due the contractor to be made in accordance with the
2 14 terms of the contract. Except as provided in section 573.12
2 15 for progress payments, failure to make payment pursuant to
2 16 this section, of any amount due the contractor, within forty
2 17 days, unless a greater time period not to exceed fifty days is
2 18 specified in the contract documents, after the work under the
2 19 contract has been completed and if the work has been accepted
2 20 and all required materials, certifications, and other
2 21 documentations required to be submitted by the contractor and
2 22 specified by the contract have been furnished the awarding
2 23 public corporation by the contractor completion date, shall
2 24 cause interest to accrue on the amount unpaid to the benefit
2 25 of the unpaid party. Interest shall accrue during the period
2 26 commencing the thirty=first day following the completion of
2 27 work and satisfaction of the other requirements of this
2 28 paragraph date and ending on the date of payment. The rate of
2 29 interest shall be determined by the period of time during
2 30 which interest accrues, and shall be the same as the rate of
2 31 interest that is in effect under section 12C.6, calculated as
2 32 the prime rate plus one percent per year as of the day
2 33 interest begins to accrue, for a deposit of public funds for a
2 34 comparable period of time. This paragraph subsection does not
2 35 abridge any of the rights set forth in section 573.16. Except
3 1 as provided in sections 573.12 and 573.16, interest shall not
3 2 accrue on funds retained by the public corporation to satisfy
3 3 the provisions of this section regarding claims on file or
3 4 minor items of work that remain incomplete. This chapter does
3 5 not apply if the public corporation has entered into a
3 6 contract with the federal government or accepted a federal
3 7 grant which is governed by federal law or rules that are
3 8 contrary to the provisions of this chapter. For purposes of
3 9 this subsection, "prime rate" means the prime rate charged by
3 10 banks on short=term business loans, as determined by the board
3 11 of governors of the federal reserve system and published in
3 12 the federal reserve bulletin.
3 13 EXPLANATION
3 14 Current law provides that payments made under contract for
3 15 the construction of public improvements shall be made based
3 16 upon monthly estimates of work performed with an amount of not
3 17 more than 5 percent to be retained by the public corporation
3 18 to eventually be paid upon completion of the public
3 19 improvement. This bill provides for when this retained amount
3 20 shall be paid and modifies current law by providing that it
3 21 shall be paid when work is substantially completed.
3 22 The bill provides that for public corporations that are not
3 23 the board of regents, the retained amount shall be paid to the
3 24 contractor upon substantial completion of the improvement.
3 25 Current law provides for the payment of the retained amount
3 26 only upon final completion of the improvement. The bill
3 27 defines "substantial completion of the improvement" as the
3 28 earliest of the date the improvement has been substantially
3 29 completed according to the contract, the date the public
3 30 corporation uses or occupies the public improvement unless the
3 31 improvement involved renovation or alteration of an existing
3 32 facility continued to be used by the public corporation, the
3 33 date the public improvement is approved or certified for use
3 34 or occupancy, and the date the public improvement is certified
3 35 as having been substantially completed by the architect or
4 1 engineer authorized to make such certification or by the
4 2 contracting authority representing the public corporation.
4 3 The bill provides that the public corporation can still retain
4 4 an amount equal to two times the value of all minor items of
4 5 work that remain incomplete on the project. Current law that
4 6 allows the public corporation to retain double the amount of
4 7 claims on file is not changed by the bill.
4 8 The bill further provides that interest calculated on the
4 9 retained funds unpaid shall be the prime rate plus 1 percent.
4 10 Current law sets the interest rate as the rate set by a
4 11 committee for public deposits of money.
4 12 LSB 2153YC 81
4 13 ec:nh/gg/14