Senate Study Bill 3129
SENATE FILE
BY (PROPOSED COMMITTEE ON
LOCAL GOVERNMENT BILL BY
CO=CHAIRPERSON SHULL)
Passed Senate, Date Passed House, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to city contracts for public improvements.
2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
3 TLSB 5672XK 81
4 eg/je/5
PAG LIN
1 1 Section 1. Section 384.96, Code 2005, is amended to read
1 2 as follows:
1 3 384.96 SEALED BIDS.
1 4 When the estimated total cost to a city of a public
1 5 improvement exceeds the sum of twenty=five one hundred
1 6 thousand dollars, the governing body shall advertise for
1 7 sealed bids for the proposed improvement by publishing a
1 8 notice to bidders as provided in section 362.3, except that
1 9 the notice to bidders may be published more than twenty days
1 10 but not more than forty=five days before the date for filing
1 11 bids.
1 12 Sec. 2. Section 384.100, unnumbered paragraph 1, Code
1 13 2005, is amended to read as follows:
1 14 The governing body shall open, announce the amount of the
1 15 bids, and file all proposals received, at the time and place
1 16 specified in the notice to bidders. The governing body may,
1 17 by resolution, award the contract for the public improvement
1 18 to the bidder submitting the best bid, determined as provided
1 19 in section 384.99, or it may reject all bids received, fix a
1 20 new date for receiving bids, and order publication of a new
1 21 notice to bidders. The bid security furnished by the
1 22 successful bidder must be retained by the governing body until
1 23 the approved contract form has been executed, and a bond filed
1 24 by the bidder guaranteeing the performance of the contract,
1 25 and the contract and bond, have been approved by the governing
1 26 body. The Except as provided in section 384.104, the
1 27 provisions of chapter 573, where applicable, apply to
1 28 contracts awarded under this division.
1 29 Sec. 3. Section 384.102, Code 2005, is amended to read as
1 30 follows:
1 31 384.102 WHEN HEARING NECESSARY.
1 32 When the estimated total cost of a public improvement
1 33 exceeds the sum of twenty=five one hundred thousand dollars,
1 34 the governing body shall not enter into a contract for the
1 35 improvement until it has held a public hearing on the proposed
2 1 plans, specifications, and form of contract, and estimated
2 2 cost for the improvement. Notice of the hearing must be
2 3 published as provided in section 362.3. At the hearing any
2 4 interested person may appear and file objections to the
2 5 proposed plans, specifications, contract, or estimated cost of
2 6 the improvement. After hearing objections, the governing body
2 7 shall by resolution enter its decision on the plans,
2 8 specifications, contract, and estimated cost.
2 9 Sec. 4. NEW SECTION. 384.104 EARLY RELEASE OF RETENTION.
2 10 1. Payments made by a city for the construction of public
2 11 improvements shall be made in accordance with the provisions
2 12 of chapter 573. The payment of retained funds shall be made
2 13 as provided in section 573.14, except that:
2 14 a. At any time after all or any part of the work is
2 15 substantially completed in accordance with paragraph "c", the
2 16 contractor may request the release of all or part of the
2 17 retainage owed. The request shall be accompanied by a sworn
2 18 statement of the contractor that, ten days prior to filing the
2 19 request, the contractor gave notice as provided in subsection
2 20 4 to subcontractors, sub=subcontractors, and suppliers of
2 21 which the contractor has actual knowledge.
2 22 b. Upon receipt of the request, the city may release all
2 23 or part of the unpaid funds. Retainage that is approved as
2 24 payable shall be paid at the time of the next monthly payment
2 25 or within thirty days, whichever is sooner. If partial
2 26 retainage is released pursuant to a contractor's request, no
2 27 retainage shall be subsequently held based on that portion of
2 28 the work. If within thirty days of when payment becomes due
2 29 the city does not release the retainage due, interest shall
2 30 accrue on the retainage amount due as provided in section
2 31 573.14 until that amount is paid.
2 32 c. If at the time of the request for the retainage there
2 33 are remaining or incomplete minor items, an amount equal to
2 34 two hundred percent of the value of each remaining or
2 35 incomplete item, as determined by the city's authorized
3 1 contract representative, may be withheld until such item or
3 2 items are completed.
3 3 d. An itemization of the remaining or incomplete items, or
3 4 the reason that the request for release of the retainage was
3 5 denied, shall be provided to the contractor in writing within
3 6 thirty calendar days of the receipt of the request for release
3 7 of retainage.
3 8 2. For purposes of this section, "authorized contract
3 9 representative" means the architect or engineer who is in
3 10 charge of the project and chosen by the city to represent its
3 11 interests, or if there is no architect or engineer, then such
3 12 other contract representative or officer as designated in the
3 13 contract documents as the party representing the city's
3 14 interest regarding administration and oversight of the
3 15 project.
3 16 3. For purposes of this section, "substantially completed"
3 17 means the first date on which any of the following occurs:
3 18 a. Completion of the project or when the work has been
3 19 substantially completed in general accordance with the terms
3 20 and provisions of the contract.
3 21 b. The work or the portion designated is sufficiently
3 22 complete in accordance with the requirements of the contract
3 23 so the city can occupy or utilize the work for its intended
3 24 purpose.
3 25 c. The project is certified as having been substantially
3 26 completed by either of the following:
3 27 (1) The architect or engineer authorized to make such
3 28 certification.
3 29 (2) The contracting authority representing the city.
3 30 4. The notice required under subsection 1 shall read as
3 31 follows:
3 32 "NOTICE OF CONTRACTOR'S REQUEST FOR EARLY RELEASE OF
3 33 RETAINED FUNDS
3 34 You are hereby notified that [name of contractor] will be
3 35 requesting an early release of funds on a project designated
4 1 as [name of project] for which you have or may have provided
4 2 labor or materials. The request will be made pursuant to Iowa
4 3 Code section 384.104. The request may be filed with the [name
4 4 of city] after ten calendar days from the date of this notice.
4 5 The purpose of the request is to have [name of city] release
4 6 and pay funds for all work that has been performed and charged
4 7 to [name of city] as of the date of this notice. This notice
4 8 is provided in accordance with Iowa Code section 384.104."
4 9 5. Each contractor or subcontractor shall withhold
4 10 retainage, if at all, in the same manner as retainage is
4 11 withheld from the contractor or subcontractor; and each
4 12 subcontractor shall pass through all retainage payments to
4 13 lower tier subcontractors in accordance with the provisions of
4 14 chapter 573.
4 15 Sec. 5. Section 573.14, unnumbered paragraph 2, Code
4 16 Supplement 2005, is amended to read as follows:
4 17 The public corporation shall order payment of any amount
4 18 due the contractor to be made in accordance with the terms of
4 19 the contract. Except as provided in section 573.12 for
4 20 progress payments, failure to make payment pursuant to this
4 21 section, of any amount due the contractor, within forty days,
4 22 unless a greater time period not to exceed fifty days is
4 23 specified in the contract documents, after the work under the
4 24 contract has been completed and if the work has been accepted
4 25 and all required materials, certifications, and other
4 26 documentations required to be submitted by the contractor and
4 27 specified by the contract have been furnished the awarding
4 28 public corporation by the contractor, shall cause interest to
4 29 accrue on the amount unpaid to the benefit of the unpaid
4 30 party. Interest shall accrue during the period commencing the
4 31 thirty=first day following the completion of work and
4 32 satisfaction of the other requirements of this paragraph and
4 33 ending on the date of payment. The rate of interest shall be
4 34 determined by the period of time during which interest
4 35 accrues, and shall be the same as the rate of interest that is
5 1 in effect under section 12C.6, as of the day interest begins
5 2 to accrue, for a deposit of public funds for a comparable
5 3 period of time. However, for institutions governed pursuant
5 4 to chapter 262 and for cities, the rate of interest shall be
5 5 determined by the period of time during which interest
5 6 accrues, and shall be calculated as the prime rate plus one
5 7 percent per year as of the day interest begins to accrue.
5 8 This paragraph does not abridge any of the rights set forth in
5 9 section 573.16. Except as provided in sections 573.12 and
5 10 573.16, interest shall not accrue on funds retained by the
5 11 public corporation to satisfy the provisions of this section
5 12 regarding claims on file. This chapter does not apply if the
5 13 public corporation has entered into a contract with the
5 14 federal government or accepted a federal grant which is
5 15 governed by federal law or rules that are contrary to the
5 16 provisions of this chapter. For purposes of this unnumbered
5 17 paragraph, "prime rate" means the prime rate charged by banks
5 18 on short=term business loans, as determined by the board of
5 19 governors of the federal reserve system and published in the
5 20 federal reserve bulletin.
5 21 EXPLANATION
5 22 Currently, the city must comply with contract letting
5 23 procedures, including a public hearing, when the total
5 24 estimated cost of a public improvement exceeds $25,000. This
5 25 bill raises that threshold amount to $100,000. This change
5 26 will impact counties and rural water districts that are
5 27 required to follow the same contract letting procedures.
5 28 For the construction of a public improvement, state and
5 29 local governmental entities are required to comply with Code
5 30 chapter 573 when making payments to a contractor for the work
5 31 performed and the material delivered. A percentage of the
5 32 contract price is retained from payments to be made to the
5 33 contractor to create a fund for the subsequent payment of
5 34 claims on the public improvement. After the public
5 35 improvement is completed, the retained funds are paid in
6 1 accordance with Code section 573.14. However, if the contract
6 2 is 95 percent complete, Code section 573.15A provides for the
6 3 early payment of retained funds. The bill provides another
6 4 alternative for such early payment of funds, but only for
6 5 cities.
6 6 Under the bill, a city may release all or part of the
6 7 retained funds to a contractor after the work on the public
6 8 improvement is "substantially completed" as defined. Before a
6 9 contractor files a request for retained funds, the contractor
6 10 is required to notify the subcontractors, sub=subcontractors,
6 11 and suppliers that may have provided labor or materials for
6 12 the public improvement. The city may approve and pay the
6 13 contractor's retainage request, or the city may withhold funds
6 14 if there are minor items that remain to be completed. The
6 15 city may deny the request; however, the city must provide a
6 16 written itemization of the remaining or incomplete items or
6 17 the reason for denying the retainage request.
6 18 If the city fails to timely pay the retainage amount,
6 19 interest will accrue until the amount is paid. The bill
6 20 changes the rate of interest for cities. The rate of interest
6 21 is calculated as the prime rate plus 1 percent per year as of
6 22 the day interest begins to accrue. The state board of regents
6 23 is subject to the same rate. Currently, the rate of interest
6 24 for cities and all other state and local governmental entities
6 25 is the same as the rate of interest that is in effect under
6 26 Code section 12C.6, as of the day interest begins to accrue,
6 27 for a deposit of public funds for a comparable period of time.
6 28 LSB 5672XK 81
6 29 eg:rj/je/5