By Siebert H.B. No. 2860
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the prompt payment of contractors and subcontractors in
1-3 governmental contracting.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Sections 2251.001(2) and (7), Government Code,
1-6 are amended to read as follows:
1-7 (2) "Governmental entity" means this state or a state
1-8 agency or political subdivision of this state
1-9 (7) "Subcontractor" means a person who contracts with
1-10 a vendor or another subcontractor to work or contribute toward
1-11 completing work for a governmental entity.
1-12 SECTION 2. Section 2251.002(a), Government Code, is amended
1-13 to read as follows:
1-14 (a) This chapter does not apply to a payment made by a
1-15 governmental entity, vendor, or subcontractor if;
1-16 (1) [there is a bona fide dispute between the
1-17 political subdivision and a vendor, contractor, subcontractor, or
1-18 supplier about the goods delivered or the services performed that
1-19 causes the payment to be late,]
1-20 [(2) there is a bona fide dispute between a vendor and
1-21 a subcontractor or between a subcontractor and its supplier about
2-1 the goods delivered or the services performed that causes the
2-2 payment to be late,]
2-3 [(3)] the terms of a federal contract, grant,
2-4 regulation, or statute prevent the governmental entity from making
2-5 a timely payment with federal funds; or
2-6 (2) [(4)] the invoice is not mailed to the person to
2-7 whom it is addressed in strict accordance with any instruction on
2-8 the purchase order relating to the payment.
2-9 SECTION 3. Subchapter A, Chapter 2251, Government Code, is
2-10 amended by adding Sections 2251.004 and 2251.005 to read as
2-11 follows:
2-12 Sec. 2251.004. WAIVER PROHIBITED. The provisions of this
2-13 chapter may not be waived by contract or otherwise.
2-14 Sec. 2251.005. TIME FOR SUBMITTING INVOICES UNDER CERTAIN
2-15 CONTRACTS. (a) This section applies only to the submission of
2-16 invoices under a contract with a governmental entity to improve
2-17 real property or to perform construction or maintenance services.
2-18 (b) A vendor shall submit invoices to the governmental
2-19 entity periodically, but no less often than monthly, for all goods
2-20 and services provided by or through the vendor for the governmental
2-21 entity, including those goods and services provided to the vendor
2-22 by a subcontractor.
2-23 (c) A subcontractor shall submit invoices to the vendor
2-24 periodically, but no less often than monthly, for all goods and
2-25 services provided by or through the subcontractor for the vendor,
3-1 including those goods and services provided to the subcontractor by
3-2 another subcontractor.
3-3 SECTION 4. Section 2251.021(a), Government Code, is amended
3-4 to read as follows:
3-5 Sec. 2251.021. Time for Payment by Governmental Entity. (a)
3-6 Except as provided by Subsection (b), a payment by a governmental
3-7 entity [under a contract executed on or after September 1, 1987,]
3-8 is overdue on the 31st day after the later of:
3-9 (1) the date the governmental entity receives the
3-10 goods under the contract;
3-11 (2) the date the performance of the service under the
3-12 contract is completed; or
3-13 (3) the date the governmental entity, or a
3-14 representative of the governmental entity authorized to act on
3-15 behalf of the entity, receives an invoice for the goods or
3-16 services.
3-17 SECTION 5. Section 2251.022, Government Code, is amended to
3-18 read as follows:
3-19 Sec. 2251.022. Time for Payment by Vendor. (a) A vendor
3-20 who receives a payment from a governmental entity shall pay a
3-21 subcontractor the appropriate share of the payment, plus any
3-22 interest, not later than the seventh [10th] day after the date the
3-23 vendor receives the payment.
3-24 (b) The appropriate share, plus any interest, is overdue on
3-25 the eighth [11th] day after the date the vendor receives the
4-1 payment.
4-2 SECTION 6. Section 2251.023, Government Code, is amended to
4-3 read as follows:
4-4 Sec. 2251.023. Time for Payment by Subcontractor. (a) A
4-5 subcontractor who receives a payment from a vendor shall pay its
4-6 subcontractor [a person] who supplies goods or a service for which
4-7 the payment is made the appropriate share of the payment, plus any
4-8 interest, not later than the seventh [10th] day after the date the
4-9 subcontractor receives the payment.
4-10 (b) The appropriate share, plus any interest, is overdue on
4-11 the eighth [11th] day after the date the subcontractor receives the
4-12 payment.
4-13 SECTION 7. Sections 2251.025(b) and (c), Government Code,
4-14 are amended to read as follows:
4-15 (b) An overdue payment bears interest at the rate of 1-1/2
4-16 [one] percent each month.
4-17 (c) Interest on an overdue payment stops accruing on the
4-18 date the governmental entity, subcontractor, or vendor mails or
4-19 electronically transmits the payment.
4-20 SECTION 8. Section 2251.026, Government Code, as amended by
4-21 Section 3(a), Chapter 634, Acts of the 75th Legislature, Regular
4-22 Session, 1997, is amended to read as follows:
4-23 Sec. 2251.026. PAYMENT OF INTEREST BY GOVERNMENTAL ENTITY
4-24 [STATE AGENCY]. (a) If the warrant for a payment the governmental
4-25 entity [originating state agency] owes is not mailed or
5-1 electronically transmitted before the payment is overdue, the
5-2 governmental entity [agency] is liable for an interest payment that
5-3 accrues under this chapter.
5-4 (b) The comptroller or governmental entity shall compute
5-5 interest imposed on the governmental entity [state agency] under
5-6 this chapter.
5-7 (c) The comptroller or governmental entity shall pay the
5-8 interest at the time payment is made on the principal.
5-9 (d) The comptroller or governmental entity shall submit the
5-10 interest payment with the net amount due for goods and services.
5-11 (e) The comptroller or governmental entity [and the state
5-12 agency] may not require a vendor to petition, bill, or wait an
5-13 additional day to receive the interest due.
5-14 (f) The comptroller or governmental entity may require
5-15 necessary and timely information and adopt rules to administer this
5-16 section.
5-17 SECTION 9. Section 2251.042, Government Code, is amended to
5-18 read as follows:
5-19 Sec. 2251.042. DISPUTED PAYMENT. (a) If there is a bona
5-20 fide dispute about the goods, materials, labor, or services, the
5-21 party disputing its obligation to pay may withhold from the payment
5-22 owed not more than 100 percent of the difference between the amount
5-23 the obligee claims is due and the amount the obligor claims is due.
5-24 (b) A governmental entity shall notify a vendor of an error
5-25 in an invoice submitted for payment by the vendor not later than
6-1 the 15th [21st] day after the date the entity receives the invoice.
6-2 (c) [(b)] If a dispute is resolved by agreement, or an award
6-3 is made in favor of the vendor or subcontractor for all or part of
6-4 its claim, the vendor or subcontractor is entitled to receive
6-5 interest, as provided by this chapter, on the portion of the unpaid
6-6 balance of the invoice which was resolved by agreement or awarded
6-7 to [submitted by] the vendor or subcontractor, beginning on the
6-8 date under Section 2251.021, 2251.022, or 2251.023 that the payment
6-9 for the invoice is overdue.
6-10 (d) [(c)] If a dispute is resolved in favor of the
6-11 governmental entity, the vendor shall submit a corrected invoice
6-12 that must be paid in accordance with Section 2251.021. The balance
6-13 accrues interest as provided by this chapter if the corrected
6-14 invoice is not paid by the appropriate date.
6-15 SECTION 10. Subchapter C, Chapter 2251, Government Code, is
6-16 amended by adding Section 2251.044 to read as follows:
6-17 Sec. 2251.044. RIGHT TO SUSPEND WORK. (a) If a payment in
6-18 the undisputed amount is not made by the governmental entity to a
6-19 vendor within the time limits prescribed by this chapter, the
6-20 vendor or any subcontractor of that vendor may suspend performance
6-21 of their contracts. Before suspending performance, a vendor or
6-22 subcontractor must give the governmental entity at least 10 days
6-23 written notice of its intent to do so.
6-24 (b) The subcontractor or vendor is responsible for damages
6-25 resulting from the suspension of its work under Subsection (a) only
7-1 if:
7-2 1) its work is specified as a reason for nonpayment;
7-3 or
7-4 2) the government entity or vendor notifies the vendor
7-5 or subcontractor before work is suspended:
7-6 (A) that payment has been made; or
7-7 (B) that a bona fide dispute for payment exists
7-8 for specific reasons stated in the notice.
7-9 (c) In the event the governmental entity or vendor provides
7-10 a list of specific reasons to the vendor or subcontractor in
7-11 accordance with Subsection (b) that includes the vendor's or
7-12 subcontractor's labor, services, or goods, the governmental entity
7-13 or vendor shall give the vendor or subcontractor a reasonable
7-14 opportunity to cure the listed items. The governmental entity or
7-15 vendor shall accept the cured items or a reasonable value offered
7-16 by the vendor or subcontractor to cover the items that may not be
7-17 promptly cured, and the vendor or subcontractor is not obligated to
7-18 supply further labor, services, or goods until properly paid as
7-19 provided by this chapter for work that is properly performed or
7-20 goods that are properly supplied and for the costs of
7-21 demobilization and remobilization.
7-22 (d) The rights provided by this section are in addition to
7-23 the other rights provided by this chapter and any rights and
7-24 remedies available under other law.
7-25 SECTION 11. Section 2251.027, Government code, is repealed.
8-1 SECTION 12. (a) This Act takes effect September 1, 1999.
8-2 (b) The changes in law made by this Act apply only to a
8-3 contract or agreement entered into on or after the effective date
8-4 of this Act. A contract or agreement entered into before the
8-5 effective date of this Act is governed by the law in effect when
8-6 the contract was entered into, and the former law is continued in
8-7 effect for that purpose.
8-8 SECTION 13. The importance of this legislation and the
8-9 crowded condition of the calendars in both houses create an
8-10 emergency and an imperative public necessity that the
8-11 constitutional rule requiring bills to be read on three several
8-12 days in each house be suspended, and this rule is hereby suspended.