SRC-JEC S.B. 1720 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 1720
78R6023 KCR-FBy: Williams
State Affairs
4/10/2003
As Filed


DIGEST AND PURPOSE 

A contractor or subcontractor in the construction business can be in a
position of financial jeopardy when required to pay workers and material
suppliers regardless of whether payment has been received from the owner
of the project or general contractor.  In the private sector, contractors
and subcontractors have the right to suspend work if they are not getting
paid for work properly performed.  However, there is no protection for
contractors and subcontractors performing public work projects.   As
proposed, S.B. 1720 extends the right to suspend work to contractors and
subcontractors when a governmental entity is the project owner. 

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to
a state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter B, Chapter 2251, Government Code, by adding
Sections 2251.031 and 2251.032, as follows: 

Sec. 2251.031.  VENDOR REMEDY FOR NONPAYMENT OF CONTRACT.  (a) Authorizes
a vendor to suspend performance required under a contract with a
governmental entity if certain conditions are met. 
 
(b)  Prohibits the vendor from suspending performance under this section
before the 10th day after the date the vendor gives notice under
Subsection (a). 
 
(c)  Provides that a vendor who suspends performance under this section is
not required to supply further labor, services, or materials until the
vendor is paid the amount provided for under this chapter, plus costs for
demobilization and remobilization, or responsible for damages resulting
from suspending work if the governmental entity with which the vendor has
the contract has not notified the vendor in writing before performance is
suspended that payment has been made or that a good faith dispute for
payment exists. 
 
(d)  Requires a notification under Subsection (c)(2) that a good faith
dispute for payment exists to specify the reasons for nonpayment.
Provides that, if a reason specified is that labor, services, or materials
provided by the vendor or a subcontractor are not provided in compliance
with the contract, the vendor or subcontractor is entitled to a reasonable
opportunity to cure the noncompliance, or offer a reasonable amount to
compensate for listed items for which noncompliance cannot be promptly
cured. 
 
(e)  Provides that the rights and remedies provided by this section are in
addition to rights and remedies provided by this chapter or other law. 
 
(f)  Prohibits a person from waiving any rights or remedies granted by
this section, by contract, or by any other means.  Provides that any
purported waiver of this section is void. 
  
Sec. 2251.032.  SUBCONTRACTOR REMEDY FOR VENDOR'S NONPAYMENT OF CONTRACT.
(a)  Authorizes a subcontractor of a vendor under a contract with a
governmental entity to suspend performance required under the contract
with the vendor if certain conditions are met. 

(b)  Prohibits the subcontractor from suspending performance under this
section before the 10th day after the date the subcontractor gives notice
under Subsection (a). 
 
(c)  Provides that a subcontractor who suspends performance under this
section is not required to supply further labor, services, or materials
until the subcontractor is paid the amount provided for under the
contract, plus costs for demobilization and remobilization, or responsible
for damages resulting from suspending work if the vendor has not notified
the subcontractor in writing before performance is suspended that payment
has been made or that a good faith dispute for payment exists. 
 
(d)  Requires a notification under Subsection (c)(2) that a good faith
dispute for payment exists to specify the reasons for nonpayment.
Provides that, if a reason specified is that labor, services, or materials
provided by the subcontractor are not provided in compliance with the
contract, the subcontractor is entitled to a reasonable opportunity to
cure the noncompliance, or offer a reasonable amount to compensate for
listed items for which noncompliance cannot be promptly cured. 
 
(e)  Provides that the rights and remedies provided by this section are in
addition to rights and remedies provided by this chapter or other law. 
 
(f)  Prohibits a person from waiving any rights or remedies granted by
this section by contract or by any other means.  Provides that any
purported waiver of this section is void. 
 
SECTION 2.  Effective date:  September 1, 2003.
            Makes application of this Act prospective.