Two bills are pending before the Illinois Legislature that could have a significant impact on the construction industry:

HB 3486

This bill seeks to amend, among other things, the Illinois State Prompt Payment Act, 30 ILCS 540 et. seq., by creating a procedure and deadline for contractors and subcontractors making claims for additional amounts due under contracts on Illinois Department of Transportation’s (the “Department”) projects.  The proposed addition states, in part, that if a contractor or subcontractor:

[C]laims that additional payment is due under the terms of the contract, or for any other reason arising out of the performance of the contract, and the Department has not agreed during the ordinary course of contract administration that payment is due, then the contractor or subcontractor may file a claim according to the requirements and procedures specified by the Department.  If written notifications are not given, or if the Department is not afforded reasonable access by the contractor or subcontractor to complete records of actual costs or additional time claimed, or if a claim is not filed according to the procedures and within the time specified in the rules of the Department…, then the contractor or subcontractor’s claim is waived and the Department is released from any and all demands and claims under that contract by the contractor or subcontractor.

Two obligations arise out of the proposed language.  First, the contracting state entity is entitled to audit the contractor’s and subcontractor’s actual costs and time data.  Second, the contractor and subcontractor must meet the claim procedures outlined.  The claim is waived if either of these two requirements are not met.

While this bill appears to bar a contractor’s or subcontractor’s claim against the State if its requirements are not met, it does not address claims by the subcontractor against the contractor.  If this bill becomes law, contractors would be wise to ensure that their subcontracts include provisions requiring subcontractors to abide by the requirements of this statute or claim, or the claim will be waived.

SB 1395

This bill would amend the Contractor Prompt Payment Act, 815 ILCS 603 et seq., by making the maximum amount that an owner can withhold from a contractor (and that a contractor can withhold from a subcontractor) 5%.

This change, if enacted, is favorable to contractors and subcontractors as the current version of the statute does not include a maximum retainage.

If you have questions or concerns about how these laws might impact your business, contact Manion Stigger to speak with a construction law attorney today.