On June 20, 2014, Missouri Governor signed into law Senate Bill 529. The Act revises and expands the scope of the Missouri Public Prompt Payment Act and the law relating to public works projects. The revised provisions are operative August 28, 2014. Of note, under existing law, all public works contracts made by a political subdivision for a public works project must provide for prompt payment to the contractor. Under the revised Act, these contracts must also provide for prompt payment of any professional engineer, architect, landscape architect, or land surveyor.
Under existing law, a public owner may retain 5% of the value of a public works contract or up to 10% if it is determined by the public owner and the architect or engineer determine that a higher rate is required to ensure performance. The revised Act provides that a public owner may retain up to 10% if the contractor is not required to obtain a bond because the contract is not estimated to exceed $50,000; the Act requires contractors to furnish a bond when the estimated cost of the project exceeds $50,000 instead of $25,000 as contemplated under the existing law. In turn, retainage could be adjusted prior to completion when work was proceeding satisfactorily and retainage was to be paid after substantial completion of the contract or per contract terms. In such cases, 200% of the value of the remaining work was to be withheld until completion. The Act provides that 150% of the value is to be withheld until completion. In turn, under existing law, contractors were required to pay subcontractors and suppliers when they received payment less any retention not to exceed 10%. The Act lowers the retention to 5%.
The Act further provides that, if the owner determines the work is not substantially completed, the owner must provide a written explanation within 14 calendar days to the contractor. The contractor must then provide the notice to its subcontractors and suppliers. If the explanation is not given by the public body, the public body must pay at least 98% of the retainage within 30 calendar days. In addition, under existing law, when the public owner does not release full payment due because there are specific areas of work or materials it is rejecting, the subcontractors and suppliers involved are not paid for the rejected work. The Act now requires that the subcontractors and suppliers that will not be paid are to be provided a written explanation as to why the work or supplies were rejected.
The Act requires the public owner to include any withheld retainage with final payment of moneys owed to the contractor within 30 days of the due date, and to pay any professional engineer, architect, landscape architect, or land surveyor the amount due within 30 days after receiving an invoice. If full payment is not made, the contracting agency must pay 1.5% interest per month it remains unpaid.