N.Y. General Municipal Law § 106-b: Payment on public work projects

§ 106-b. Payment on public work projects. Notwithstanding the

provisions of any other law to the contrary, all contracts made and

awarded by the appropriate officer, board or agency of a political

subdivision or of any district therein, hereafter referred to as the

public owner, for construction, reconstruction or alteration of any

public work project shall provide for payment by the public owner to the

contractor and payment by the contractor to the subcontractor in

accordance with the following:

1. Payment by public owners to contractors. (a) The contractor shall

periodically, in accordance with the terms of the contract, submit to

the public owner and/or his agent a requisition for a progress payment

for the work performed and/or materials furnished to the date of the

requisition less any amount previously paid to the contractor. The

public owner shall in accordance with the terms of the contract approve

and promptly pay the requisition for the progress payment less an amount

necessary to satisfy any claims, liens or judgments against the

contractor which have not been suitably discharged and less any retained

amount as hereafter described. The public owner shall retain not more

than five per centum of each progress payment to the contractor except

that the public owner may retain in excess of five per centum but not

more than ten per centum of each progress payment to the contractor

provided that there are no requirements by the public owner for the

contractor to provide a performance bond and a labor and material bond

both in the full amount of the contract. The public owner shall pay,

upon requisition from the contractor, for materials pertinent to the

project which have been delivered to the site or off-site by the

contractor and/or subcontractor and suitably stored and secured as

required by the public owner and the contractor provided, the public

owner may limit such payment to materials in short and/or critical

supply and materials specially fabricated for the project each as

defined in the contract. When the work or major portions thereof as

contemplated by the terms of the contract are substantially completed,

the contractor shall submit to the public owner and/or his agent a

requisition for payment of the remaining amount of the contract balance.

Upon receipt of such requisition the public owner shall approve and

promptly pay the remaining amount of the contract balance less two times

the value of any remaining items to be completed and an amount necessary

to satisfy any claims, liens or judgments against the contractor which

have not been suitably discharged. As the remaining items of work are

satisfactorily completed or corrected, the public owner shall promptly

pay, upon receipt of a requisition, for these items less an amount

necessary to satisfy any claims, liens or judgments against the

contractor which have not been suitably discharged. Any claims, liens

and judgments referred to in this section shall pertain to the project

and shall be filed in accordance with the terms of the applicable

contract and/or applicable laws. Where the public owner is other than

the city of New York, the term "promptly pay" shall mean payment within

thirty days, excluding legal holidays, of receipt of the requisition

unless such requisition is not approvable in accordance with the terms

of the contract. Notwithstanding the foregoing, where the public owner

is other than the city of New York and is a municipal corporation which

requires an elected official to approve progress payments, "promptly

pay" shall mean payment within forty-five days, excluding legal

holidays, of receipt of the requisition unless such requisition is not

approvable in accordance with the terms of the contract.

(b) Not later than forty-five business days after the date when the

project has reached substantial completion, as such term is defined in

the contract or as it is contemplated by the terms of the contract, the

public owner shall submit to the contractor a written list describing

all remaining items to be completed by the contractor. Not later than

five business days after receiving a written list describing all

remaining items to be completed by the contractor, the contractor shall

submit to each subcontractor from whom the contractor is withholding

retainage a written list of all remaining items required to be completed

by the subcontractor. Such list may include items in addition to those

items on the public owner's list.

(c) Each public owner other than the city of New York which is

required to make a payment from public funds pursuant to a contract and

which does not make such contract payment by the required payment date

shall make an interest payment to the contractor on the amount of the

contract payment which is due unless failure to make such contract

payment is the result of a lien, attachment, or other legal process

against the money due said contractor, or unless the amount of the

interest payment as computed in accordance with the provisions set forth

hereinafter is less than ten dollars. Interest payments on amounts due

to a contractor pursuant to this paragraph shall be paid to the

contractor for the period beginning on the day after the required

payment date and ending on the payment date for those payments required

according to this section and shall be paid at the rate of interest in

effect on the date when the interest payment is made. Notwithstanding

any other provision of law to the contrary, interest shall be computed

at the rate equal to the overpayment rate set by the commissioner of

taxation and finance pursuant to subsection (e) of section one thousand

ninety-six of the tax law. A pro rata share of such interest shall be

paid by the contractor or subcontractor, as the case may be, to

subcontractors and materialmen in a proportion equal to the percentage

of their pro rata share of the contract payment. Such pro rata share of

interest shall be due to such subcontractors and materialmen only for

those payments which are not paid to such subcontractors and materialmen

prior to the date upon which interest begins to accrue between the

public owner and the contractor. Such pro rata shares of interest shall

be computed daily until such payments are made to the subcontractors and

materialmen.

(d) For projects of a public owner other than the city of New York, if

state funds directly related to and which have been budgeted for the

construction of the project for which the payment is due have not been

received prior to the expiration of the thirty or forty-five days

specified in paragraph (a) of this subdivision, the interest provided

for in paragraph (c) of this subdivision shall not begin to accrue and

payment shall not be due, until ten days after receipt of the state

funds. Nothing in this paragraph shall prevent the public owner from

approving the requisition, subject to receipt of the state funds. State

funds shall mean monies provided to the public owner by the state, its

officers, boards, departments, commissions, or a public authority and

public benefit corporation, a majority of the members of which have been

appointed by the governor or who serve as members by virtue of holding a

civil office of the state, or a combination thereof.

2. Payment by contractors to subcontractors. Within seven calendar

days of the receipt of any payment from the public owner, the contractor

shall pay each of his subcontractors and materialmen the proceeds from

the payment representing the value of the work performed and/or

materials furnished by the subcontractor and/or materialman and

reflecting the percentage of the subcontractor's work completed or the

materialman's material supplied in the requisition approved by the owner

and based upon the actual value of the subcontract or purchase order

less an amount necessary to satisfy any claims, liens or judgments

against the subcontractor or materialman which have not been suitably

discharged and less any retained amount as hereafter described. Failure

by the contractor to make any payment, including any remaining amounts

of the contract balance as hereinafter described, to any subcontractor

or materialman within seven calendar days of the receipt of any payment

from the public owner shall result in the commencement and accrual of

interest on amounts due to such subcontractor or materialman for the

period beginning on the day immediately following the expiration of such

seven calendar day period and ending on the date on which payment is

made by the contractor to such subcontractor or materialman. Such

interest shall be the sole responsibility of the contractor, and shall

be paid at the rate of interest in effect on the date payment is made by

the contractor. Notwithstanding any other provision of law to the

contrary, interest shall be computed at the rate established in

paragraph (b) of subdivision one of section seven hundred fifty-six-b of

the general business law. The contractor shall retain not more than five

per centum of each payment to the subcontractor and/or materialman

except that the contractor may retain in excess of five per centum but

not more than ten per centum of each payment to the subcontractor

provided that prior to entering into a subcontract with the contractor,

the subcontractor is unable or unwilling to provide a performance bond

and a labor and material bond both in the full amount of the subcontract

at the request of the contractor. However, the contractor shall retain

nothing from those payments representing proceeds owed the subcontractor

and/or materialman from the public owner's payments to the contractor

for the remaining amounts of the contract balance as provided in

subdivision one of this section. If the contractor has failed to submit

a requisition for payment of the remaining amounts of the contract

balance within ninety days of substantial completion as provided in

subdivision one of this section, then any clause in the subcontract

between the contractor and the subcontractor or materialman which states

that payment by the contractor to such subcontractor or materialman is

contingent upon payment by the owner to the contractor shall be deemed

invalid. Within seven calendar days of the receipt of payment from the

contractor, the subcontractor and/or materialman shall pay each of his

subcontractors and materialmen in the same manner as the contractor has

paid the subcontractor, including interest as herein provided above.

Nothing provided herein shall create any obligation on the part of the

public owner to pay or to see to the payment of any moneys to any

subcontractor or materialman from any contractor nor shall anything

provided herein serve to create any relationship in contract or

otherwise, implied or expressed, between the subcontractor or

materialman and the public owner.

3. In the event that the terms of payment on a public works project,

as provided in this section, are pre-empted or superseded as a result of

the provisions of any federal statute, regulation or rule applicable to

the project, the terms of this section shall not apply.