Subcontractors in Kansas will be assured payment on all projects following Gov. Kathleen Sebelius' (D-Kan.) signing of the Fairness in Public Construction Contract Act (SB-333) on April 21. The comprehensive prompt payment law requires public owners to pay contractors undisputed amounts due within 30 days of receiving a proper invoice — and contractors to pay subcontractors within seven days of receiving payment from owners.
According to Bill Miller, president of Building Erection Services Co. LC, Midwest Crane & Rigging, Olathe, Kan., who is also immediate past president of the Greater Kansas City Area American Subcontractors Association and current government relations chairman, the problem with payment in construction contracts is nationwide. In a study done by Clemson University in 2004, Miller cites that the average time for contractors to receive retainage was 93 days after the owner occupied the building. “The average time for a subcontractor or supplier was 180 days, and 10.4% received only partial or none of the retainage,” he says.
Miller, who has been working with ASA National for the past 17 years to try and get fair contract language in construction contracts, admits much of his earlier efforts were in vain. That's why he decided to pursue the issue at the local level. Things started to turn around after he rallied support from Sen. Karin Brownlee (R-Olathe).
“The Senator comes from a construction background and understood the problems small subcontractors and suppliers face in being forced to sign unfair contracts and give up their rights to file liens or bond claims to secure payment for their work or materials furnished,” Miller says. “She made the private prompt payment bill (SB-33) a Senate Commerce Committee Bill in 2005, and worked very hard to educate the committee on the complicated and confusing construction contract problem.”
The design of SB-33, he continues, was to require all parties in the contract chain to pay the next in line within a reasonable time and to eliminate the onerous contract terms that the powerful forced upon the weaker. “As the depth of the problem became apparent to this committee, the support grew rapidly, quickly becoming a public policy issue,” he says.
Fairness is the primary goal, says ASA-GKC Secretary/Treasurer Ken Keller, Western Extralite Co., Kansas City, Mo., regarding the new law's seven-day requirement, which applies to all tiers of construction. Miller characterizes SB-333 as the most comprehensive construction contract reform law passed anywhere. “As with SB-33 for private work, this will clean up a serious problem that has gotten so bad that a great many small business men and women have been forced out of business and into bankruptcy simply because they could not get paid for their work,” he says.