Construction Prompt Payment Requirement
Starting July 1, 2007: New Procedures to enable prompt payment to general contractors, subcontractors, and material suppliers.
Act 291, SLH 2006, the Prompt Payment Act, went into effect July 1 , 2007 for contracts that are executed on or after July 1, 2007. The act enables prompt payment for government work of general contractors, subcontractors, and material suppliers. It achieves a reasonable balance between incentive for prompt payment and protecting the interests of general contractors, subcontractors, material suppliers, and government agencies. All government agencies are responsible for implementation.
- Provides for prompt payment by the government procurement officer to the general
contractor and by the general contractor to the subcontractor for work satisfactorily
completed under the subcontract.
- Clarifies requirements for bonding, documentation, and conditions that must be fulfilled by the subcontractor to receive prompt payment.
- Specifies penalties that shall be imposed on the government agency or general
contractor for failing to pay in accordance with the requirements of the section.
- Enables payment of subcontractors including retainage when their work is done even if it is long before the total project is completed.
- Allows for a “release of retainage bond” and adoption of Federal Prompt Payment Act documentation requirements for payments.
- Requires that any retainage provided for in HRS section 103-32.1, be held by the
government procurement officer. This provides assurance that general contractors cannot withhold payment for their use at the expense of the subcontractor.
- Protects the right of the contractors and subcontractors to negotiate other conditions in their subcontracts.
- Adopts documentation requirements from the Federal Prompt Payment Act.
- Provides for prompt payment for change orders.
- Provides for a force account method of cost determination when the government and general contractor cannot agree on change order costs