Getting Paid on IL State/Local Projects - LAW OFFICE OF ELIAS M. GORDAN

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0 height="100%"><tr> <td valign="top" width=175 BGCOLOR="#A6CAF0" TEXT="#080000"> <div> <B> <TABLE BORDER="0" CELLPADDING="2" CELLSPACING="1" WIDTH="132" BORDERCOLORLIGHT="#C0C0C0" BORDERCOLORDARK="#808080" FRAME="BOX" RULES="ALL" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP HEIGHT= 35 ><NOBR><div> <IMG BORDER="0" SRC="1x1.gif" HEIGHT="29" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" WIDTH="21"></div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> <IMG BORDER="0" SRC="1x1.gif" HEIGHT="29" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" WIDTH="21"></div> </NOBR></tD> <tD VALIGN=TOP WIDTH="20"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="35" ALIGN="bottom" WIDTH="20" HSPACE="0" VSPACE="0"></tD> <tD VALIGN=TOP><NOBR><div> <A HREF="our_legal_information.htm" TARGET="_top" TITLE="LAW OFFICE OF ELIAS M. GORDAN Legal Inf"><U><B><IMG SRC="00d0d1d0.gif" border=0 width="13" height="29" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></B></U></A></div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> <IMG BORDER="0" SRC="1x1.gif" HEIGHT="29" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" WIDTH="27"></div> </NOBR></tD> </tR> </TABLE></B></div> <div> <B>© </B>2001 Elias M. Gordan</div> <div> All rights reserved</div> <bR> <div> <B>Law Office of</B></div> <div> <B>Elias M. Gordan</B></div> <div> Post Office Box 60</div> <div> Palos Park, IL  60464</div> <bR> <div> Phone  708.923.9735</div> <div> Email  gordanlaw@att.net</div> <div> Web    www.gordanlaw.com</div> <div> <A HREF="index.htm" TARGET="_top" TITLE="HOME PAGE LAW OFFICE OF ELIAS M. GORDAN"><U><B>HOME</B></U></A></div> <div> <A HREF="id24.htm" TARGET="_top" TITLE="LAW OFFICE OF ELIAS M. GORDAN About Us"><U><B>About Us</B></U></A></div> <div> <A HREF="id30.htm" TARGET="_top" TITLE="LAW OFFICE OF ELIAS M. GORDAN Links"><U><B>Links</B></U></A></div> <div> <A HREF="id26.htm" TARGET="_top" TITLE="LAW OFFICE OF ELIAS M. GORDAN Contact U"><U><B>Contact Us</B></U></A></div> <bR> <bR> <bR> </td> <td valign="top" BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <B>GETTING PAID FOR SUBCONTRACT WORK</B></div> <div> <B>(ILLINOIS - STATE AND LOCAL PROJECTS)</B></div> <div> ©2001 Attorney Elias M. Gordan, <FONT SIZE="3" COLOR="#0000FF" FACE="Arial" ><A HREF="http://www.gordanlaw.com" TARGET="_top" TITLE="http://www.gordanlaw.com"><U><U>http://www.gordanlaw.com</U></U></A></FONT>.  All rights reserved.</div> <bR> <div> Subcontractors frequently complain of slow payment for work they have performed on construction projects, even though the work in question has complied with the requirements of the contract.  Preventing such problems should be an important priority of every subcontractor.  Prevention of payment problems requires three steps:</div> <div> - Inquire about past payment histories of the contractor and owner.  Online resources, such as Dun and Bradstreet, at <FONT SIZE="3" COLOR="#0000FF" FACE="Arial" ><A HREF="http://www.dnb.com" TARGET="_top" TITLE="http://www.dnb.com"><U><U>http://www.dnb.com</U></U></A></FONT> , can provide valuable information for a small charge (often for slightly over $100).  Such an inquiry is very helpful if an extended or large contract is contemplated, or if the subcontractor has never worked for the entity before.  Your banker may also be helpful.  Contract disclosure requirements, requiring “upstream” contracting parties to disclose changes of ownership or financial condition, may be bargained for in some instances.</div> <div> - Carefully examine contract provisions before signing, to see if “pay-if-paid” provisions, indemnification requirements, arbitration provisions, “no-damages- for-delay” clauses, or other risk-shifting provisions are included.  Pricing should accurately reflect such risks.</div> <div> - Continually monitor receivables, to promptly detect delays in payment, and to assert lien and other rights in a timely manner.  Insist on proper documentation of extra work ordered by the Owner, Contractor, or others, to avoid problems later.</div> <bR> <div> Subcontractors on State and local projects in Illinois have three main avenues of relief: liens on public funds, liens against Contractor payment bonds, and the Illinois “prompt payment” statute.</div> <bR> <div> <B>1) </B> <B>Liens on (unpaid) public funds (Illinois Compiled Statutes, chapter 770, section 60/23)</B>.</div> <div>      Available on the Internet at <FONT SIZE="3" COLOR="#0000FF" FACE="Arial" ><A HREF="http://www.legis.state.il.us/legislation/ilcs/ch770/ch770act60.htm" TARGET="_top" TITLE="http://www.legis.state.il.us/legislation"><U><U>http://www.legis.state.il.us/ilcs/ch770/ch770act60.htm</U></U></A></FONT> </div> <div> While liens cannot be filed in most cases against publicly-owned land, subcontractors and suppliers can assert liens against the <U>unpaid</U> balances due to a contractor on a State or local project.  Some State and local agencies (like IDOT) post contractor payment information on the Internet, to facilitate this.  The clerk or Secretary of the local agency must be notified in person, or by registered or certified mail, delivery limited to addressee only, return receipt requested.  The contractor, and any “upper-tier” subcontractors/suppliers, must be notified in like manner.  Within 90 days (NOT three months) after giving the required notice, the subcontractor or supplier must file suit for an accounting, and serve notice, against the prime contractor, and the party to whom the subcontractor furnished services or materials.  A copy of the complaint must be delivered to the clerk or Secretary of the municipal body, within the same 90-day period.  Additional rules apply to State agencies.  NOTE: “No-lien” contracts, where the subcontractor must waive lien rights to be awarded the subcontract, are usually considered unenforceable, and against public policy, under section 60/1.1.  Lien waivers or releases may still be valid, however.</div> <bR> <div> <B>2) Claims against Contractor payment bonds (Public Construction Bond Act, Illinois Compiled Statutes, chapter 30, section 550).</B></div> <div> <FONT SIZE="3" COLOR="#000000" FACE="Arial" >     Available on the Internet at </FONT><FONT SIZE="3" COLOR="#0000FF" FACE="Arial" ><A HREF="http://www.legis.state.il.us/legislation/ilcs/ch30/ch30act550.htm" TARGET="_top" TITLE="http://www.legis.state.il.us/legislation"><U><U>http://www.legis.state.il.us</U></U></A></FONT><A HREF="http://www.legis.state.il.us/legislation/ilcs/ch30/ch30act550.htm" TARGET="_top" TITLE="http://www.legis.state.il.us/legislation"><U><B>/</B></U></A><A HREF="http://www.legis.state.il.us/legislation/ilcs/ch30/ch30act550.htm" TARGET="_top" TITLE="http://www.legis.state.il.us/legislation"><U>ilcs/ch30/ch30act550.htm</U></A><FONT SIZE="3" COLOR="#000000" FACE="Arial" > </FONT></div> <div> The statute requires all contractors on State or local projects over $5000, to provide a surety bond, for the completion of the contract, and for the payment of labor and materials furnished under contract to the prime contractor or subcontractors.  Suits involving claims against the payment bond must be filed after 120 days of the date of last work, or the furnishing of the last materials (exceptions may permit filing before the end of the 120-day period).  A verified notice of this claim must be filed with the “officer, board, bureau, or department awarding the contract”, within 180 days of the date of last work, or the furnishing of the last materials.  The contractor must then be notified within ten days of notifying the agency.  Section 550/2 specifies the format to use.  If the project is accepted by the State or municipality, suit must be filed within six months of acceptance, in addition to the other time limits.</div> <bR> <div> <B>3) The Illinois Local Government Prompt Payment Act (Illinois Compiled Statutes, chapter 50, section 505), and the State Prompt Payment Act (Illinois Compiled Statutes, chapter 30, section 540).</B>  </div> <div>      Available on the Internet at </div> <div> <A HREF="http://www.legis.state.il.us/legislation/ilcs/ch50/ch50act505.htm" TARGET="_top" TITLE="http://www.legis.state.il.us/legislation"><U><U>http://www.legis.state.il.us/ilcs/ch50/ch50act505.htm</U></U></A><FONT SIZE="3" COLOR="#000000" FACE="Arial" > (Municipalities)</FONT></div> <div> <A HREF="http://www.legis.state.il.us/legislation/ilcs/ch30/ch30act540.htm" TARGET="_top" TITLE="http://www.legis.state.il.us/legislation"><U><U>http://www.legis.state.il.us/ilcs/ch30/ch30act540.htm</U></U></A><FONT SIZE="3" COLOR="#000000" FACE="Arial" >  (State)</FONT></div> <div> Both statutes require the contractor on the State or local agency project, upon payment by the agency, to pay each subcontractor or materials supplier, in proportion to the work completed by each one, minus any retention.  An exception applies if the Contractor has rejected the subcontractor work or supplier materials.  If the Contractor, without reasonable cause, fails to pay its subcontractors and materials suppliers within fifteen (15) days after receiving payment under the public construction contract, the contractor must pay interest, at the rate of 2% per month, from the end of the 15-day period, until the amount is fully paid.  The same rule applies if “higher-tier” subcontractors and suppliers get paid, and fail to pay their “lower-tier” subcontractors and suppliers, after a 15-day period.</div> <bR> <div> In addition to the above three measures, subcontractors may also sue their contractor in a breach-of-contract action, assuming that they have not given up their rights to sue under the contract.</div> <div> Because construction disputes can be very fact-intensive, an attorney’s assistance is recommended at the first sign of a problem, before time limits are missed and rights lost.  Subcontractors can greatly facilitate their work (and the attorney’s work) with careful and organized record-keeping.</div> <div> Please <FONT SIZE="3" COLOR="#0000BF" FACE="Arial" ><A HREF="id26.htm" TARGET="_top" TITLE="LAW OFFICE OF ELIAS M. GORDAN Contact U"><U>contact our office</U></A></FONT>, or call us at 708.923.9735, if you have further questions on these issues.</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>DISCLAIMER</B></div> <div> The information contained in this guide is meant only to convey general information, and is not intended to serve as legal advice or counsel, nor is it meant to create an attorney-client relationship.  The information presented here is subject to change or modification that any time without notice, and may not apply to the specific facts of your case.  Accordingly, you should check with a with an attorney before acting on this information, to make sure that it applies to your situation.</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>Law Office of Elias M. 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