SB 627

            
2020 SESSION

20105094D

SENATE BILL NO. 627


Offered January 8, 2020


Prefiled January 7, 2020

A BILL to amend and reenact � 2.2-4354 of the Code of Virginia 
 and to amend the Code of Virginia by adding a section numbered 11-4.6, relating 
 to prompt payment; contractors and subcontractors.
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Patron-- Vogel

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Referred to Committee on General Laws and Technology

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Be it enacted by the General Assembly of Virginia:
 
 
1. That � 2.2-4354 of the Code of Virginia is amended and 
 reenacted and that the Code of Virginia is amended by adding a section numbered 
 11-4.6 as follows:
 
 
� 2.2-4354. Payment clauses to be included in contracts.
 
 
A. Any contract awarded by any 
 state agency, or any contract awarded by any agency of local government in 
 accordance with � 2.2-4352, shall include:
 
 
1. A payment clause that obligates the contractor to take one of the two following 
 actions pay the 
 subcontractor for the proportionate share of the total payment received from 
 the agency attributable to the work performed by the subcontractor within seven days after receipt of amounts paid to the 
 contractor by the state agency or local government for work performed by the 
 subcontractor under that contract:
 
 
a. Pay the subcontractor for the proportionate 
 share of the total payment received from the agency attributable to the work 
 performed by the subcontractor under that contract; or
 
 
b. Notify the agency and subcontractor, in writing, 
 of his intention to withhold all or a part of the subcontractors payment with 
 the reason for nonpayment.
 
 
2. A payment clause that requires (i) individual contractors 
 to provide their social security numbers and (ii) proprietorships, 
 partnerships, and corporations to provide their federal employer identification 
 numbers.
 
 
3. An interest clause that obligates the contractor to pay 
 interest to the subcontractor on all amounts owed by the contractor that remain 
 unpaid after seven days following receipt by the contractor of payment from the 
 state agency or agency of local government for work performed by the 
 subcontractor under that contract, except for amounts withheld as allowed in 
 subdivision 1.
 
 
4. An interest rate clause stating, "Unless otherwise 
 provided under the terms of this contract, interest shall accrue at the rate of 
 one percent per month."
 
 
B. Any such contract awarded 
 shall further require the contractor to include in each of its subcontracts a 
 provision requiring each subcontractor to include or otherwise be subject to 
 the same payment and interest requirements with respect to each lower-tier 
 subcontractor.
 
 
C. A contractors obligation to 
 pay an interest charge to a subcontractor pursuant to the payment clause in 
 this section shall not be construed to be an obligation of the state agency or 
 agency of local government. A contract modification shall not be made for the 
 purpose of providing reimbursement for the interest charge. A cost 
 reimbursement claim shall not include any amount for reimbursement for the 
 interest charge.
 
 
D. A subcontractor shall be entitled to payment 
 when such subcontractor has performed in accordance with the provisions of the 
 contract. Payment by the state agency or agency of local government to the contractor 
 shall not be a condition precedent for payment to a subcontractor, and payment 
 by a contractor to a subcontractor shall not be a condition precedent for 
 payment to any other subcontractor. Any agreement to the contrary shall be 
 unenforceable.
 
 
� 11-4.6. Construction contract; interest provision; payments to 
 subcontractors.
 
 
A. As used in this section, unless the context 
 requires a different meaning:
 
 
"Construction contract" means a contract 
 between a general contractor and a subcontractor relating to the construction, 
 alteration, repair, or maintenance of a nonresidential building, 
 structure, or appurtenance thereto, including moving, demolition, and 
 excavation connected therewith, or any provision contained in any contract 
 relating to the construction of projects other than buildings. "Construction 
 contract" shall not include any contract with any locality or legislative, 
 executive, or judicial body, agency, 
 office, department, authority, post, commission, committee, institution, or 
 board.
 
 
"General contractor" means the 
 same as that term is defined in � 43-1.
 
 
"Owner" means the person who enters into 
 a construction contract with a general contractor.
 
 
"Subcontractor" means the 
 same as that term is defined in � 43-1.
 
 
B. Any construction contract entered into on or 
 after July 1, 2020, shall be deemed to include an interest 
 clause that obligates the general contractor to pay 
 interest to the subcontractor on all amounts owed by the contractor that remain 
 unpaid after seven days following receipt by the general 
 contractor of payment from the owner for work 
 performed by the subcontractor under that contract.
 
 
C. A subcontractor shall be entitled to payment 
 when such subcontractor has performed in accordance with the provisions of the 
 contract. Payment by the owner to the contractor shall not be a condition 
 precedent for payment to a subcontractor, and payment by a contractor to a 
 subcontractor is not a condition precedent for payment to any other 
 subcontractor. Any agreement to the contrary shall be unenforceable.