Section 3-125-23 - Prompt payment by contractors to subcontractors The following paragraph, or similar statement expressing the same intent, shall be included in all contracts:
"Prompt Payment Clause
(1)Generally Any money paid to a contractor shall be disbursed to subcontractors within ten days after receipt of the money in accordance with the terms of the subcontract; provided that the subcontractor has met all the terms and conditions of the subcontract and there are no bona fide disputes on which the procurement agency has withheld payment.(2)Final payment. Upon final payment to the contractor, full payment to the subcontractor, including retainage, shall be made within ten days after receipt of the money; provided that there are no bona fide disputes over the subcontractor' s performance under the subcontract.(3)Penalty. The procurement officer or the contractor, as applicable, will be subject to a penalty of one and one-half per cent per month upon outstanding amounts due that were not timely paid by the responsible party under the following conditions. Where a subcontractor has provided evidence to the contractor of satisfactorily completing all work under their subcontract and has provided a properly documented final payment request as described in paragraph (4), and: (A) Has provided to the contractor an acceptable performance and payment bond for the project executed by a surety company authorized to do business in the State, as provided in section 103-32.1, HRS; or(B) The following has occurred: (i) A period of ninety days after the day on which the last of the labor was done or performed and the last of the material was furnished or supplied has elapsed without written notice of a claim given to contractor and the surety, as provided for in section 103D-324, HRS; and(ii) The subcontractor has provided to the contractor, an acceptable release of retainage bond, executed by a surety company authorized to do business in the State, in an amount of not more than two times the amount being retained or withheld by the contractor; any other bond acceptable to the contractor; or any other form of mutually acceptable collateral, then, all sums retained or withheld from a subcontractor and otherwise due to the subcontractor for satisfactory performance under the subcontract shall be paid by the procurement officer to the contractor and subsequently, upon receipt from the procurement officer, by the contractor to the subcontractor within the applicable time periods specified in paragraph (2) and section 103-10, HRS. The penalty may be withheld from future payment due to the contractor, if the contractor was the responsible party. If a contractor has violated paragraph (2) three or more times within two years of the first violation, the contractor shall be referred by the procurement officer to the contractors license board for action under section 444-17(14), HRS.(4) A properly documented final payment request from a subcontractor, as required by paragraph (3), shall include: (A) Substantiation of the amounts requested;(B) A certification by the subcontractor, to the best of the subcontractor's knowledge and belief, that: (i) The amounts requested are only for performance in accordance with the specifications, terms, and conditions of the subcontract;(ii) The subcontractor has made payments due to its subcontractors and suppliers from previous payments received under the subcontract and will make timely payments from the proceeds of the payment covered by the certification, in accordance with their subcontract agreements and the requirements of this section; and(iii) The payment request does not include any amounts that the subcontractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of their subcontract; and(C) The submission of documentation confirming that all other terms and conditions required under the subcontract agreement have been fully satisfied. The procurement officer shall return any final payment request that is defective to the contractor within seven days after receipt, with a statement identifying the defect.
(5) In the case of a construction contract, a payment request made by a contractor to the procurement officer that includes a request for sums that were withheld or retained from a subcontractor and are due to a subcontractor may not be approved under paragraph (3) unless the payment request includes: (A) Substantiation of the amounts requested; and(B) A certification by the contractor, to the best of the contractor's knowledge and belief, that: (i) The amounts requested are only for performance in accordance with the specifications, terms, and conditions of the contract;(ii) The subcontractor has made payments due to its subcontractors and suppliers from previous payments received under the contract and will make timely payments from the proceeds of the payment covered by the certification, in accordance with their subcontract agreements and the requirements of this section; and(iii) The payment request does not include any amounts that the contractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of their subcontract. The procurement officer shall return any final payment request that is defective to the contractor within seven days after receipt, with a statement identifying the defect.
(6) This section shall not be construed to impair the right of a contractor or a subcontractor at any tier to negotiate and to include in their respective subcontracts provisions that provide for additional terms and conditions that are requested to be met before the subcontractor shall be entitled to receive final payment under paragraph (3); provided that any such payments withheld shall be withheld by the procurement officer."[Eff 12/15/95; am and comp 11/17/97; am AUG 24 2009] (Auth: HRS §§ 103D-202, 103D-501) (Imp; HRS § 103D-501)