The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Rules
BILL: CS/SB 378
INTRODUCER: Governmental Oversight and Accountability Committee and Senator Bradley
SUBJECT: Payment for Construction Services
DATE: March 16, 2021 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Paglialonga Ryon CA Favorable
2. Ponder McVaney GO Fav/CS
3. Paglialonga Phelps RC Favorable
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 378 enhances the statutory interest rate for public and private parties that fail to make
required payments for certain construction labor, services, and material.
The bill increases, by one percent per month, the remedial interest rate applied to payments
wrongfully withheld for construction services for public and private construction projects. For
public sector construction projects, the bill increases the interest rate from one percent to two
percent per month. Public entities that wrongfully withhold payment to contractors and, likewise,
contractors who wrongfully withhold payment to subcontractors and sub-subcontractors on
public projects will be liable for interest at a rate of two percent per month on the unpaid
amounts. For private sector construction projects, current law specifies that late payments bear
interest at the rate specified in s. 55.03, F.S., which provides the general rate of interest on
judgments.1 The bill increases the late payment interest for the private sector to the rate specified
in s. 55.03, F.S., plus twelve percent per annum.
1
Under s. 55.03, F.S., the Chief Financial Officer sets rates of interest that apply to judgments or decrees for the calendar
quarter beginning January 1 and adjusted quarterly on April 1, July 1, and October 1 by averaging the discount rate of the
Federal Reserve Bank of New York for the preceding 12 months, then adding 400 basis points to the averaged federal
discount rate. As of January 1, 2021, the current judgment interest rate per annum is 4.81%. Jimmy Patronis Florida’s Chief
Financial Officer Website, Current Judgement Interest Rates, available at:
https://www.myfloridacfo.com/division/aa/localgovernments/current.htm (last visited Jan. 25, 2021).
BILL: CS/SB 378 Page 2
Furthermore, the bill clarifies that parties who contract with a public or private entity for
construction services and knowingly and intentionally fail to pay the undisputed contract
obligations for construction labor, services, or materials, commit misapplication of construction
funds, as provided in s. 713.345, F.S. The Construction Industry Licensing Board must take
disciplinary against a construction industry licensee found guilty of committing misapplication
of construction funds and suspend the licensee’s license for a minimum of one year.
The state and local governments and contractors may incur additional costs associated with the
increased interest rates applied to the late payment of constructions services.
The provisions of the bill apply only to contracts executed on or after July 1, 2021.
II. Present Situation:
Florida law has several Prompt Payment Acts regulating various aspects of payments connected
to construction projects and services. Part VII of ch. 218, F.S., addresses payment for local
government construction projects. Chapter 255, F.S., governs payments connected to state
agency construction projects, and payments for private construction projects are regulated in
chs. 713 and 715, F.S.
Prompt Payment Act for Local Governments
Part VII of ch. 218, F.S., is known as the “Local Government Prompt Payment Act” and requires
“payment for all purchases by local governmental entities be made in a timely manner.”2
Moreover, the stated purpose of this act is to provide for prompt payments by local governments
to parties for construction services, apply interest on late payments made by local governments,
and establish a dispute resolution process for contested payments.3
The act applies to a county or municipal government, school board, school district, authority,
special taxing district, other political subdivision, or any office, board, bureau, commission,
department, branch, division, or institution thereof.4 The act defines construction services as all
labor, services, and materials provided in connection with the construction, alteration, repair,
demolition, reconstruction, or other improvements to real property.5
Payment Deadlines for Prime Contractors
According to s. 218.735, F.S., when a local governmental entity enters into a contract for
construction services with a contractor,6 the local government must identify the representative
who is to receive contractor invoices. The payment process begins when a contractor submits an
invoice. This action starts the local government entity's timeframe to remit payment or reject the
invoice.
2
Section 218.71, F.S.
3
Id.
4
Section 218.72(5), F.S.
5
Section 218.72(2), F.S.
6
Section 218.72(3), F.S.: “Contractor or provider of construction services means the person who contracts directly with a
local governmental entity to provide construction services.”
BILL: CS/SB 378 Page 3
The payment due date depends on whether an agent must approve the invoice. If a local
government representative must approve the invoice before it is submitted to the entity for
payment, the payment is due 25 business days after the date on which the invoice is stamped as
received. If the invoice does not require approval by an entity representative, payment is due 20
days after the date on which the invoice is stamped as received.7
If payment is not received by the due date, the contractor can send an overdue notice to the local
government entity. After four business days of delivering the overdue notice, if the invoice is not
rejected, the invoice will be considered undisputed, except for any amounts that are fraudulent or
misleading.8
If the invoice does not meet contract requirements, the local government entity must provide the
contractor with a written rejection specifying the deficiency and action needed to rectify within
20 business days of receipt. Once the invoice is corrected, payment or notice of rejection of the
invoice is due within ten business days of receipt or the first business day after the local
government entity’s next held meeting.9
Payment Deadlines for Subcontractors, Sub-Subcontractors, & Suppliers
When payment is received by a contractor for labor, services, or materials furnished by
subcontractors and suppliers, payment is due to those subcontractors and suppliers within 10
days of receipt of payment from the local government entity.10
If a subcontractor utilizes sub-subcontractors and suppliers, payment to those parties is due
within 7 days of the subcontractor receiving payment.11 Under s. 218.735(6), F.S., contractors
and subcontractors are entitled to dispute invoices so long as the payment rejection is in writing.
The actions required to rectify the dispute must be included in the rejection. However, any
undisputed amounts are required to be paid within the outlined time limits.
Penalties for Late Payment
Under the Local Government Prompt Payment Act, if payment for construction services is late or
wrongfully withheld, statutorily imposed interest will accrue at a rate of 1 percent per month, or
a greater rate specified by contract, until the debt is paid. Attorney fees and court costs are only
available to disputes between contractors, subcontractors, and suppliers. They will only be
awarded if payments were withheld without any reasonable basis in law or fact. 12
Prompt Payment Act for State Construction Projects
Sections 255.0705 - 255.078, F.S., are known as the Florida Prompt Payment Act. This act
governs the timely payment for construction services by the state or any agency thereof (public
7
Section 218.72(1), F.S.
8
Id.
9
Section 218.735(3), F.S.
10
Section 218.735(6), F.S.
11
Id.
12
Section 218.735(6), F.S.
BILL: CS/SB 378 Page 4
entity).13 This act also governs payments made by contractors to subcontractors and suppliers
when the construction services are in connection with a public entity construction project.
Payment Deadline for Public Entity to Contractor
For public entities contracting with a prime contractor, the payment process starts when a
contractor submits a pay application to the public entity. The public entity must submit the
contractor’s request to the Chief Financial Officer within 20 days of receiving the payment
application. Upon receipt, the payment officer performs an inspection of the construction services
claimed by the payment application. The payment officer must approve or deny the payment
application within 10 days. Under these provisions, payment to a contractor who properly performs
construction services is due within 30 days after the payment application is submitted.14
Payment Deadline for Contractor to Subcontractors and Suppliers
Prime contractors typically do not have to pay other parties involved in a public construction
project until the public entity has paid the prime contractor.15 Subcontractors and suppliers are
entitled to receive payment from a prime contractor once all the necessary lien waivers and
payment applications have been submitted to the prime contractor. After these prerequisites are
fulfilled, the prime contractor must release undisputed payments within 30 days after the labor or
materials were provided, or 10 days from receipt of payment from the public entity, whichever is
later.16
Penalties for Late Payment
All payments due for the purchase of construction services under the Florida Prompt Payment
Act and wrongfully withheld by a public entity or prime contractor bear statutorily imposed
interest at the rate of 1 percent per month.17
Prompt Payment Law for Private Construction Projects
The payment procedures for private construction projects in Florida are described in chs. 713 and
715, F.S. Section 713.346, F.S., describes how persons are required to pay contract obligations
for labor, services, or materials provided on account for constructing or altering permanent
improvements to real property. Section 715.12, F.S., titled “Construction Contract Prompt
Payment Law,” specifically applies to written contracts to improve a real property for which a
construction lien is authorized under Part I of ch. 713, F.S.
Payment Deadlines and Remedies
Under s. 713.346, F.S., failure to pay any undisputed obligations for labor, services, or materials
used in a private construction project within 30 days after payment became due or is received,
13
Section 255.073, F.S., defines “public entity” to mean the state, or any office, board, bureau, commission, department,
branch, division, or institution thereof.
14
Section 255.073-74, F.S.
15
See International Engineering Services Inc. v. Scherer Const. & Engineering of Cent. Florida, LLC, 74 So.3d 531 (Fla. 5th
DCA 2011); see also Everett Painting Co., Inc. V. Padula & Wadsworth Const., Inc., 856 So.2d 1059 (Fla. DCA 4th 2003).
16
Section 255.073(3), F.S.
17
Section 255.073(4), F.S.
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whichever last occurs, entitles the person providing such construction services to bring a verified
complaint. Based on this complaint and an evidentiary hearing, the court may award either party
an accounting of the payment, an injunction, prejudgment attachment, and any other appropriate
legal and equitable remedy.
Under s. 715.12, F.S., an obligee18 is entitled to payment for construction services as described
by the terms of a contract, and when all the following events have occurred:
 The obligee has furnished the obligor19 with a written request for payment.
 The obligor, except the owner of the real property, immediately above the obligee in the
chain of contracts has been paid for the obligee’s labor, services, or materials.
 The obligee has furnished the obligor with all affidavits or waivers required for the owner to
make proper payments under s. 713.06, F.S.20
Penalties for Late Payment
Any payment due under the provisions of s. 715.12, F.S., excluding any amounts withheld
pursuant to a good faith dispute, bears interest at the rate specified in s. 55.03 F.S., computed
beginning on the fourteenth day after payment is due.
A party can withhold payment for reasons specified in s. 713.346 and s. 715.12, F.S. If none of
the exceptions apply, any late or wrongfully withheld payments will be subject to interest
accruing at the current judgment rate or a rate specified in the contract, whichever is greater.21 If
the dispute goes to court, the prevailing party will be awarded attorney fees.22
Construction Industry Licensing Board
Florida regulates construction contracting under Part I of ch. 489, F.S. Florida establishes the
Construction Industry Licensing Board (“CILB”) under s. 489.107, F.S., to oversee the licensing
and various regulations for the Florida construction industry. When applying for a construction
license, the CILB will meet to consider the application. The CILB also reviews disciplinary cases
and conducts informal hearings regarding licensure.23
Disciplinary Action
The CILB is authorized to take disciplinary actions upon finding that a licensee has violated
Florida construction industry regulations. The CILB may suspend the license holder from all
operations as a contractor, revoke a license, or place the license holder on probation. Furthermore,
the CILB may attach conditions to any disciplinary action taken, which in the sound discretion of
the CILB are deemed appropriate disciplinary measures based on the factual circumstances.24
18
Section 715.12(3)(b), F.S., defines “obligee” to mean a contractor, subcontractor, sub-subcontractor, or materialman who is
entitled to receive payments under a contract that is subject to the Prompt Payment Law.
19
Section 715.12(3)(a), F.S., defines “obligor” to mean an owner, contractor, subcontractor, or sub-subcontractor who has an
obligation to make payments under a contract that is subject to the Prompt Payment Law.
20
Section 715.12(4), F.S.
21
Section 715.12(5)(a), F.S.
22
Section 713.346(7), F.S.
23
Section 489.129, F.S.
24
Id.
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During Fiscal Year 2019-2020, the CILB received 8,128 complaints of which 1,950 received a
finding of probable cause by the CILB or the Department of Business and Professional Regulation
(Department) in instances delegated by the CILB).25 Also, during this time frame, the CILB
received $139,512 in unlicensed activity fees, $111,520 in administrative fines, and $17,163 in
citations.26
Misapplication of Construction Funds
Section 713.345, F.S., provides that the misapplication of construction funds is a crime in
Florida. This statute only imposes criminal liability on those who misuse construction project
funds and does not impose any fiduciary relationship between parties in contractual relationships
for construction, and is not a civil cause of action.
The statute provides that “any person who receives payments for the improvement of real property
must apply such portion of any payments to the payment of all amounts then due and owing for
services and labor performed.” However, this provision “does not prevent any person from
withholding any payment, or any part of a payment, in accordance with the terms of a contract for
services, labor, or materials, or pursuant to a bona fide dispute regarding the amount due, if any,
for such services, labor, or materials.”
Section 713.345, F.S., continues to state that “any person who knowingly and intentionally fails to
comply with paragraph (a) [the proper payment of accounts due and owing] is guilty of
misapplication of construction funds[.]” Thus, to be criminally convicted for misapplication of
construction funds, there are two relevant elements: