HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: CS/CS/HB 585 Payment for Construction Services
SPONSOR(S): Commerce Committee, Regulatory Reform Subcommittee, DiCeglie
TIED BILLS: IDEN./SIM. BILLS: CS/SB 378
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Regulatory Reform Subcommittee 17 Y, 0 N, As CS Brackett Anstead
2) Civil Justice & Property Rights Subcommittee 14 Y, 0 N Mawn Jones
3) State Administration & Technology 12 Y, 0 N Helpling Topp
Appropriations Subcommittee
4) Commerce Committee 20 Y, 0 N, As CS Brackett Hamon
SUMMARY ANALYSIS
Current law requires prompt payments to parties for construction services, and requires interest to accrue on
amounts owed for construction services if the state, a local government, or a private party fails to timely make
payments for such services. The calculation of interest is set by statute or determined by the contract. Interest
also accrues on amounts owed if a contractor receives payment for labor, services, or materials and fails to
make timely payments under the contract obligations for such labor, services, or materials.
If a person receives payment for labor, services, or materials for construction work on private real property and
knowingly and intentionally fails to make undisputed payments under the contract obligations for labor,
services, or materials, the person commits misapplication of construction funds. Misapplication of construction
funds is a felony, the degree of which is determined by the amount of unpaid funds.
Construction contractors are certified by or registered with the Construction Industry Licensing Board (CILB)
housed within the Department of Business and Professional Regulation. Certified contractors can practice
statewide and are licensed and regulated by the CILB. Registered contractors are licensed and regulated by a
local jurisdiction and may practice within that locality.
The bill:
Increases the interest rate from 1 percent per month to 1.5 percent per month for untimely payments
for construction services by the state or local governments;
Increases the interest rate for untimely payments for private construction services from the interest rate
payable on judgments to the interest rate payable on judgments plus 1 percent per annum;
Provides that a party who receives payment from the state, any local government, or public authority for
a public works construction project that knowingly and intentionally fails to pay the undisputed contract
obligations to another party commits misapplication of construction funds;
Clarifies that the CILB may discipline a contractor for committing misapplication of construction funds;
and
Requires the CILB to suspend a contractor’s licenses for a minimum of one year if the contractor is
convicted of misapplication of construction funds.
The bill applies to contracts executed on or after July 1, 2021.
The bill may have an indeterminate negative fiscal impact on state and local governments. See Fiscal
Comments.
The bill has an effective date of July 1, 2021.
This document does not reflect the intent or official position of the bill sponsor or House of Representatives.
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DATE: 4/14/2021
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Prompt Payment Act for Local Governments – Current Situation
Part VII of ch. 218, F.S., is known as the “Local Government Prompt Payment Act” (“Act”). The purpose
of the Act is to provide for prompt payments by local governments, apply interest on late payments
made by local governments, and establish a dispute resolution process for contested payments.1 The
Act defines “local government entity,” as 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.2
Current law provides that when a local government entity enters into a contract for construction
services3 with a contractor,4 the local government entity must identify the agent,5 employee, facility, or
office who is to receive the contractor’s payment request or invoices.6 Every local government entity
must establish procedures so that every payment request or invoice received by the local government
entity is marked as received on the date on which it is delivered to an agent or employee of the local
government entity, or a facility or office of the local governmental entity.7
When a contractor submits a payment request or invoice, the local government entity must make the
payment within:8
25 business days after the date on which the payment request or invoice is stamped, if an agent
must approve the invoice before it is submitted to the entity for payment;
20 business days after the date the payment request or invoice is stamped, if an agent is not
required to approve the invoice.
If payment is not received by the due date, the contractor may send an overdue notice to the local
government entity. Four business days after overdue notice delivery, if the invoice is not rejected, the
invoice will be considered undisputed, except for any amounts that are fraudulent or misleading.9
If the payment request or invoice does not meet the contract requirements, the local government entity
must provide the contractor with a written rejection specifying the deficiency and any action needed to
rectify it, within 20 business days of receipt of the payment request or invoice.10
If a contractor submits a corrected payment request or invoice, the local government entity must pay or
dispute the request within:11
Ten business days after the date the corrected payment request or invoice is stamped as
received; or
1
Id.
2
S. 218.72(5), F.S.
3
“Construction services” is defined as all labor, services, and materials provided in connection with the construction, alteration,
repair, demolition, reconstruction, or other improvements to real property. S. 218.72(2), F.S.
4
“Contractor” means the person who contracts directly with a local governmental entity to provide construction services.” S.
218.72(3), F.S.
5
“Agent” means the project architect, project engineer, or other agency or person acting on behalf of the local governmental entity. S.
218.72, F.S.
6
S. 218.735(1), F.S.
7
S. 218.74(1), F.S.
8
S. 218.72(1), F.S.
9
S. 218.735(1), F.S.
10
S. 218.735(2), F.S.
11
S. 218.735(3), F.S.
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The first business day after the local government entity’s next regularly scheduled meeting, if
the local governmental entity is required by ordinance, charter, or other law to approve or reject
the corrected payment request or invoice.
If a local government entity cannot resolve a dispute with the contractor, the dispute must be resolved
by the dispute resolution procedure established in the contract or by the local government entity.12
When payment is received by a contractor from a local government entity for labor, services, or
materials furnished by subcontractors or suppliers, the payment is due to those subcontractors and
suppliers within 10 days of the contractor receiving the payment from the local government entity.13
If a subcontractor utilizes sub-subcontractors or suppliers, payment to those parties is due within 7 days
of the subcontractor receiving payment.14 Contractors and subcontractors may dispute a party’s invoice
as long as the contractor or subcontractor notifies the party in writing of the amount in dispute and the
actions required to resolve the dispute. However, any undisputed amounts must be paid within the
required time periods.15
Any payment for construction services that is not made within the required time period accrues interest
at a rate of 1 percent per month, or the rate specified by contract, whichever is greater. A local
government entity may not prohibit late interest charges in a contract with a vendor or provider of
construction services.16 In an action to recover amounts due for construction services purchased by a
local government entity, a court must award court costs and reasonable attorney fees to the prevailing
party.17
Prompt Payment Act for Local Governments – Effect of the Bill
The bill increases the interest rate for untimely payments for local government construction services to
1.5 percent per month, or the rate specified by contract, whichever is greater.
Prompt Payment Act for State Construction Projects – Current Situation
Sections 255.0705 - 255.078, F.S., are known as the Florida Prompt Payment Act. The act governs the
timely payment for construction services18 by a public entity, except construction services for the
Department of Transportation.19 Public entity means the state, or any office, board, bureau,
commission, department, branch, division, or institution thereof.20
Every public entity must establish procedures so that every payment request or invoice from a
contractor,21 which is received by the public entity, is marked as received on the date on which it is
delivered to an agent,22employee, facility, or office of the local governmental entity.23
12
S. 218.735(4), F.S.
13
S. 218.735(6), F.S.
14
Id.
15
Id.
16
Ss. 218.735(9), and 218.75, F.S.
17
S. 218.76(3), F.S.
18
“Construction Services” means all labor, services, and materials provided in connection with the construction, alteration, repair,
demolition, reconstruction, or any other improvements to real property. The term “construction services” does not include contracts or
work performed for the Department of Transportation. S. 255.072(2), F.S.
19
S. 255.072(2), F.S.
20
S. 255.072(5), F.S.
21
“Contractor” means any person who contracts directly with a public entity to provide construction services. S. 255.072(3), F.S.
22
“Agent” means project architect, project engineer, or any other agency or person acting on behalf of a public entity. S. 255.072(1),
F.S.
23
S. 255.074(1), F.S.
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Upon receipt of a contractor’s invoice or payment, a public entity must maintain the date of:24
Receipt of the invoice or payment;
Receipt of the provided goods and services; and
Inspection and approval of the goods and services.
Approval and inspection of goods or services may take no longer than 5 working days unless the bid
specifications, purchase order, or contract specifies otherwise. The latter of these days is the “prompt
pay start date.”25
The public entity must submit the contractor’s invoice or payment request, the entity’s receipt of the goods
and services, and its inspection and approval of the goods or services to the Chief Financial Officer
(CFO). The CFO is a member of the Cabinet and serves as the chief fiscal officer of the state and agency
head of the Department of Financial Services (DFS).26 The public entity must submit this information
within 20 days of the prompt pay start date.27
Upon receipt of the contractor’s invoice or payment, DFS must approve or deny the payment application
within 10 days, unless exceptional circumstances require a longer period. If the 10-day period contains
fewer than 6 business day, DFS may approve or deny the payment within 6 business days.28 If payment
is not issued within 40 days of the prompt payment start date, interest begins to accrue.29
A public entity may dispute any payment but must pay any undisputed amounts. Disputes must be
resolved in accordance with rules developed and adopted by the Chief Justice for the judicial branch,
and rules adopted by the Department of Financial Services or in a formal administrative proceeding
before an administrative law judge of the Division of Administrative Hearings for state agencies.30
When payment is received by a contractor from a public entity for labor, services, or materials furnished
by subcontractors or suppliers, the payment is due to those subcontractors and suppliers within 10
days of the contractor receiving the payment from the local government entity.31 If a subcontractor
utilizes sub-subcontractors or suppliers, payment to those parties is due within 7 days of the
subcontractor receiving payment.32 Contractors and subcontractors may dispute a party’s invoice as
long as the contractor or subcontractor notifies the party in writing of the amount in dispute and the
actions required to resolve the dispute. 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.33
In an action to recover amounts due for construction services purchased by a public entity, a court must
award court costs and reasonable attorney fees, if the court finds that the nonprevailing party withheld
any portion of the payment that is the subject of the action without any reasonable basis in law or fact to
dispute the prevailing party’s claim to those amounts.34
Any payment for construction services that is not made within the required time period accrues interest
at a rate of 1 percent per month.35 A public entity may not prohibit late interest charges in a contract
with a vendor or provider of construction services.36
24
Ss. 215.422(1) and (3), F.S.; Chief Financial Officer, Payment Processing October 2013,
https://www.myfloridacfo.com/Division/aa/documents/2013-PaymentProcessOverviewFinal.pdf (last visited Mar. 23, 2021).
25
Id.
26
Art. IV, s. 4, Fla. Const.; Ch. 17, F.S.
27
S. 215.422(1), F.S.
28
Ss. 215.422(1) and (2), F.S.
29
S. 215.422(3), F.S.
30
Ss. 215.422(3), and 255.073(2), F.S.
31
S. 255.073(3), F.S.
32
Id.
33
S. 255.073(3), F.S.
34
S. 255.076, F.S.
35
S. 255.073(4), F.S.
36
S. 255.075, F.S.
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Prompt Payment Act for State Construction Projects – Effect of the Bill
The bill increases the interest rate for untimely payments for state construction services to 1.5 percent
per month.
Prompt Payment Law for Private Construction Projects – Current Situation
Section 715.12, F.S., is the Construction Contract Prompt Payment Law. It defines an “obligor” as an
owner, contractor, subcontractor, or sub-subcontractor who has an obligation to make payments under
a written construction contract. It defines an “obligee” as a contractor, subcontractor, sub-subcontractor,
or materialman who is entitled to receive payments under a written construction contract.37
An obligee is entitled to payment for his or her construction services, labor, or materials when all of the
following have occurred:38
The obligee is entitled to payment at the time and under the terms specified in the contract
between the obligor and the obligee;
The obligee has furnished the obligor with a written request for payment;
The obligor, except an owner, has been paid for the obligee’s labor, services, or materials
described in the obligee’s request for payment by the person immediately above the obligor in
the chain of contracts; and
The obligee has furnished the obligor with all affidavits or waivers required for the owner to
make proper payments under the construction lien law.39
Beginning 14 days after a payment is due, any payment, except payments withheld pursuant to a good
faith dispute or retained in accordance with the contract, bears interest at the rate of interest payable on
judgments or the rate specified in the contract, whichever is greater.40 An obligee may not waive the
right to receive interest before a payment is due under a contract subject to this section. However, an
obligee may waive the interest due on any late payment on or after the date the payment is due.41
The CFO sets the rate of interest on judgments. The CFO adjusts the rate quarterly beginning January
1 and 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.42 The current interest rate is 4.81% per annum or .0131781% per day.43
Prompt Payment Law for Private Construction Projects – Effect of the Bill
The bill incr