Sponsor Testimony - House Bill 68 (Prompt Pay), Representatives Cross and Sweeney (February 17, 2021)

Summary

Sponsor testimony on House Bill 68 (Prompt Pay) from Representatives Jon Cross and Bride Rose Sweeney to the House Commerce and Labor Committee, dated February 17, 2021. The testimony says the bill would require private sector owners of construction projects to pay prime contractors no more than 30 days after the prime contractors provide final invoices. It cites a 2018 Construction Payments Report issued by Rabbet and a $40 billion impact on the industry from slow payments. Sweeney's portion states that the industry has 51 days sales outstanding and describes current law on public construction payment, including the 30 days after the invoice for public projects.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

                    Representatives Jon Cross & Bride Rose Sweeney
                       Sponsor Testimony: House Bill 68 (Prompt Pay)
                          House Commerce and Labor Committee
                                     February 17, 2021


Chairman Stein, Vice-Chair Johnson, Ranking Member Lepore-Hagan, and Members of the
Commerce and Labor Committee, Representative Sweeney and I are excited to sponsor and testify
in support of House Bill 68. Our legislation seeks to address an issue in the construction industry
that unfortunately falls on those small businesses who can least afford it. House Bill 68 would
require private sector owners of construction projects to provide payment to the prime
contractors no more than 30 days after the prime contractors provide final invoices to the owners.

According to the 2018 Construction Payments Report issued by Rabbet, there is a $40 billion
impact on the industry for carrying forward the fees and costs of slow payments. This same study
found that an overwhelming majority of subcontractors must turn to other sources of financing
for wages and materials while they wait for payment. Only 39% of subcontractors reported the
ability to rely on their balance sheet, followed by 36% having to use a line of credit, 22% using
credit cards, 15% use personal savings and 6% use retirement savings. While wages must be paid
weekly or bi-weekly and materials are typically purchased on 30-day invoices terms, three out of
four contractors reported waiting longer than 30 days to receive payments. One in three
contractors reported waiting longer than 60 days.

This bill aims to get money flowing from, often-times, very large companies to Ohio contractors..
This bill would not impact home builders and we believe focuses on large-scale commercial
developers that are not paying their contractors within a reasonable time. House Bill 68 is
modeled after 29 others states’ current laws, including Texas.
I’ll now turn it over to my colleague, Representative Sweeney, to discuss the details of the bill.

Thank you, Representative Cross. Chairman Stein, Vice-Chair Johnson, Ranking Member Lepore-
Hagan, and Members of the Commerce and Labor Committee, when prime contractors are not
paid promptly, everyone is left worse off. Businesses struggle to make ends meet when project
owners fail to make payments in a timely manner. Slow payments and carrying over late fees cost
the construction industry billions of dollars each year.

The construction industry suffers from 51 days sales outstanding which is the longest of any
industry in the US. The General Assembly has tried to address this issue by placing certain time
limits for payments. Current law states that public construction projects require the owner to pay
the prime contractor within 30 days after the invoice. The prime contractor to sub-contractor
payment is 10 days after the prime contractor receives the payment and then another 10 days from
the sub to lower tiers.
However, there is no such provision to get the payments flowing for private construction projects.
While the day limit for prime contractor to sub-contractor and sub-contractor to lower tier is the
same for public or private, there is no provision on how long owners can pay their prime
contractor on private projects. Since there is no time limit for when the general contractor gets
paid, the sub-contractor is waiting to get paid and so goes the same down the line.

Prompt payment of prime contractors would offer stability to working class families. It would
provide predictability to the small businesses and contractors that drive our economy and will be
tasked with rebuilding Ohio’s infrastructure in the years to come.

House Bill 68 harmonizes the laws governing the timeline of construction projects without
creating an undue burden on the owners of those projects. Whether a contractor is working for
the public on I-480 or privately on one of the massive new datacenters being built in Ohio, that
contractor should be able to count on prompt payment for work completed.

Thank you and we look forward to answering any of your questions.




                                                2


File and source

File

2021-02-17_commerce-labor_testimony_hb68sponsorcrosssweeney.pdf

Size

92,208 bytes

SHA-256

ef3cf5a4af9d5b5011de6842aa595b03dff5ab808418c78ede0ec2659c967c63

Our copy

2021-02-17_commerce-labor_testimony_hb68sponsorcrosssweeney.pdf

Original

No public link identified.