CAM’s Michigan Construction Payment Act Becomes Senate Bill 1121
A Letter from the CAM Chairman of the Board, Mr. Joseph Fontanesi:
Fellow members, within the next few months, representatives of CAM will have the opportunity to make the case in support of CAM’s Michigan Construction Payment Act (MCPA), now known as Senate Bill 1121, before a State Senate subcommittee. CAM’s proposed legislation is intended to become the first prompt pay law for private sector commercial projects in the State of Michigan. Also, if the MCPA becomes law as proposed, it will eliminate the unfair industry practice known as retention or retainage.
Currently, Michigan is one of only a handful of states that does not have a prompt payment act for the private sector construction industry. Additionally, every state in the country, including Michigan, has prompt pay legislation on the books for public sector work. Who has not traveled to major metropolitan cities like Chicago, New York, Dallas, Atlanta or Seattle and marveled at all of the cranes at work and thought, “What If?” All of these great cities are located in states with legislation on the books guaranteeing prompt payment on both public and private projects.
Our country’s free market system compels Michigan to compete against other states for business. In order to successfully convince employers to establish and grow their businesses in the Great Lakes State, we need to be either a low-cost producer or provide added value. In truth, on many occasions, a state needs to do both to lure employers. Whether it’s the cost of money associated with a line of credit or the lost opportunity cost of not deploying money efficiently, the cost of money is a real cost. The leaders of states that have enacted private sector prompt pay legislation recognize the importance of a healthy construction industry and what it can do for their individual state’s overall economy today and into the future.
For a state to have a healthy construction industry, the money must flow in a timely and efficient manner. Unfortunately, in today’s private sector construction industry, intentional and unreasonable delays in paying for work, materials and services that have been accepted as being completed satisfactory are becoming more prevalent. In fact, delays in excess of 120 days are not uncommon. The Michigan Construction Payment Act will put an end to this unscrupulous practice. Key provisions of the MCPA include:
- Owners must prove their ability to pay;
- Owners are required to pay for acceptable work within 30 days;
- Contractors and subcontractors must pay their tiers within 7 days of receiving payment;
- An interest penalty clause is included for wrongfully withholding payment;
- Contractual retainage/retention provisions are prohibited;
- Withholding of payment without penalty for work unsatisfactorily completed is permitted;
- Contract provisions requiring the contractor to assume the risk of non-payment are void and unenforceable.
Consequently, we are asking everyone for their support in addressing and rectifying this very critical problem plaguing our industry. For starters, we need you to write to and/or call your local legislators and ask them to support Senate Bill 1121. Timing is of the essence! Click this link for a customizable letter that you can send to your local State Senators and Representatives: Senate Bill 1121 Letter to the Legislators .
See who your Senators and Representatives are at this link: buildwithcam.com/government-contacts. Tell them today that you support Senate Bill 1121, CAM’s Michigan Construction Payment Act!
Thank you for your support of this paramount issue.
2018 CAM Chairman of the Board
Fontanesi & Kann Co./Architectural Building Components, Inc.