Construction Payment Act Proposal - Get Paid Quicker

Construction Payment Act Proposal - Get Paid Quicker

Construction Payment Act Proposal - Get Paid Quicker

Michigan’s private contractors have a new bill to be excited about this year! In June 2022, House Bill 6174 was introduced to Michigan lawmakers to provide prompt payment protection on commercial and private construction projects. This bill helps provide payment protection on a select group of projects contractors need to take note of. Along with 35 other states, Michigan is considering implementing this Act to ensure a steady and consistent cash flow for construction projects.

As of now, the Act will not cover public works projects or residential projects that fall within the guidelines of being a dwelling with the purpose of a residence or related facility to the premises intended for use as an adjunct or residential occupancy. 

Beyond those parameters outlined in the Bill, private contractors should keep a close eye out for any additions or revisions that alter who is affected by them.

Getting Paid Quicker

For general contractors to get paid quicker, they need to consider the timeliness of their invoicing procedures. By having a defined invoicing procedure for all of their commercial and private construction projects, they can ensure that payment would be made more promptly. After all, you can’t pay for something that isn’t specified via billing.

Through the Act, a contractor is entitled to submit an invoice to the building owner every 30 days for payment of work that has been performed, or when the work has been fully completed. All invoices must be paid within 30 days of receipt or 30 days after the end of the billing cycle. If a contractor needs to pay subcontractors, sub-subcontractors, and suppliers, it must be done within 7 days of receipt of payment from the higher-tiered party.

The only stipulation for withholding payment is if the work is not completed, unsatisfactory, or if there is a dispute over what has been provided as work done. Any withheld payments must be disputed within 10 days of the invoice to be considered.

In the case that someone decides to wrongfully withhold or refuse to make on-time payments, an interest rate of 12% per year can be additionally expended at 1% per month. With prices of materials and labor continuing to increase as is, this bill would help to combat the lack of responsible payments being made to ensure contractors can also be seen as reputable and efficient in paying their employees, subcontractors, and suppliers.

If you are a Michigan contractor that serves the commercial and private building market, make sure to watch for upcoming information regarding this bill.