HBA-AMW, MPM H.B. 554 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 554
By: Mowery
State Affairs
2/14/2001
Introduced



BACKGROUND AND PURPOSE 

Current law requires contractors for residential homestead improvement
projects that exceed $5,000 to deposit payments for work done by
subcontractors into a construction account to help ensure that the
subcontractors are paid for their services and expenses, but provides no
such requirements for contractors and subcontractors working on public
projects.  House Bill 554 requires contractors  for public projects in
excess of $5,000 to deposit payments for work done by subcontractors into a
construction account and sets forth prompt payment requirements for
contractors and subcontractors under public contracts. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 554 amends the Property Code to require contractors for public
projects in excess of $5,000 to deposit trust funds in a construction
account in a financial institution.  The bill requires a contractor who
receives a payment from a contracting governmental entity for a contract to
improve real property to pay each of its subcontractors their portion of
the payment, including interest, if any, no later than the seventh day
after the contractor receives payment.  The bill also requires a
subcontractor who receives a payment from a contractor for a contract to
improve real property to pay each of its subcontractors their portion of
the payment, including interest, if any, no later than the seventh day
after the subcontractor receives the contractor's payment (Sec. 28.101). 

The bill provides that if a good faith dispute exists concerning the amount
of the payment owed, the contracting governmental entity, contractor, or
subcontractor that disputes its obligation to pay or the payment amount is
authorized to withhold from the payment owed no more than 100 percent of
the difference between the amount the obligee claims is due and that the
obligor claims is due.   The bill provides that a good faith dispute
includes a dispute regarding whether or not the work was performed properly
(Sec. 28.102). 

EFFECTIVE DATE

September 1, 2001.