Kansas Prompt Payment Guide and FAQs

(a) K.S.A. 16-1801 through 16-1807, and amendments thereto, shall be known and may be cited as the Kansas fairness in private construction contract act.

(b)   The rights and duties prescribed by this act shall not be waivable or varied under the terms of a contract. The terms of any contract waiving the rights and duties prescribed by this act shall be unenforceable.

As used in this act:

(a)   “Construction” means furnishing labor, equipment, material or supplies used or consumed for the design, construction, alteration, renovation, repair or maintenance of a building, structure, road, bridge, water line, sewer line, oil line, gas line, appurtenance or other improvement to real property, including any moving, demolition or excavation.

(b)   “Contract” means a contract or agreement concerning construction made and entered into by and between an owner and a contractor, a contractor and a subcontractor or a subcontractor and another subcontractor.

(c)   “Contractor” means a person performing construction and having a contract with an owner of the real property or with a trustee, agent or spouse of an owner.

(d)   “Owner” means a person who holds an ownership interest in real property.

(e)   “Person” means an individual, corporation, estate, trust, partnership, limited liability company, association, joint venture or any other legal entity.

(f)   “Retainage” means money earned by a contractor or subcontractor but withheld to ensure proper performance by the contractor or subcontractor.

(g)   “Subcontractor” means any person performing construction covered by a contract between an owner and a contractor but not having a contract with the owner.

(a) Subject to the provisions of subsections (b), (c), (d), (e), (f), (g) and (h) and K.S.A. 16-1804 and 16-1805, and amendments thereto, all persons who enter into a contract for private construction after the effective date of this act, shall make all payments pursuant to the terms of the contract.

(b)   The following provisions in a contract for private construction shall be against public policy and shall be void and unenforceable:

      (1)   A provision that purports to waive, release or extinguish the right to resolve disputes through litigation in court or substantive or procedural rights in connection with such litigation except that a contract may require binding arbitration as a substitute for litigation or require non-binding alternative dispute resolution as a prerequisite to litigation;

(2)   a provision that purports to waive, release or extinguish rights provided by article 11 of chapter 60 of the Kansas Statutes Annotated, and amendments thereto, except that a contract may require a contractor or subcontractor to provide a waiver or release of such rights as a condition for payment, but only to the extent of the amount of payment received; and

(3)   a provision that purports to waive, release or extinguish rights of subrogation for losses or claims covered or paid by liability or workers compensation insurance except that a contract may require waiver of subrogation for losses or claims paid by a consolidated or wrap-up insurance program, owners and contractors protective liability insurance, or project management protective liability insurance, unless otherwise prohibited under subsection (b)(5) of K.S.A. 2009 Supp. 40-5403, and amendments thereto.

(c)   Any provision in a contract for private construction providing that a payment from a contractor or subcontractor to a subcontractor is contingent or conditioned upon receipt of a payment from any other private party, including a private owner, is no defense to a claim to enforce a mechanic’s lien or bond to secure payment of claims pursuant to the provisions of article 11 of chapter 60 of the Kansas Statutes Annotated, and amendments thereto.

(d)   All contracts for private construction shall provide that payment of amounts due a contractor from an owner, except retainage, shall be made within 30 days after the owner receives a timely, properly completed, undisputed request for payment.

(e)   If the owner fails to pay a contractor within 30 days following receipt of a timely, properly completed, undisputed request for payment, the owner shall pay interest to the contractor beginning on the thirty-first day after receipt of the request for payment, computed at the rate of 18% per annum on the undisputed amount.

(f)   A contractor shall pay its subcontractors any amounts due within seven business days of receipt of payment from the owner, including payment of retainage, if retainage is released by the owner, if the subcontractor has provided a timely, properly completed and undisputed request for payment to the contractor.

(g)   If the contractor fails to pay a subcontractor within seven business days, the contractor shall pay interest to the subcontractor beginning on the eighth business day after receipt of payment by the contractor, computed at the rate of 18% per annum on the undisputed amount.

(h)   The provisions of subsections (f) and (g) shall apply to all payments from subcontractors to their subcontractors.

(a) An owner, contractor or subcontractor may withhold no more than 10% retainage from the amount of any undisputed payment due.

(b)   If an owner, contractor or subcontractor fails to pay retainage, if any, pursuant to the terms of a contract for private construction or as required by this act, the owner, contractor or subcontractor shall pay interest to the contractor or subcontractor to whom payment was due, beginning on the first business day after the payment was due, at a rate of 18% per annum.

If any undisputed payment is not made within seven business days after the payment date established in a contract for private construction or in this act, the contractor and any subcontractors, regardless of tier, upon seven additional business days’ written notice to the owner and, in the case of a subcontractor, written notice to the contractor, shall, without prejudice to any other available remedy, be entitled to suspend further performance until payment, including applicable interest, is made. The contract time for each contract affected by the suspension shall be extended appropriately and the contract sum for each affected contract shall be increased by the suspending party’s reasonable costs of demobilization, delay and remobilization.

In any action to enforce K.S.A. 16-1803, 16-1804 or 16-1805, and amendments thereto, including arbitration, the court or arbitrator shall award costs and reasonable attorney fees to the prevailing party. Venue of such an action shall be in the county where the real property is located. The hearing in such an arbitration shall be held in the county where the real property is located.

The provisions of this act shall not apply to single family residential housing and multifamily residential housing of four units or less. The provisions of this act shall not apply to public works projects. The provisions of this act shall not apply to contracts entered into prior to the effective date of this act.

K.S.A. 75-6401 to 75-6407, inclusive, shall be known and may be cited as the Kansas prompt payment act.

As used in the Kansas prompt payment act, unless the context clearly requires otherwise, the following words and phrases shall have the meanings respectively ascribed thereto.

(a)   “State agency” means the state and any state agency, department, division or authority thereof.

(b)   “Government agency” means any state agency, library, community college or unified school district.

(c)   “Vendor” means any person, corporation, association or other business concern engaged in a trade or business, either on a profit or not-for-profit basis, and providing any goods or services to a government agency.

(d)   “Goods” means any goods, supplies, materials, equipment or other personal property, but does not mean any real property.

(e)   “Services” means any contractual services including architectural, engineering, medical, financial, consulting or other professional services, any construction services and any other personal services, but does not mean any services performed as an officer or employee of any government agency. Services shall not include construction contracts subject to K.S.A. 16-1901 through 16-1908, and amendments thereto.

(f)   “Bill” means a proper billing which requests payment and which contains or is accompanied by such substantiating documentation as may be required for payment for the goods or services.

(g)   “Community college” means any community college organized and operating under the laws of this state.

(h)   “Library” means a library which serves the general public and is supported in whole or in part with tax money.

 (a) Each government agency purchasing or contracting for goods or services from a vendor shall make prompt payment therefor, including payment of any interest penalties due, in accordance with this section.

(b)   Each government agency which has received goods or services from a vendor and which does not make payment therefor as prescribed by this subsection shall be subject to an interest payment penalty if the vendor makes a request for payment in accordance with subsection (c). Each government agency shall make payment of the full amount due for such goods or services on or before the 30th calendar day after the date of receipt by the government agency of the goods and services or the date of receipt by the government agency of the bill therefor, whichever is later, unless other provisions for payment are agreed to in writing by the vendor and the government agency. No goods or services shall be deemed to be received by a government agency until all such goods or services are completely delivered and finally accepted by the government agency. For purposes of determining whether a payment was made in accordance with this subsection, a payment by a government agency shall be considered to be made on the date on which the warrant or check for such payment is dated.

(c) (1)   Any vendor to which payment has not been made within the time prescribed by subsection (b) may make a written request for payment to the chief executive officer of the government agency obligated to make the payment with interest thereon. Such request shall indicate the government agency obligated to make the payment, the date of receipt of the goods or services by the government agency, the date the vendor sent the government agency the bill for such goods or services and, in the case of a state agency, such other information as may be prescribed by rules and regulations adopted under K.S.A. 75-6407. (2)   Each state agency shall forward a copy of each vendor’s request for payment to the director of accounts and reports along with the voucher prepared by the state agency to make payment to the vendor, including payment of the interest penalty prescribed by this subsection. For purposes of computing the interest penalty due a vendor, the state agency shall add seven days from the date the voucher is sent to the director of accounts and reports for payment. Interest penalties on amounts due to a vendor by a state agency shall be paid to the vendor beginning on the day after the required payment date under subsection (b) and ending seven days after the voucher for payment is sent to the director of accounts and reports, except that no interest penalty shall be paid if full payment of the amount due for such goods or services is made on or before the 15th calendar day after the required payment date under subsection (b). (3)   The chief executive officer of the unified school district shall forward a copy of each vendor’s request for payment to the governing body thereof, if any, along with the documents prepared to make payment to the vendor, including payment of the interest penalty prescribed by this subsection. Interest penalties on amounts due to a vendor by a unified school district shall be paid to the vendor beginning on the day after the required payment date under subsection (b) and ending on the date on which payment of the amount due is made, except that no interest penalty shall be paid if full payment of the amount due for such goods or services is made on or before the 15th calendar day after the required payment date under subsection (b).

(d)   The interest penalty under this section shall be computed at the rate of 1.5% per month on the amount of the payment which is due in accordance with this section. Any amount of an interest penalty which remains unpaid at the end of any thirty-day period after the required payment date under subsection (b) shall be added to the principal amount of the debt and thereafter interest penalties shall accrue on such added amount.

(e)   In the event a state agency denies liability and alleges grounds to not make payment after a vendor has requested payment therefor in accordance with subsection (c), the state agency shall inform the vendor in writing of the reasons therefor and that the vendor has the right to file a claim on the dispute with the joint committee on special claims against the state.

(f)   No interest penalty shall be payable if a vendor fails to request payment in accordance with subsection (c) within four months after the payment date prescribed by subsection (b).

Nothing in the Kansas prompt payment act shall be construed to prohibit full or partial payments by government agencies for goods or services whether or not such goods or services have been completely received or finally accepted by the government agencies.

(a) If a vendor offers a government agency a discount from the amount otherwise due under a contract for goods or services in exchange for payment within a specified period of time, the government agency may make payment in an amount equal to the discounted price only if payment is made within such specified period of time.

(b)   Each government agency which violates subsection (a) shall be subject to a late payment penalty under K.S.A. 75-6403 if the vendor makes a request for payment in accordance with subsection (c) of K.S.A. 75-6403.

The secretary of administration may adopt necessary rules and regulations for the implementation of the provisions of the Kansas prompt payment act applicable to state agencies.

(a) K.S.A. 16-1901 through 16-1908, and amendments thereto, shall be known and may be cited as the Kansas fairness in public construction contract act.

(b)   The rights and duties prescribed by this act shall not be waivable or varied under the terms of a contract. The terms of any contract waiving the rights and duties prescribed by this act shall be unenforceable.

(a)   “Construction” means furnishing labor, equipment, material or supplies used or consumed for the design, construction, alteration, renovation, repair or maintenance of a building, water or waste water treatment facility, oil line, gas line, appurtenance or other improvement to real property, including any moving, demolition or excavation of a building. “Construction” shall not mean the design, construction, alteration, renovation, repair or maintenance of a road, highway or bridge.

(b)   “Contract” means a contract or agreement concerning construction made and entered into by and between an owner and a contractor, a contractor and a subcontractor or a subcontractor and another subcontractor.

(c)   “Contractor” means a person performing construction and having a contract with an owner of the real property or with a trustee or agent of an owner.

(d)   “Owner” means a public entity that holds an ownership interest in real property.

(e)   “Public entity” means the state of Kansas, political subdivisions, cities, counties, state universities or colleges, school districts, all special districts, joint agreement entities, public authorities, public trusts, nonprofit corporations and other organizations which are operated with public money for the public good.

(f)   “Retainage” means money earned by a contractor or subcontractor but withheld to ensure timely performance by the contractor or subcontractor.

(g)   “Subcontractor” means any person performing construction covered by a contract between an owner and a contractor but not having a contract with the owner.

(h)   “Substantial completion” means the stage of a construction project where the project, or a designated portion thereof, is sufficiently complete in accordance with the contract, so that the owner can occupy or utilize the constructed project for its intended use.

(i)   “Undisputed payment” means payments which all parties to the contract agree are owed to the contractor.

(a) Subject to the provisions of subsections (b), (c), (d), (e), (f), (g), (h) and K.S.A. 16-1904 and 16-1905, and amendments thereto, all owners, contractors and subcontractors, who enter into a contract for public construction after the effective date of this act, shall make all payments pursuant to the terms of the contract.

(b)   The following provisions in a contract for public construction shall be against public policy and shall be void and unenforceable: (1)   A provision that purports to waive, release or extinguish the right to resolve disputes through litigation in court or substantive or procedural rights in connection with such litigation except that a contract may require nonbinding alternative dispute resolution as a prerequisite to litigation; (2)   a provision that purports to waive, release or extinguish rights to file a claim against a payment or performance bond, except that a contract may require a contractor or subcontractor to provide a waiver or release of such rights as a condition for payment, but only to the extent of the amount of payment received; and (3)   a provision that purports to waive, release or extinguish rights of subrogation for losses or claims covered or paid by liability or workers compensation insurance except that a contract may require waiver of subrogation for losses or claims paid by a consolidated or wrap-up insurance program, owners and contractors protective liability insurance, or project management protective liability insurance or a builder’s risk policy.

(c)   All contracts for public construction shall provide that payment of amounts due a contractor from an owner, except retainage, shall be made within 30 days after the owner receives a timely, properly completed, undisputed request for payment according to terms of the contract, unless extenuating circumstances exist which would preclude approval of payment within 30 days. If such extenuating circumstances exist, then payment shall be made within 45 days after the owner receives such payment request.

(d)   The architect or engineer of record or agent of the owner shall review, approve and forward undisputed requests for payment to the owner within seven business days of receipt from the contractor.

(e)   If the owner fails to pay a contractor within the time period set forth in subsection (c), the owner shall pay interest computed at the rate of 18% per annum on the undisputed amount to the contractor beginning on the day following the end of the time period set forth in subsection (d).

(f)   A contractor shall pay its subcontractors any amounts due within seven business days of receipt of payment from the owner, including payment of retainage, if retainage is released by the owner, if the subcontractor has provided a timely, properly completed and undisputed request for payment to the contractor.

(g)   If the contractor fails to pay a subcontractor within seven business days, the contractor shall pay interest to the subcontractor beginning on the eighth business day after receipt of payment by the contractor, computed at the rate of 18% per annum on the undisputed amount.

(h)   The provisions of subsection (g) shall also apply to all payments from subcontractors to their subcontractors.

(a) An owner, contractor or subcontractor may withhold no more than 10% retainage from the amount of any undisputed payment due.

(b)   An owner must release the retainage on any undisputed payment due on a construction project within 30 days after substantial completion of the project; however, if any subcontractor is still performing work on the project under its subcontract, an owner may withhold that portion of the retainage attributable to such subcontract until 30 days after such work is completed.

(c)   If an owner, contractor or subcontractor fails to pay retainage, if any, pursuant to the terms of a contract for public construction or as required by this act, the owner, contractor or subcontractor shall pay interest to the contractor or subcontractor to whom payment was due, beginning on the first business day after the payment was due, at a rate of 18% per annum.

(d)   Nothing in this section shall prevent early release of retainage if it is determined by the owner, the contractor and the project architect or engineer, that a subcontractor has completed performance satisfactorily and that the subcontractor can be released prior to substantial completion of the entire project without risk or additional cost to the owner or contractor. Once so determined, the contractor shall request such adjustment in retainage, if any, from the owner as necessary to enable the contractor to pay the subcontractor in full, and the owner shall, as part of the next contractual payment cycle, release the subcontractor’s retainage to the contractor, who shall, as part of the next contractual payment cycle, release such retainage as is due to the subcontractor.

If any undisputed payment is not made within seven business days after the payment date established in a contract for public construction or in this act, the contractor and any subcontractors, regardless of tier, upon seven additional business days’ written notice to the owner and, in the case of a subcontractor, written notice to the contractor, shall, without prejudice to any other available remedy, be entitled to suspend further performance until payment, including applicable interest, is made. The contract time for each contract affected by the suspension shall be extended appropriately and the contract sum for each affected contract shall be increased by the suspending party’s reasonable costs of demobilization, delay and remobilization.

In any action to enforce K.S.A. 16-1903, 16-1904 or 16-1905, and amendments thereto, including arbitration, between a contractor and subcontractors or subcontractors and subcontractors, the court or arbitrator shall award costs and reasonable attorney fees to the prevailing party. Venue of such an action shall be in the county where the real property is located and under Kansas law. The hearing in such an arbitration shall be held in the county where the real property is located.

Any provision in a contract that purports to waive the rights of a party to the contract to collect damages for delays caused by another party to the contract shall be void, unenforceable and against public policy. This provision is not intended to create a contract between parties where a contract did not otherwise exist.

The provisions of the Kansas fairness in public construction contract act shall not apply to construction projects which are required to comply with section 109 of the Kansas department of transportation special provisions to the standard specifications, 1990 edition (90P-205-R6) or any subsequent editions.