Connecticut’s prompt payment requirements for state contracts are about to change. The Connecticut General Assembly approved the new state budget bill (House Bill 7287), which includes a significant change to Connecticut’s Prompt Payment requirements for state contracts, Conn. Gen. Stat. §49-41c. The bill, which Governor Ned Lamont intends to sign into law, modifies the timing for downstream payments by a contractor to its subcontractors from thirty (30) days to fifteen (15) days from receipt of payment from the state. The current state of the law requires 15-day payment turnaround to minority and women-owned business entities (MWBE), but the bill now mandates the 15-day payment cycle from receipt of payment to all subcontractors, not just MWBEs.
As with the existing law, if a contractor elects to withhold payment for a bona fide reason or reasons, the contractor must notify the affected subcontractor, in writing, of the reasons for withholding such payment and provide a copy of the notice to the state entity holding the prime contract. However, in keeping with the change in timing for payment, the bill modifies the notice period from thirty (30) days to fifteen (15) days.
While the expected truncation of the timing for prompt payment on state contracts is not hugely significant, general contractors should review the subcontracts and purchase orders to ensure compliance with the anticipated change, which is likely to go into effect on July 1, 2025, once Governor Lamont signs the bill.
The expected change provides general contractors with a good reason to sharpen contractual language concerning the notification of a bona fide reason for withholding payment from a subcontractor or vendor. Moreover, the expected revision to the state of the law presents general contractors with timely opportunity to re-train project management and administrative staff on the importance of properly documenting bases for withholding downstream payments, as well as the elements required for timely and compliant withholding notices to the affected subcontractors and the state entity holding the prime contract.
