Public sector subcontractors back timely payment bill.

Byline: Brian Johnson

Donna Gulden isn't chasing work on public sector projects in Minnesota anymore.

The reason: She's tired of waiting for that check in the mail to be paid in full. In one case, Gulden said, it took five years to be fully paid for a public sector project completed by her business, Blaine-based Homeco Insulation. She declined to go into detail about the project or the client for fear of retribution.

"I want to do this work. I am not trying to limit what we can do," said Gulden, president of Homeco Insulation. "But when I have to wait five years I am not going to bid it anymore."

Gulden isn't alone in waiting to get paid, according to the Minnesota Subcontractors Association.

The MSA says subcontractors sometimes have to wait months or even years to be paid in full for their work on public contracts, and that's a big problem for the companies, many of which are many small or disadvantaged businesses.

At issue is a Minnesota law that allows owners to withhold 5 percent of each payment to subcontractors. The idea is to ensure the project will be completed properly. But the law doesn't specify when that final payment, known as "retainage," has to be paid.

The MSA and other industry groups are backing a bill that would require owners to pay subcontractors and general contractors within 30 days after their work is successfully completed. The bill is expected to be introduced later this week.

In addition, the bill requires any retainage to be held in a trust account, and it specifies that any disputes with regard to the retainage payment must be documented and shared with the parties involved, according to the MSA.

"The legislation is about basic fairness and paying people in a reasonable time for the work they successfully performed," said Nick McNeely, a lobbyist for the MSA.

A fall 2017 survey of MSA members shows that subcontractors waited more than 290 days on average to be fully compensated for work completed for owners ranging from cities and school districts to the state of Minnesota.

"This creates a significant cash flow problem for all subcontracting businesses in Minnesota and is particularly difficult on small and emerging businesses," said David Bruneau, executive director of the MSA.

The MSA survey reviewed billing dates, payment dates and retainage amounts on more than 90 public sector projects. The combined value of the work performed was $23.4 million, including $1.35 million worth of retainage.

In one case, a...