Brief⁽¹⁾

S.B. 489, as amended, relates to construction contracts and to the establishment of minimum wages for such contracts.

Construction Contracts. The bill creates a new act that relates to the practice of retaining monies by public entities contracting for construction activities until completion of the contract.

In contracts of $1 million or more a public entity may approve a request from a contractor to place retained funds in an interest bearing escrow account. Costs to establish and maintain the escrow account would be paid by the contractor. If a contractor defaults on the contract retained funds in the account would be returned to the public entity. Retained funds would not be released to the contractor until authorized by the contracting public entity but interest would paid to the contractor. Also for contracts involving $1 million or more, the contractor could request that with the approval of the public entity, securities of types specified in the bill be substituted for the funds retained by the public entity. The bill specifies the manner in which such securities are to be issued and requires the retained funds for which securities are substituted to be paid to the contractor within five working days.

Prevailing Wages on Construction Contracts. These provisions would require contractors or subcontractors to pay employees the prevailing wage and fringe benefits of corresponding classes of laborers and mechanics employed on similar construction projects in the county where the project is to be performed. The prevailing wage would be the wage paid to the majority of laborers or mechanics, unless the same wages are not paid to a majority, in which case the prevailing wage would be the average wages paid, weighted by the total employed in the classification. In the alternative, the prevailing wage must be that determined by the federal law for federally-financed public work projects in the county.

Whenever possible, work done on public works projects owned by or built for a state agency would be done by Kansas resident employees.

Background

The provisions of S.B. 489 were requested and supported by the Kansas Contractors Association, the Heavy Constructors of Kansas City, and the Builders Association/AGC of Kansas City.

Conferees who opposed certain provisions of the bill included: the Executive Director of the American Institute of Architects; the Executive Director of the League of Kansas Municipalities; the Legislative Services Director and General Counsel of the Kansas Association of Counties; the Director of Accounts and Reports; the Intergovernmental Director, Johnson County Government; and the Director of the Division of Architectural Services.

The Assistant Secretary and State Transportation Engineer of the Kansas Department of Transportation (KDOT) said that KDOT supported the 5 percent retainage provisions, but opposed the provisions relating to escrow accounts.

The Senate Committee amendments would allow a public entity to approve any request from a contractor to place retained funds in an escrow account in contracts of $1 million or more or to substitute securities. The Committee deleted provisions that would have provided for a 5 percent retainage in funds in contracts between public entities and contractors. Current law allows for a not more than 10 percent withholding of the full contract price. The Committee amendments strike all sections of the bill that would have amended existing statutes.

The House Committee of the Whole added the provisions relating to prevailing wage requirements on construction projects. Similar provisions are also contained in S.B. 299 and H.B. 2447.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.