First Regular Session Sixty-ninth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 13-0361.01 Jery Payne x2157 HOUSE BILL 13-1090 HOUSE SPONSORSHIP Fischer, SENATE SPONSORSHIP Tochtrop, House Committees Senate Committees Business, Labor, Economic, & Workforce Development A BILL FOR AN ACT Concerning payment of amounts due under a construction agreement. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill sets the following requirements for both private and public construction contracts: The owner and contractor must make regular progress payments approximately every 30 days to contractors and subcontractors for work actually performed. To receive the progress payments, the contractor and subcontractor must submit a progress payment invoice plus any required documents. A contractor must pass on the progress payment to the subcontractor within 5 days or by the end of the billing cycle. Interest accrues on unpaid progress payments. A contract may extend a billing cycle to 60 days, but the contract must duly warn of this. An owner or contractor may only retain 5% of each progress payment to ensure work is done properly. If a subcontractor's work is done before the whole project is done, the subcontractor may apply to be paid the retained 5%. The owner and contractor must pay the retainage if the work is done correctly and the subcontractor gives waivers and the proper documents. A person who retains from a payment must give the contractor or subcontractor a chance to cure the default. The owner and contractor must pay for changes made to the contract. If they cannot agree on the price, the person doing the work may bill monthly at cost plus 15% or terminate performance. A contractor or subcontractor is authorized to suspend performance after 15 days notice if the owner or contractor fails to make progress payments. After suspending performance, the contractor or subcontractor is obliged to resume work after being paid for the work and reasonable costs and interest. A contractor or subcontractor may not suspend performance if the failure to make a payment is due to a failure of the contractor or subcontractor or a dispute about the construction. The bill voids any provision in a construction contract that does not comply with these requirements. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. In Colorado Revised Statutes, add article 10.5 to title 8 as follows: ARTICLE 10.5 Construction Prompt Payment Reform Act 8-10.5-101. Short title. This article shall be known and may be cited as the "Construction Prompt Payment Reform Act of 2012". 8-10.5-102. Legislative declaration. (1) The general assembly hereby finds and declares that the timely payment for properly completed work under private construction agreements in Colorado is a matter of statewide concern. (2) The general assembly further finds and declares that the construction industry is a significant part of the state's economy, that there is a substantial statewide interest in fostering the growth and stability of the construction industry and in ensuring that it remains economically viable, and that standard payment and retention provisions assist parties to construction agreements in managing their operations. 8-10.5-103. Definitions. As used in this article, unless the context otherwise requires: (1) "Change directive" means additional work requested by an owner from a contractor, or by a contractor from a subcontractor, under the terms of a construction agreement that requires the work to be performed without prior agreement to the cost of the additional work. (2) "Construction agreement" means a contract, subcontract, or agreement for materials or labor for the construction, alteration, renovation, or repair of an owner's building, building site, structure, highway, street, roadway, bridge, viaduct, water or sewer system, gas or other distribution system, or other work dealing with construction. "Construction agreement" includes any moving, demolition, or excavation connected with the construction. "Construction agreement" does not include: (a) A contract, subcontract, or agreement that concerns property owned or operated by a federally regulated railroad; (b) A real property lease or rental agreement between a landlord and a tenant, even if a provision of the lease or rental agreement concerns construction, alteration, improvement, or maintenance of real property; (c) A contract for the construction, improvement, alteration, moving, or demolition of a single-family dwelling or multi-family dwelling with no more than two units; or (d) A contract between an owner and a contractor of an amount less than one hundred thousand dollars. (3) "Construction project" means a project that is the subject of a construction agreement. (4) "Contractor" means a person that has a direct contract with an owner to perform work under a construction agreement. (5) "Day" means a calendar day. (6) "Material supplier" means a person that has a contract with an owner, contractor, or subcontractor for the provision of construction materials or equipment actually used to complete a construction agreement. (7) "Owner" means a person that holds an interest in real property and causes a building, structure, or improvement on real property to be constructed, altered, moved, or demolished or that causes land to be excavated or otherwise developed or improved, including a lessee or a vendee under a contract to purchase "Owner" does not include a public entity as defined in section 24-91-102 (10), C.R.S. (8) "Progress payment" means a payment for work actually performed under a construction agreement before the entire contractual obligation has been met. (9) "Progress payment invoice" means a bill submitted by a contractor or subcontractor for work completed in the most recent billing cycle or for work performed during the period covered by the bill or a payment estimate. "Progress payment invoice" includes requests for payment for work performed as a result of a change directive. (10) "Retainage" means a percentage withheld from any progress payment to a contractor or subcontractor under a construction agreement. (11) "Subcontractor" means a person that has a direct contract with a contractor or another subcontractor to perform a portion of the work under a construction agreement. 8-10.5-104. Billing cycles and progress payments. (1) In a construction agreement taking more than one month to complete, the owner and contractor shall include a requirement that regular progress payments be made to the contractor and each subcontractor based upon a billing cycle set forth in the agreement. This requirement does not apply to a single-payment contract, unit-price contract, or contract payable in installments or on completion. (2) Except as provided in this article, a subcontractor shall submit to the contractor, on a monthly basis, a progress payment invoice for work actually performed and material actually supplied during the most recent billing cycle. Upon receipt of a progress payment invoice and all contractually required documentation from the subcontractor, the contractor shall approve or disapprove all or a portion of the progress payment invoice within seven days. In order to deny all or a portion of the progress payment, the contractor must give the reasons for any disapproval to the subcontractor in writing. A contractor shall not unreasonably withhold approval of an invoice. (3) A contractor shall submit to the owner or to the owner's representative a progress payment invoice with all documentation required by the construction agreement at the end of each billing cycle for work actually performed and material actually supplied during the most recent billing cycle. Upon receipt of a progress payment invoice and all contractually required documentation from the contractor, the owner shall approve or disapprove all or a portion of the progress payment invoice within seven days. In order to deny all or a portion of the progress payment, the owner must give the reasons for any disapproval to the contractor in writing. An owner shall not unreasonably withhold approval of an invoice. (4) Failing to disapprove or approving all or part of a progress payment invoice by a contractor or owner is not: (a) A waiver of any claim for work not in conformance with the construction agreement; or (b) A waiver of claims for breach of the construction agreement. (5) Except as authorized by this section or section 8-10.5-105, an owner shall pay a progress payment invoice to the contractor no later than: (a) Twenty-five days after receipt of the progress payment invoice by the owner or the owner's representative if the contractor used a subcontractor; (b) Thirty days after receipt of the progress payment invoice by the owner or the owner's representative if the contractor did not use a subcontractor. (6) If a contractor receives a progress payment from an owner, the contractor shall pay each subcontractor any amounts actually received for the subcontractor's work. The contractor shall pay the subcontractors within the thirty-day billing cycle or within five days after receipt of the progress payment from the owner for the work, whichever occurs first. (7) If an owner does not pay the approved portion of the progress payment to a contractor when due, the owner shall pay the contractor interest on the unpaid amount from the date the payment was due at the greater of the rate of twelve percent per annum or the rate specified in the construction agreement. The contractor shall pay the interest received to each subcontractor or material supplier for the portion of the progress payment paid for the subcontractor's work. (8) If a contractor who received a progress payment from an owner fails to make payments required by this article to a subcontractor, the contractor shall pay the subcontractor interest on the unpaid amount from the date the payment was due at the greater of the rate of twelve percent per annum or the rate specified in the construction agreement. (9) Nothing in this article prohibits an owner, contractor, subcontractor, or material supplier from excluding, deducting, or offsetting from payment amounts permitted by the construction agreement or by law. (10) The person excluding, deducting, or offsetting amounts from the payment shall provide the party requesting payment with written notice of the reasons for the exclusion, deduction, or offset and shall afford the party a reasonable time or the time permitted by the construction agreement to cure the default. 8-10.5-105. Extended progress payment time. (1) An owner may make progress payments to a contractor more than twenty-five days, but no more than sixty days, after receipt of a progress payment invoice if: (a) The construction agreement on its face specifically provides, in at least fourteen-point, bold-faced type, for a later payment date defined by a specified number of days after receipt of a progress payment invoice; and (b) The following notice, or a substantially similar notice, specifying the number of days for payment appears in at least fourteen-point, bold-faced type, on each page of each set of plans for the construction project, including bid plans and contract plans; each page of the construction project's specifications; and the cover sheet of each bid proposal or request for proposal: NOTICE OF EXTENDED PAYMENT PROVISION: THIS CONTRACT ALLOWS THE OWNER TO MAKE PAYMENT TO THE GENERAL CONTRACTOR WITHIN ( ) DAYS AFTER RECEIPT OF A PROGRESS PAYMENT INVOICE FROM THE CONTRACTOR TO THE OWNER. 8-10.5-106. Retainage. (1) Subject to subsection (2) of this section, a construction agreement may provide for retainage. (2) (a) An owner shall pay to the contractor at least ninety-five percent of the value of completed work on each progress payment invoice required by the construction agreement. (b) A contractor shall pay to each subcontractor at least ninety-five percent of the value of completed work on each progress payment invoice required by the construction agreement. (3) If the work of a subcontractor under a construction agreement has been completed before substantial completion of the entire construction project, the subcontractor may apply for payment of retainage prior to substantial completion of the entire construction project. If the subcontractor applies for payment of retainage, the owner shall release retainage to the contractor within ninety days after the subcontractor complies with the following: (a) All work by the subcontractor is complete and in substantial compliance with the subcontract documents and the construction agreement; (b) The subcontractor has provided the contractor and the owner with conditional payment lien waivers and releases from any sub-subcontractor, vendor, or material supplier for the work performed by the subcontractor, together with all documents, instructions, warranties, and other items required by the construction agreement; and (c) The work of the subcontractor has been approved and accepted by the owner and any public entity whose acceptance or approval of the work is required under the construction agreement or by law. (4) The release of retainage to a contractor or subcontractor is not a waiver or release of any claims for damages or loss due to any later-discovered incomplete work or defect in the contractor's or subcontractor's work. (5) Within seven days after receipt of the retainage, the contractor shall pay the subcontractor the retainage paid by the owner and any interest thereon for work completed by the subcontractor. 8-10.5-107. Change directives. (1) Until a written agreement is reached on the cost of a change directive, an owner or contractor shall pay a contractor or subcontractor monthly for any completed additional work requested by a change directive at the actual cost less retainage. (2) If the parties to the change directive have not reached a written agreement as to its cost within two months after the commencement of the additional work and the owner or contractor directing the additional work has not terminated performance of the additional work, the party performing the additional work may either: (a) Bill monthly for the cost of the additional work previously performed plus overhead at ten percent and profit at five percent, and the person directing the work shall pay the invoice; or (b) At least seven days after providing written notice to the owner and contractor, cease performing the additional work until a written agreement is reached without causing a breach of the construction agreement. (3) This section does not prohibit the owner or contractor issuing a change directive from ordering or requiring the cessation of the additional work prior to reaching a written agreement on the cost, but the owner or contractor shall pay for the actual cost of the completed work plus overhead at ten percent and profit at five percent. 8-10.5-108. Suspension of performance. (1) A contractor or subcontractor may suspend performance without breaching a construction agreement for failure by the owner or contractor to make timely payment of the approved portion of a progress payment invoice. A contractor or subcontractor shall provide written notice to the owner or contractor at least fifteen days before the contractor's or subcontractor's intended suspension unless the construction agreement grants a shorter notice period. (2) After suspending performance, the contractor or subcontractor shall resume work within thirty days after receiving payment for certified and approved work plus reasonable costs of shutdown, demobilization, remobilization, and interest on unpaid amounts. (3) A contractor or subcontractor shall not suspend performance of the work under a construction agreement if the failure to pay any part of the progress payment is because of the following: (a) Defective construction work or materials not remedied; (b) Failure of the contractor or subcontractor to comply with material provisions of the construction agreement; (c) Third-party claims filed or reasonably expected to be filed; (d) Failure of the contractor or subcontractor to make timely payments for labor, equipment, or materials; or (e) A good-faith dispute regarding whether the work was included in the construction agreement. 8-10.5-109. Written notice. Written notice required by this article is deemed to have been provided if the written notice is delivered personally or by any recognized method of delivery that provides confirmation of the delivery to the recipient, the registered agent of the recipient, or any person designated in the construction agreement for this purpose. 8-10.5-110. Public policy. Any provision in a construction agreement that sets payment terms in violation of this article is unenforceable and void as against public policy. 8-10.5-111. Choice of law. Notwithstanding any contractual provision to the contrary, the laws of the state of Colorado apply to and govern every construction agreement affecting improvements to real property within Colorado. SECTION 2. In Colorado Revised Statutes, amend 24-91-102 as follows: 24-91-102. Definitions. As used in this article, unless the context otherwise requires: (1) "Acceptable securities" means: (a) United States bonds, United States treasury notes, or United States treasury bills; (b) General obligation or revenue bonds of this state; (c) General obligation or revenue bonds of any political subdivision of this state; (d) Certificates of deposit from a state or national bank or a savings and loan association insured by the federal deposit insurance corporation or its successor and having its principal office in this state. (2) "Change directive" means additional work requested by a public entity from a contractor, or by a contractor from a subcontractor, under the terms of a construction agreement that requires the work to be performed without prior agreement to the cost of the additional work. (3) "Construction agreement" means a contract, subcontract, or agreement for materials or labor for the construction, alteration, renovation, or repair of a public entity's building, building site, structure, highway, street, roadway, bridge, viaduct, water or sewer system, gas or other distribution system, or other work dealing with construction. "Construction agreement" includes any moving, demolition, or excavation connected with the construction. "Construction agreement" does not include: (a) A contract, subcontract, or agreement that concerns property owned or operated by a federally regulated railroad; (b) A real property lease or rental agreement between a landlord and a tenant, even if a provision of the lease or rental agreement concerns construction, alteration, improvement, or maintenance of real property; (c) A contract for the construction, improvement, alteration, moving, or demolition of a single-family dwelling or multi-family dwelling with no more than two units; or (d) A contract between a public entity and a contractor of an amount less than one hundred thousand dollars. (4) "Construction project" means a project that is the subject of a construction agreement. (2) (5) "Contractor" means any person, company, firm, or corporation which is a party to a contract with a public entity to construct, erect, alter, install, or repair any highway, public building, public work, or public improvement, structure, or system a person that has a direct contract with a public entity to perform work under a construction agreement. (6) "Day" means a calendar day. (7) "Material supplier" means a person that has a contract with a public entity, contractor, or subcontractor for the provision of construction materials or equipment actually used to complete a construction agreement. (8) "Progress payment" means a payment for work actually performed under a construction agreement before the entire contractual obligation has been met. (9) "Progress payment invoice" means a bill submitted by a contractor or subcontractor for work completed in the most recent billing cycle or for work performed during the period covered by the bill or a payment estimate. "Progress payment invoice" includes requests for payment for work performed as a result of a change directive. (3) (10) "Public entity" means this state or a county, city, city and county, town, or district, including any political subdivision thereof. (11) "Retainage" means a percentage withheld from any progress payment to a contractor or subcontractor under a construction agreement. (4) (12) "Subcontractor" means and includes any person, company, firm, or corporation which is a party to a contract with a contractor to construct, erect, alter, install, or repair any highway, public building, public work, or public improvement, structure, or system and which, in connection therewith, furnishes and performs on-site labor with or without furnishing materials a person that has a direct contract with a contractor or another subcontractor to perform a portion of the work under a construction agreement. (5) (13) "Substantial completion" means the date when the construction is sufficiently complete, in accordance with the contract documents, as modified by any change orders agreed to by the parties, so that the work or designated portion thereof is available for use by the owner. SECTION 3. In Colorado Revised Statutes, amend 24-91-103 as follows: 24-91-103. Public entity - contracts - partial payments. (1) Progress payments. (a) A public entity awarding a contract exceeding one hundred fifty thousand dollars for the construction, alteration, or repair of any highway, public building, public work, or public improvement, structure, or system shall authorize partial payments of the amount due under such contract at the end of each calendar month, or as soon thereafter as practicable, to the contractor, if the contractor is satisfactorily performing the contract. The public entity shall pay at least ninety-five percent of the calculated value of completed work. The withheld percentage of the contract price of any contracted work, improvement, or construction may be retained until the contract is completed satisfactorily and finally accepted by the public entity. In a construction agreement taking more than one month to complete, the public entity and contractor shall include a requirement that regular progress payments be made to the contractor and subcontractor based upon a billing cycle set forth in the agreement. This requirement does not apply to a single-payment contract, unit-price contract, or contract payable in installments or on completion. (b) The public entity shall make a final settlement in accordance with section 38-26-107, C.R.S., within sixty days after the contract is completed satisfactorily and finally accepted by the public entity. (c) If the public entity finds that satisfactory progress is being made in any phase of the contract, it may, upon written request by the contractor, authorize final payment from the withheld percentage to the contractor or subcontractors who have completed their work in a manner finally acceptable to the public entity. Before the payment is made, the public entity shall determine that satisfactory and substantial reasons exist for the payment and shall require written approval from any surety furnishing bonds for the contract work. (2) (a) Whenever a contractor receives payment pursuant to this section, the contractor shall make payments to each of his subcontractors of any amounts actually received which were included in the contractor's request for payment to the public entity for such subcontracts. The contractor shall make such payments within seven calendar days of receipt of payment from the public entity in the same manner as the public entity is required to pay the contractor under this section if the subcontractor is satisfactorily performing under his contract with the contractor. The subcontractor shall pay all suppliers, sub-subcontractors, laborers, and any other persons who provide goods, materials, labor, or equipment to the subcontractor any amounts actually received which were included in the subcontractor's request for payment to the contractor for such persons, in the same manner set forth in this subsection (2) regarding payments by the contractor to the subcontractor. If the subcontractor fails to make such payments in the required manner, the subcontractor shall pay said suppliers, sub-subcontractors, and laborers interest in the same manner set forth in this subsection (2) regarding payments by the contractor to the subcontractor. At the time the subcontractor submits a request for payment to the contractor, the subcontractor shall also submit to the contractor a list of the subcontractor's suppliers, sub-subcontractors, and laborers. The contractor shall be relieved of the requirements of this subsection (2) regarding payment in seven days and interest payment until the subcontractor submits such list. If the contractor fails to make timely payments to the subcontractor as required by this section, the contractor shall pay the subcontractor interest as specified by contract or at the rate of fifteen percent per annum whichever is higher, on the amount of the payment which was not made in a timely manner. The interest shall accrue for the period from the required payment date to the date on which payment is made. Nothing in this subsection (2) shall be construed to affect the retention provisions of any contract. Except as provided in this article, a subcontractor shall submit to the contractor, on a monthly basis, a progress payment invoice for work actually performed and material actually supplied during the most recent billing cycle. Upon receipt of a progress payment invoice and all contractually required documentation from the subcontractor, the contractor shall approve or disapprove all or a portion of the progress payment invoice within seven days. In order to deny all or a portion of the progress payment, the contractor must give the reasons for any disapproval to the subcontractor in writing. A contractor shall not unreasonably withhold approval of an invoice. (b) A contractor shall submit to the public entity or to the public entity's representative a progress payment invoice with all documentation required by the construction agreement at the end of each billing cycle for work actually performed and material actually supplied during the most recent billing cycle. Upon receipt of a progress payment invoice and all contractually required documentation from the contractor, the public entity shall approve or disapprove all or a portion of the progress payment invoice within seven days. In order to deny all or a portion of the progress payment, the public entity must give the reasons for any disapproval to the contractor in writing. A public entity shall not unreasonably withhold approval of an invoice. (c) Failing to disapprove or approving all or part of a progress payment invoice by a contractor or public entity is not: (I) A waiver of any claim for work not in conformance with the construction agreement; or (II) A waiver of claims for breach of the construction agreement. (d) Except as authorized by this section, a public entity shall pay a progress payment invoice to the contractor no later than: (I) Twenty-five days after receipt of the progress payment invoice by the public entity or the public entity's representative if the contractor used a subcontractor; (II) Thirty days after receipt of the progress payment invoice by the public entity or the public entity's representative if the contractor did not use a subcontractor. (e) If a contractor receives a progress payment from a public entity, the contractor shall pay each subcontractor any amounts actually received for the subcontractor's work. The contractor shall pay the subcontractors within the thirty-day billing cycle or within five days after receipt of the progress payment from the public entity for the work, whichever occurs first. (f) If a public entity does not pay the approved portion of the progress payment to a contractor when due, the public entity shall pay the contractor interest on the unpaid amount from the date the payment was due at the greater of the rate of twelve percent per annum or the rate specified in the construction agreement. The contractor shall pay the interest received to each subcontractor or material supplier for the portion of the progress payment paid for the subcontractor's work. (g) If a contractor who received a progress payment from a public entity fails to make payments required by this article to a subcontractor, the contractor shall pay the subcontractor interest on the unpaid amount from the date the payment was due at the greater of the rate of twelve percent per annum or the rate specified in the construction agreement. (h) Nothing in this article prohibits a public entity, contractor, subcontractor, or material supplier from excluding, deducting, or offsetting from payment amounts permitted by the construction agreement or by law. (i) The person excluding, deducting, or offsetting amounts from the payment shall provide the party requesting payment with written notice of the reasons for the exclusion, deduction, or offset and shall afford the party a reasonable time or the time permitted by the construction agreement to cure the default. (3) Extended progress payment time. (Deleted by amendment, L. 2011, (HB 11-1115), ch. 211, p. 912,  2, effective August 10, 2011.) A public entity may make progress payments to a contractor more than twenty-five days, but no more than sixty days, after receipt of a progress payment invoice if: (a) The construction agreement on its face specifically provides, in at least fourteen-point, bold-faced type, for a later payment date defined by a specified number of days after receipt of a progress payment invoice; and (II) The following notice, or a substantially similar notice, specifying the number of days for payment appears in at least fourteen-point, bold-faced type, on each page of each set of plans for the construction project, including bid plans and contract plans; each page of the construction project's specifications; and the cover sheet of each bid proposal or request for proposal: NOTICE OF EXTENDED PAYMENT PROVISION: THIS CONTRACT ALLOWS THE PUBLIC ENTITY TO MAKE PAYMENT TO THE GENERAL CONTRACTOR WITHIN ( ) DAYS AFTER RECEIPT OF A PROGRESS PAYMENT INVOICE FROM THE CONTRACTOR TO THE PUBLIC ENTITY. (4) Retainage. (a) Subject to paragraph (b) of this subsection (4), a construction agreement may provide for retainage. (b) (I) A public entity shall pay to the contractor at least ninety-five percent of the value of completed work on each progress payment invoice required by the construction agreement. (II) A contractor shall pay to each subcontractor at least ninety-five percent of the value of completed work on each progress payment invoice required by the construction agreement. (c) If the work of a subcontractor under a construction agreement has been completed before substantial completion of the entire construction project, the subcontractor may apply for payment of retainage prior to substantial completion of the entire construction project. If the subcontractor applies for payment of retainage, the public entity shall seek written approval from any surety furnishing a bond for the contract work. Upon obtaining the approval, the public entity shall release the retainage to the contractor within ninety days after the subcontractor complies with the following: (I) All work by the subcontractor is complete and in substantial compliance with the subcontract documents and the construction agreement; (II) The subcontractor has provided the contractor and the public entity with conditional payment lien waivers and releases from any sub-subcontractor, vendor, or material supplier for the work performed by the subcontractor, together with all documents, instructions, warranties, and other items required by the construction agreement; and (III) The work of the subcontractor has been approved and accepted by the public entity and any other public entity whose acceptance or approval of the work is required under the construction agreement or by law. (d) The release of retainage to a contractor or subcontractor is not a waiver or release of any claims for damages or loss due to any later-discovered incomplete work or defect in the contractor's or subcontractor's work. (e) Within seven days after receipt of the retainage, the contractor shall pay the subcontractor the retainage paid by the public entity and any interest thereon for work completed by the subcontractor. (5) Final settlement. The public entity shall make a final settlement in accordance with section 38-26-107, C.R.S., within sixty days after the contract is completed satisfactorily and finally accepted by the public entity. SECTION 4. In Colorado Revised Statutes, add 24-91-103.7, 24-91-103.8, and 24-91-103.9 as follows: 24-91-103.7. Change directives. (1) Until a written agreement is reached on the cost of a change directive, a public entity or contractor shall pay a contractor or subcontractor monthly for any completed additional work requested by a change directive at the actual cost less retainage. (2) If the parties to the change directive have not reached a written agreement as to its cost within two months after the commencement of the additional work and the public entity or contractor directing the additional work has not terminated performance of the additional work, the party performing the additional work may either: (a) Bill monthly for the cost of the additional work previously performed plus overhead at ten percent and profit at five percent, and the person directing the work shall pay the invoice; or (b) At least seven days after providing written notice to the public entity and contractor, cease performing the additional work until a written agreement is reached without causing a breach of the construction agreement. (3) This section does not prohibit the public entity or contractor issuing a change directive from ordering or requiring the cessation of the additional work prior to reaching a written agreement on the cost, but the public entity or contractor shall pay for the actual cost of the completed work plus overhead at ten percent and profit at five percent. 24-91-103.8. Suspension of performance. (1) A contractor or subcontractor may suspend performance without breaching a construction agreement for failure by the public entity or contractor to make timely payment of the approved portion of a progress payment invoice. A contractor or subcontractor shall provide written notice to the public entity or contractor at least fifteen days before the contractor's or subcontractor's intended suspension unless the construction agreement grants a shorter notice period. (2) After suspending performance, the contractor or subcontractor shall resume work within thirty days after receiving payment for certified and approved work plus reasonable costs of shutdown, demobilization, remobilization, and interest on unpaid amounts. (3) A contractor or subcontractor shall not suspend performance of the work under a construction agreement if the failure to pay any part of the progress payment is because of the following: (a) Defective construction work or materials not remedied; (b) Failure of the contractor or subcontractor to comply with material provisions of the construction agreement; (c) Third-party claims filed or reasonably expected to be filed; (d) Failure of the contractor or subcontractor to make timely payments for labor, equipment, or materials; or (e) A good-faith dispute regarding whether the work was included in the construction agreement. 24-91-103.9. Public policy. Any provision in a construction agreement that sets payment terms in violation of sections 24-91-103 to 24-91-103.8 is unenforceable and void as against public policy. SECTION 5. Effective date - applicability. This act takes effect July 1, 2013, and applies to construction agreements made on or after said date. SECTION 6. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.