Reform Prompt Payment Rules

Associated General Contractors
New Mexico Building Branch
1615 University Blvd. NE Albuquerque, NM 87102-1791
505-842-1462
FAX: 505-842-1980
email:

As part of accountability in the construction industry AGC supports prompt payment legislation that gives reasonable time for payment by state agencies but requires stiff penalties, calculated in a consistent way when payment is late. Contractors must be able to keep their operations going. The construction industry requires cash to pay workers, acquire materials, and pay taxes. Every business involved in a construction project must be able to meet its own obligations on a timely basis. That power only comes when money due is paid when due.

Receivables must be turned into cash as quickly as possible. The construction industry is no different from any other, except perhaps, for the number of dollars that may be due at any one time. Large accounts receivable limit growth, reduce bonding capacity and affect the entity’s ability to borrow, affect the entity’s relationship with prime contractor, specialty contractors and suppliers—just to mention a few consequences.

The State’s prompt payment rules have been written to give the state’s departments time to do what is needed to insure the work has been performed and has been accepted. The current statute seems to give an understandable means of computing any interest or penalty due.

Every business entity needs to have a reasonable period of time to receive invoices then process and pay them. The State of New Mexico must live under the same system. All public owners should approve and certify each progress estimate within seven days of submission. Failure to do so within the seven-day deadline should result in automatic approval and certification of the progress estimate. Bills then could be paid promptly within 21 business days of receipt. If not paid by that date the method to calculate penalty or interest due must be made clear and unmistakable in method and amount.