The Governor signed a bill on January 6, 2021, amending State Finance Law § 139-f(a)[i] to remove the statutory definition of “substantial completion”, in relation to payments on public construction contracts (the “Bill”). The Bill took effect on December 15, 2020. In particular, the Bill removed the definition of substantial completion and now allows public agencies to retain their own definitions of substantial completion. Substantial completion of the work on a public contract acts as a trigger for permitting a contractor to request a reduction in the typical retention on a construction project and to submit its final payment requisition for payment of the remaining amount due on its contract.
State Finance Law § 139-f previously defined when a public project was substantially completed and when a contractor was permitted to submit its final payment requisition. Substantial completion was previously defined as “mean[ing] the state in the progress of the project when the work required by the contract with the public owner is sufficiently complete in accordance with the contract so that the public owner may occupy or utilize the work for its intended use; provided further, that ‘substantial completion’ shall apply to the entire project or a portion of the entire project if the contract with the public owner provides for occupancy or use of a portion of the project”[ii].
The reason for this change to State Finance Law § 139-f was that the definition of substantial completion applied to various types of contracts and industries. The Legislature determined that there should be a more flexible term, depending on a particular contract or industry. The Bill “allow[s] for public contracts to be the defining authority on what constitutes substantial completion, by referring to substantial completion, as it appears within the terms of the contract.”[iii]
State Finance Law § 139-f also amended the timing for a contractor to complete certain tasks set forth in the public owner’s “punch” list of work to be completed from seven calendar days to five business days. This change “provide[s] essentially the same amount of time without contract deadlines falling on holidays or the weekends.”[iv]
When issuing or negotiating a public improvement contract, it is important that the contract define when substantial completion occurs. Jaspan Schlesinger LLP can help you in issuing or negotiating public improvement contracts.
[i] 2021 NY S.B. S880. State Senator Neil D. Breslin (44th Senate District).
[ii] 2020 NY CLS St Fin § 139-f
[iii] 2021 NY S.B. S880 at “Justification”.