AN ACT relating to state contracts.

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AN ACT relating to state contracts. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 45A.035 is amended to read as follows: 3
(1) The secretary of the Finance and Administration Cabinet shall have power and 4
authority over, and may, except as otherwise expressly provided in this code, adopt 5
regulations pursuant to KRS Chapter 13A and consistent with this code governing 6
the purchasing, management, and control of any and all supplies, services, and 7
construction, and other items required to be purchased by the Commonwealth. The 8
secretary shall consider and decide matters of policy with regard to state 9
procurement. The secretary shall have the power of review with respect to the 10
implementation of administrative regulations and policy determinations. 11
(2) Administrative regulations shall be promulgated governing the following: 12
(a) Conditions and procedures for delegations of purchasing authority; 13
(b) Prequalification, suspension, debarment, and reinstatement of prospective 14
bidders; 15
(c) Small purchase procedures; 16
(d) Conditions and procedures for the purchase of items for resale; 17
(e) Conditions and procedures for the purchase of agricultural products in 18
accordance with KRS 45A.645; 19
(f) Conditions and procedures for the use of source selection methods authorized 20
by this code, including emergency purchases; 21
(g) Opening and rejection of bids or offers, consideration of alternate bids, and 22
waiver of informalities in offers; 23
(h) Confidentiality of technical data and trade secrets information submitted by 24
actual or prospective bidders or offerors; 25
(i) Partial, progressive, and multiple awards; 26
(j) Supervision of storerooms and inventories, including determination of 27
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appropriate stock levels and the management, transfer, sale, or other disposal 1
of state-owned property; 2
(k) Definitions and classes of contractual services and procedures for acquiring 3
them; 4
(l) An appeals process to resolve disputes arising from specifications requiring 5
items deemed to be equivalent or a sole brand as specified in KRS 45A.170; [ 6
and] 7
(m) Use of reverse auctions as defined in KRS 45A.070; and 8
(n) Policies and procedures governing timely payments, partial payments, 9
reimbursement, and resolution for contract payments in violation of KRS 10
45.453 and Section 2 of this Act. 11
The secretary may promulgate other administrative regulations as deemed advisable 12
to carry out the purposes of this code. 13
SECTION 2. A NEW SECTION OF KRS CHAPTER 45A IS CREATED TO 14
READ AS FOLLOWS: 15
(1) As used in this section: 16
(a) "Purchasing agency" me ans a unit or body of state government that 17
receives goods or services from a contractor or vendor; and 18
(b) "Undisputed amount" means a good -faith, valid, accurate, and timely 19
request for payment that has been submitted to an entity owing money, and 20
for which the entity has reviewed and confirmed that the money is due and 21
owing. 22
(2) All contracts shall include but not be limited to the following provisions for: 23
(a) Timely payments in accordance with KRS 45.451; 24
(b) Penalties for nonpayment. Payments that are not timely received shall be 25
subject to a penalty: 26
1. In accordance with KRS 45.454, and except as provided in KRS 27
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371.405, an interest penalty of one percent (1%) shall be applied and 1
added to any undisputed amount for each month or fraction thereof 2
after thirty (30) business days following the receipt of the goods or 3
services, or receipt of the invoice by the purchasing agency; or 4
2. In accordance with the payment terms of the contract; 5
(c) Addressing partial payment. Partial payment terms shall be included to: 6
1. Allow disbursement of partial payment for undisputed amounts in the 7
invoice or an agreed -upon payment process for goods received or 8
services performed that are not rejected or deficient; or 9
2. Not allow disbursement of partial payment for goo ds received or 10
services performed that are not rejected or deficient; 11
(d) A payment process for the disbursement of funds. When invoices are 12
utilized for payment, terms shall be included for the invoice requirements, 13
including form, format, delivery, necessary information, supporting 14
documentation, and communication and notifica tion procedures for 15
complete invoices. For deliverables-based contracts, terms shall be included 16
to establish milestones that shall be fully met before payment; 17
(e) A payment schedule that may include an initial disbursement of funds upon 18
execution of the contract for project initiation; and 19
(f) A payment resolution process in accordance with subsection (7)(c) of this 20
section. 21
(3) Any undisputed amount shall be paid: 22
(a) Within thirty (30) business days of receipt of the goods, services, or 23
contractor's invoice; or 24
(b) In accordance with the negotiated payment terms of the contract. 25
(4) (a) The purchasing agency shall make a good -faith effort of notifying the 26
contractor or vendor that an invoice has been rejected, of any errors in an 27
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invoice, or any requirem ent of additional or missing information in an 1
invoice within fifteen (15) business days from receipt of the goods, services, 2
or invoice, or in accordance with the terms of the contract. 3
(b) 1. If the purchasing agency transmits a rejection notice to the c ontractor 4
or vendor, there shall be a ten (10) calendar day correction period for 5
the contractor or vendor to remedy any problems in the delivery of a 6
good or service or submit a corrected invoice to fulfill the approval 7
requirements. Utilization of the te n (10) calendar day correction 8
period shall not create a new date of submission or receipt for all items 9
included in the invoice or terms of the contract and shall not be 10
considered a new invoice for calculation of the late payment fee 11
pursuant to KRS 45.454. 12
2. If a contractor or vendor fails to remedy the problem with the good or 13
service, or fails to submit a corrected invoice within the ten (10) 14
calendar day correction period, the submitted invoice shall be 15
considered a new invoice with a new date of sub mission for 16
calculation of the late payment fee pursuant to KRS 45.454. 17
(5) In accordance with KRS 45.458, the interest penalty shall be paid by the 18
purchasing agency and the amount of the payments shall not be deducted from 19
the contract budget, and modifi cations shall not be made to the budget of the 20
contract, the total award of the contract, funds encumbered or obligated for the 21
contract, or total amount available to fulfill the contract agreement as awarded by 22
the contracting agency. 23
(6) If a contractor or vendor has not received payment within thirty (30) business 24
days for an undisputed amount and has executed a loan, line of credit, revolving 25
credit, or other financial instrument in order to fulfill the obligations and 26
continue performance of the contract, the contractor or vendor may recover from 27
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the purchasing agency the interest and costs of credit borne until the date 1
payment has been issued. 2
(7) The secretary shall promulgate administrative regulations in accordance with 3
KRS Chapter 13A relating to contract payments no later than October 1, 2026, to 4
implement this section. The administrative regulations shall include: 5
(a) Procedures for correcting an invoice submission error when the purchasing 6
agency does not reject the goods or services received; 7
(b) Procedures for partial payment of invoices by a purchasing agency for 8
portions of an invoice; and 9
(c) A payment resolution process to resolve late payment claims by contractors 10
or vendors that includes but is not limited to: 11
1. That a contractor may not ify the purchasing agency the payment is 12
overdue and information to include when a payment has not been 13
received within the thirty (30) day period after receipt of an invoice; 14
2. The method and manner payment disputes shall be submitted to the 15
purchasing agency for resolution by the secretary; 16
3. Information required to be included when a contractor or vendor 17
submits an administrative payment dispute; 18
4. The time period by which the purchasing agency shall submit a 19
response to the secretary and contractor o r vendor, not to exceed ten 20
(10) days; 21
5. The time period for the secretary to issue a determination or written 22
notice not to exceed thirty (30) days from submission of a payment 23
dispute; and 24
6. The requirement for the purchasing agency to issue payment wi thin 25
five (5) business days from when the determination or written notice 26
establishes the total payment due. The secretary may grant an 27
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extension to pay upon receipt of a joint request between the contractor 1
and purchasing agency. 2
(8) The Finance and Admin istration Cabinet shall make the payment resolution 3
process to resolve a late payment claim with instructions for contractors and 4
vendors available on its website no later than October 1, 2026. 5
(9) (a) Beginning on July 1, 2027, the Finance and Administrat ion Cabinet shall 6
submit a written report every six (6) months to the Legislative Research 7
Commission for referral to: 8
1. The Interim Joint Committee on Appropriations and Revenue, or 9
House and Senate Standing Committees on Appropriations and 10
Revenue, as appropriate; and 11
2. The Interim Joint Committee on State Government, or Senate 12
Standing Committee on State and Local Government and House 13
Standing Committee on State Government, as appropriate. 14
(b) The report shall include the quantity of late payment contract disputes 15
submitted to the secretary of the Finance and Administration Cabinet, 16
including but not limited to: 17
1. Purchasing agency at issue; 18
2. Unpaid amount alleged or disputed; 19
3. Duration of late payment claimed; and 20
4. Determination issued. 21