HB1224: GOVT CONTRACT RETAINAGE

Legislative Summary

Amends the Public Construction Bond Act. Provides that, before the completion of 50% of the contract for public works, the State or a local governmental unit, except for the Department of Transportation, may not withhold retainage from any payment to a contractor who furnishes the bond or bond substitute required by the Act in an amount in excess of 10% of any payment made before the date of completion of 50% of the contract for public works. Provides that, when a contract for public works is 50% complete, the State or the local governmental unit, except for the Department of Transportation, shall reduce the retainage so that no more than 5% is held. Allows a State agency, subject to these limitations, to withhold as retainage a portion of the moneys from the payment of a contract that is entered into on or after the effective date of the amendatory Act if and only if the State agency determines that satisfactory progress has not been achieved by a contractor or subcontractor during any period for which a payment is to be made. Requires satisfactory progress to be clearly provided for in the contract between the State agency and the contractor or subcontractor. Provides that retainage may not be used as a substitute for good contract management, and the State agency may not withhold funds without cause. Provides that determinations to retain and the specific amount to be withheld must be made by the State agency on a case-by-case basis based on the performance of milestones under the current contract as provided for in the contract between the State agency and the contractor. Prohibits a contractor from withholding retainage from a subcontractor except to the extent a State agency has withheld retainage from the contractor which is attributable to that subcontractor's subcontract. Defines "retainage". Provides that nothing in the amendatory Act may be construed to modify any provision of the State Prompt Payment Act or the Local Government Prompt Payment Act. Effective June 1, 2027.