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Bill limiting retainage on private projects progresses

Bill limiting retainage on private projects progresses — AGC-backed legislation that limits retainage on private projects to 5 percent unanimously passed the Senate and awaits additional action in the House Labor and Workplace Standards Committee.

AGC member Brett Ferullo of Northwest Construction testified in support of the bill before the House Labor Committee. His testimony can be viewed here. “It’s a matter of fairness,” Ferullo told the committee. “By adopting this bill, we’ll harmonize rules in both public and private construction. Withholding 5 percent is fair; anything above that is problematic and almost abusive. This will help all of our construction industry.”

A summary of ESSB 5528:

For any private construction projects, excluding single-family residential construction of less than 12 units, certain retainage and interest requirements are established. An owner, contractor, or specialty contractor may withhold as retainage up to 5 percent of the contract price of the work completed for private construction projects. Partial payment is not acceptance or approval of some of the work or a waiver of defects in the work.

The owner, contractor or specialty contractor must pay interest at the rate of 1 percent per month on the final payment due the contractor or subcontractor. The interest commences 30 days after the contractor or subcontractor completes and the owner accepts the work under the contract, and it runs until final payment is tendered to the contractor or specialty contractor. When the contractor or specialty contractor considers the work that the contractor or specialty contractor is contracted to perform to be complete, the contractor or specialty contractor must notify the party to whom the contractor or specialty contractor is responsible for performing the construction work under the contract. The party must, within 15 days after receiving the notice, either accept the work or notify the contractor or specialty contractor of work yet to be performed under the contract or subcontract.

If the party does not accept the work or does not notify the contractor or specialty contractor of work yet to be performed, the interest commences 30 days after the end of the 15-day period. A contractor may provide notice to an owner or upper-tier contractor for release of retainage due to a specialty contractor whose work is complete. If an owner or upper-tier contractor does not accept the specialty contractor’s work or does not notify the contractor of work yet to be performed by the specialty contractor within 15 days after receiving the notice, the interest required commences 30 days after the end of the 15-day period. A contractor’s obligation to pay interest to a specialty contractor does not begin until the contractor has received payment for the specialty contractor’s retainage provided that the contractor has submitted the specialty contractor’s retainage request to the owner or upper-tier contractor within 30 days after receipt from the specialty contractor.

AGC will pursue an amendment to ensure that contractors as well as specialty contractor may tender a retainage bond in lieu of retainage, and that it must be accepted.  That amendment is expected to pass.

For further information, contact AGC Chief Lobbyist Jerry VanderWood.

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