Senate Bill Introduced Seeking to Lower Amount of Retention Withheld on Public Projects
January 17, 2013
On January 16, 2013, Maryland State Senator Joan Carter Conway of Baltimore City introduced Senate Bill 140 (“SB140”), which seeks to lower the amount of retention that a public body can withhold from a contractor when the contractor has furnished a payment and performance bond in the full amount of the contract price. Under the current version of Section 17-110 of the State Finance and Procurement Article, “the percentage specified in the contract for retainage may not exceed 10% of the total amount for the first 50% of the contract”, and “[u]nless a public body demonstrates the need to retain more than 5% to protect the public interest, after 50% of the contract is completed, a public body may retain only 5% of the total amount.” (emphasis added)
The changes proposed by SB140 would reduce the retainage to 5% from the outset of the construction project. If SB140 passes and is signed into law, contractors and subcontractors would be able to claim more funds on public projects at the beginning of the project, rather than being forced to wait until the project is 50% complete for a reduction in the retainage. A similar change with respect to private projects was enacted in 2008, when Section 9-304 of the Real Property Article was introduced to reduce retainage to 5% on all bonded construction projects in the private sector.
For a copy of SB140, click here.