Public contracts: retention proceeds.

Plain English Breakdown

The official source material does not provide specific details on what happens if retention is not withheld when it should be.

Public Contracts: Retention Proceeds

This law changes how state agencies handle retention payments in contracts for public works projects.

What This Bill Does

• Eliminates the requirement for state agencies to hold back a portion of payment (retention) when making progress payments to contractors on public works projects.
• Requires state agencies to notify certain legislative committees if withholding retention could harm their interests.

Who It Names or Affects

• State agencies
• Contractors working on public works projects

Terms To Know

Retention proceeds

Money that a state agency holds back from contractors as security until certain conditions are met.

Public works contract

A contract between a government entity and a contractor for the construction or improvement of public infrastructure.

Limits and Unknowns

• The bill does not specify what happens if retention is not withheld when it should be.
• It's unclear how this change will affect contractors' security during projects.
• This law only applies to state agencies and does not cover local government contracts.

Official Summary Text

AB 1885, as amended, Carrillo.
Public
contracts.
contracts: retention proceeds.
Existing law requires state agencies to include a provision in solicitations and contracts, if the estimated amount to be retained exceeds $10,000 and the retention continues for a period of 60 days beyond the completion of phased services, to permit, upon written request and the expense of the contractor, the payment of retentions earned directly to a state- or federally chartered bank in this state, as the escrow agent. Existing law also provides an escrow agreement form
that
for
a contractor and state agency
shall
to
use for security deposits, and defines a “state agency” for purposes of these provisions.
This bill would
make a nonsubstantive change to that definition.
repeal those provisions, including the escrow agreement form, and instead prohibit a state agency, as defined, from withholding retention proceeds when making progress payments to a contractor, as defined, for work performed on a public works contract. The bill would require a state agency to promptly notify the appropriate policy committees of the Legislature if the state agency’s best interests are compromised because retention was not withheld on a state agency public works contract.
Existing law, except as specified, prohibits the percentage of the retention proceeds withheld in a contract between the original contractor and a subcontractor, and in a contract between a subcontractor and any subcontractor thereunder, from exceeding the percentage specified in the contract between the public entity and the original contractor.
This bill would provide that nothing in the bill alters, amends, or impairs the rights, duties, and obligations of an original contractor, its subcontractors, and all subcontractors thereunder relating to the construction of any public work of improvement pursuant to the above-described provision.

Current Bill Text

Download Bill PDF