State Finance and Procurement - Retention Proceeds

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*sb0609*

SENATE BILL 609
P2 6lr3231
SB 835/25 – B&T CF HB 954
By: Senator Mautz
Introduced and read first time: February 5, 2026
Assigned to: Budget and Taxation

A BILL ENTITLED

AN ACT concerning 1

State Finance and Procurement – Retention Proceeds 2

FOR the purpose of requiring that certain retention proceeds retained by a unit or a certain 3
contractor under a State procurement contract be paid within a certain period of time 4
after the date of substantial completion; and generally relating to the payment of 5
retention proceeds under a State procurement contract. 6

BY repealing and reenacting, with amendments, 7
Article – State Finance and Procurement 8
Section 13–225 9
Annotated Code of Maryland 10
(2021 Replacement Volume and 2025 Supplement) 11

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 12
That the Laws of Maryland read as follows: 13

Article – State Finance and Procurement 14

13–225. 15

(a) (1) In this section the following words have the meanings indicated. 16

(2) “Payment security” has the meaning stated in § 17–101 of this article. 17

(3) “Performance security” has the meaning stated in § 17 –101 of this 18
article. 19

(b) (1) If a contractor has furnished 100% payment security and 100% 20
performance security in accordance with Title 17, Subtitle 1 of this article under a State 21
procurement contract for construction, the percentage specified in the contract for 22
retainage may not exceed 5% of the total amount. 23
2 SENATE BILL 609

(2) In addition to retainage, a primary procurement unit and the Maryland 1
Transportation Authority may withhold from payments otherwise due a contractor any 2
amount that the unit reasonably believes necessary to protect the State’s interest. 3

(3) Retainage withheld by a primary procurement unit and the Maryland 4
Transportation Authority may be deposited in an interest –bearing escrow account in 5
accordance with § 15–108 of this article. 6

(c) (1) A contractor may not retain a percentage of payments due a 7
subcontractor that exceeds the percentage of payments retained by the primary 8
procurement unit or the Maryland Transportation Authority. 9

(2) Paragraph (1) of this subsection may not be construed to prohibit a 10
contractor from withholding any amount in addition to retainage if the contractor 11
determines that a subcontractor’s performance under the subcontract provides reasonable 12
grounds for withholding the additional amount. 13

(d) (1) A subcontractor may not retain a percentage of payments due a lower 14
tier subcon tractor that exceeds the percentage of payments retained from the 15
subcontractor. 16

(2) Paragraph (1) of this subsection may not be construed to prohibit a 17
subcontractor from withholding any amount in addition to retainage if the subcontractor 18
determines that a lower tier subcontractor’s performance under the subcontract provides 19
reasonable grounds for withholding the additional amount. 20

(e) UNDISPUTED RETENTION PROCEEDS RETAINED BY A UNIT OR A 21
CONTRACTOR UNDER THI S SECTION SHALL BE P AID WITHIN 90 DAYS AFT ER THE 22
DATE OF SUBSTANTIAL COMPLETION, AS DEFINED BY THE AP PLICABLE CONTRACT 23
OR SUBCONTRACT. 24

(F) If retainage has been placed in escrow under § 15 –108 of this article, each 25
payment of retainage shall include a pro rata portion of interest earned. 26

[(f)] (G) This section may not be construed to limit the application of the 27
provisions of Title 17, Subtitle 1 of this article. 28

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 29
October 1, 2026. 30