SB 197: Department of Transportation: retention proceeds.
- Session Year: 2019-2020
- House: Senate
- Latest Version Date: 2019-10-12
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Date
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Status
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| Oct 12, 2019 | Chaptered by Secretary of State. Chapter 842, Statutes of 2019. |
| Oct 12, 2019 | Approved by the Governor. |
| Sep 12, 2019 | Enrolled and presented to the Governor at 9 a.m. |
| Sep 5, 2019 | In Senate. Ordered to engrossing and enrolling. |
| Sep 5, 2019 | Read third time. Passed. Ordered to the Senate. |
| Aug 15, 2019 | Read second time. Ordered to third reading. |
| Aug 14, 2019 | From committee: Do pass. (Ayes 18. Noes 0.) (August 14). |
| Jul 2, 2019 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 15. Noes 0.) (July 1). Re-referred to Com. on APPR. |
| May 6, 2019 | Referred to Com. on TRANS. |
| Apr 22, 2019 | In Assembly. Read first time. Held at Desk. |
| Apr 22, 2019 | Read third time. Passed. (Ayes 38. Noes 0.) Ordered to the Assembly. |
| Apr 9, 2019 | Read second time. Ordered to third reading. |
| Apr 8, 2019 | From committee: Do pass. (Ayes 6. Noes 0.) (April 8). |
| Mar 29, 2019 | Set for hearing April 8. |
| Mar 26, 2019 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 12. Noes 0.) (March 26). Re-referred to Com. on APPR. |
| Mar 19, 2019 | Set for hearing March 26. |
| Feb 13, 2019 | Referred to Com. on TRANS. |
| Feb 1, 2019 | From printer. May be acted upon on or after March 3. |
| Jan 31, 2019 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
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Date
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Description
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Location
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Votes
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| Sep 5, 2019 | SB 197 Beall Senate Third Reading By Frazier | Assembly Floor |
Passed |
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| Aug 14, 2019 | Do pass. | Assembly Standing Committee on Appropriations |
Passed |
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| Jul 1, 2019 | Do pass and be re-referred to the Committee on [Appropriations] with recommendation: To Consent Calendar | Assembly Standing Committee on Transportation |
Passed |
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| Apr 22, 2019 | Senate 3rd Reading SB197 Beall et al. | Senate Floor |
Passed |
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| Apr 8, 2019 | Do pass | Senate Standing Committee on Appropriations |
Passed |
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| Mar 26, 2019 | Do pass, but first be re-referred to the Committee on [Appropriations] with the recommendation: To Consent Calendar | Senate Standing Committee on Transportation |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
SENATE THIRD READING
STR Bill Id:SB 197
Author:(Beall)
As Introduced Ver:January 31, 2019
Majority vote
SUMMARY:
Eliminates the sunset date related to existing law prohibiting the California Department of Transportation (Caltrans) from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project.
Major Provisions
See summary.
COMMENTS:
Retention proceeds represent a percentage of the amount of a contract that is withheld by a public entity from a progress payment to the original contractor, or by the original contractor from one its subcontractors. By withholding a percentage of a contract, the public entity or the original contractor maintains a degree of financial control over a project. In general, the public entity or the original contractor withholds at least 5% of payment until the contract is completed to the satisfaction of the public entity or original contractor.
It was Caltrans' policy to not withhold retention proceeds on federally-funded projects between Caltrans and its prime contractors, and its contractors and their subcontractors. In 2008, the Legislature passed and Governor Schwarzenegger signed into law SB 593 (Margett), Chapter 341, which extended this practice and prohibited Caltrans from withholding retention proceeds to its contractors for work performed on any project until January 1, 2014. Prior to the enactment of SB 593, Caltrans managed a complex and administratively burdensome bifurcated contract payment system that provided for the withholding of retention proceeds on projects that did not include federal funds, and excluded retention proceeds on federally-funded projects. While state-funded projects account for a small percentage of Caltrans projects, SB 593 afforded Caltrans some degree of administrative efficiency and cost savings by eliminating the need to have a two-tiered contract payment system.
In 2014, the Legislature enacted AB 1671 (Huffman), Chapter 290, which extended the retention prohibition sunset from 2014 to January 1, 2020. Caltrans has not reported any compromise of the state's interests as a result of the prohibition against retention, while contractors have benefited greatly. This bill eliminates the sunset and makes permanent the prohibition of Caltrans withholding retention proceeds to its contractors.
According to the Author:
According to the author, "This bill will ensure Caltrans has a uniform contract payment system benefiting both contractors and the state in terms of time and cost-savings in contract administration. The prohibition on retention often goes unnoticed, but has an extremely positive impact on small and emerging construction businesses. It allows contractors to retain cash flow and to continue to bid on subsequent construction projects without having to obtain expensive lines of credit or having to operate on uncertain financial footing. This prevents delays in project completion and the resulting unnecessary costs to taxpayers."
Arguments in Support:
Writing in support of this bill, United Contractors states, "Retention can have detrimental impacts on the construction industry. Contractors have a financial obligation close to one hundred cents on the dollar. Such obligations include meeting payroll, paying employee benefits, paying material suppliers and all taxes on the value of the work completed. There are several other more meaningful contract requirements that provide assurances to a public entity over a project to bring it to satisfactory completion."
Arguments in Opposition:
None.
FISCAL COMMENTS:
According to the Assembly Appropriations Committee, minor administrative savings to Caltrans in future years, as a result of continuing to have a uniform payment policy.
VOTES:
SENATE FLOOR: 38-0-0
YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk
ASM TRANSPORTATION: 15-0-0
YES: Frazier, Fong, Aguiar-Curry, Berman, Bigelow, Chu, Cunningham, Daly, Diep, Friedman, Gipson, Grayson, Medina, Nazarian, O'Donnell
ASM APPROPRIATIONS: 18-0-0
YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas
UPDATED:
VERSION: January 31, 2019
CONSULTANT: Eric Thronson / TRANS. / (916) 319-2093 FN: 0001358
Date of Hearing: August 14, 2019
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SBPCA Bill Id:SB 197
Author:(Beall) – As Introduced Ver:January 31, 2019
Policy Committee: | Transportation | Vote: | 15 - 0 |
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Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill makes permanent the prohibition in existing law that prevents the Department of Transportation (Caltrans) form withholding retention proceeds when making progress payments to a contractor for work performed on a transportation project. Under current law, the prohibition expires on January 1, 2020.
FISCAL EFFECT:
Minor administrative savings to Caltrans in future years, as a result of continuing to have a uniform payment policy.
COMMENTS:
Retention proceeds represent a percentage of the amount of a contract that is withheld from a progress payment by the public entity to the original contractor, or the original contractor from one its subcontractors. Through retention, the public entity or the original contractor maintains a degree of financial control over a project. In general, the public entity or the original contractor withholds some portion of payment until the contract is completed to the satisfaction of the public entity or original contractor. Unsurprisingly, withholding of retention proceeds creates hardships for contractors.
It has long been Caltrans’ policy to not withhold retention proceeds from federally funded transportation projects. The Legislature codified this policy, first in 2008 with the passage of SB 593 (Margett), Chapter 341, and again in 2014 with the passage of AB 1671 (Huffman), Chapter 290. The prohibition expires at the beginning of 2020. While this committee has not heard directly from Caltrans, policy committee analyses of this bill assert Caltrans has not reported any compromise of the state’s interests as a result of the prohibition against retention.
Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081
Date of Hearing: July 1, 2019
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
SBPCA Bill Id:SB 197
Author:(Beall) – As Introduced Ver:January 31, 2019
SENATE VOTE: 38-0
SUBJECT: Department of Transportation: retention proceeds
SUMMARY: Eliminates the sunset date related to existing law prohibiting the California Department of Transportation (Caltrans) from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project.
EXISTING LAW:
1) Prohibits, until January 1, 2020, Caltrans from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project.
2) Provides that in a contract between the original contractor and a subcontractor, and in a contract between a subcontractor and any other subcontractor, the percentage of retention proceeds withheld cannot exceed the percentage specified in the contract between the public entity and the original contractor, and requires the distribution of retention proceeds by an original contractor to subcontractors within seven days of receipt of retention proceeds from the public agency.
3) Requires a contractor in a public works contract to file a performance bond with the public entity in specified amounts depending on the value of the contract.
4) Requires every contractor who is awarded a contract by a state entity involving expenditures in excess of $5,000 for any public work to file a performance bond with the state entity in a sum not less than 100% of the total amount payable by the terms of the contract.
FISCAL EFFECT: According to the Senate Committee on Appropriations, Caltrans will benefit from ongoing minor cost savings and continued administrative efficiencies.
COMMENTS: Retention proceeds represent a percentage of the amount of a contract that is withheld by a public entity from a progress payment to the original contractor, or by the original contractor from one its subcontractors. By withholding a percentage of a contract, the public entity or the original contractor maintains a degree of financial control over a project. In general, the public entity or the original contractor withholds at least 5% of payment until the contract is completed to the satisfaction of the public entity or original contractor.
It was Caltrans’ policy to not withhold retention proceeds on federally-funded projects between Caltrans and its prime contractors, and its contractors and their subcontractors. In 2008, the Legislature passed and Governor Schwarzenegger signed into law SB 593 (Margett), Chapter 341, which extended this practice and prohibited Caltrans from withholding retention proceeds to its contractors for work performed on any project until January 1, 2014. Prior to the enactment of SB 593, Caltrans managed a complex and administratively burdensome bifurcated contract payment system that provided for the withholding of retention proceeds on projects that did not include federal funds, and excluded retention proceeds on federally-funded projects. While state-funded projects account for a small percentage of Caltrans projects, SB 593 afforded Caltrans some degree of administrative efficiency and cost savings by eliminating the need to have a two-tiered contract payment system.
In 2014, the Legislature enacted AB 1671 (Huffman), Chapter 290, which extended the retention prohibition sunset from 2014 to January 1, 2020. Caltrans has not reported any compromise of the state’s interests as a result of the prohibition against retention, while contractors have benefited greatly. This bill eliminates the sunset and makes permanent the prohibition of Caltrans withholding retention proceeds to its contractors.
According to the author, “This bill will ensure Caltrans has a uniform contract payment system benefiting both contractors and the state in terms of time and cost-savings in contract administration. The prohibition on retention often goes unnoticed, but has an extremely positive impact on small and emerging construction businesses. It allows contractors to retain cash flow and to continue to bid on subsequent construction projects without having to obtain expensive lines of credit or having to operate on uncertain financial footing. This prevents delays in project completion and the resulting unnecessary costs to taxpayers.”
Writing in support of this bill, United Contractors states, “Retention can have detrimental impacts on the construction industry. Contractors have a financial obligation close to one hundred cents on the dollar. Such obligations include meeting payroll, paying employee benefits, paying material suppliers and all taxes on the value of the work completed. There are several other more meaningful contract requirements that provide assurances to a public entity over a project to bring it to satisfactory completion.”
Previous legislation. AB 1671 (Huffman), Chapter 290, Statutes of 2012, extended the retention prohibition sunset from 2014 to January 1, 2020.
SB 593 (Margett), Chapter 341, Statutes of 2008, prohibited Caltrans from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project until January 1, 2014.
REGISTERED SUPPORT / OPPOSITION:
Support
American Society of Civil Engineers-Region 9
American Subcontractors Association-California
Associated Builders and Contractors Northern California Chapter
Flasher Barricade Association
International Union of Operating Engineers, Cal-Nevada Conference
Union Roofing Contractors Association
United Contractors
Opposition
None received
Analysis Prepared by: Eric Thronson / TRANS. / (916) 319-2093
Date of Hearing: June 17, 2019
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
SBPCA Bill Id:SB 197
Author:(Beall) – As Introduced Ver:January 31, 2019
SENATE VOTE: 38-0
SUBJECT: Department of Transportation: retention proceeds
SUMMARY: Eliminates the sunset date related to existing law prohibiting the California Department of Transportation (Caltrans) from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project.
EXISTING LAW:
1) Prohibits, until January 1, 2020, Caltrans from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project.
2) Provides that in a contract between the original contractor and a subcontractor, and in a contract between a subcontractor and any other subcontractor, the percentage of retention proceeds withheld cannot exceed the percentage specified in the contract between the public entity and the original contractor, and requires the distribution of retention proceeds by an original contractor to subcontractors within seven days of receipt of retention proceeds from the public agency.
3) Requires a contractor in a public works contract to file a performance bond with the public entity in specified amounts depending on the value of the contract.
4) Requires every contractor who is awarded a contract by a state entity involving expenditures in excess of $5,000 for any public work to file a performance bond with the state entity in a sum not less than 100% of the total amount payable by the terms of the contract.
FISCAL EFFECT: According to the Senate Committee on Appropriations, Caltrans will benefit from ongoing minor cost savings and continued administrative efficiencies.
COMMENTS: Retention proceeds represent a percentage of the amount of a contract that is withheld by a public entity from a progress payment to the original contractor, or by the original contractor from one its subcontractors. By withholding a percentage of a contract, the public entity or the original contractor maintains a degree of financial control over a project. In general, the public entity or the original contractor withholds at least 5% of payment until the contract is completed to the satisfaction of the public entity or original contractor.
It was Caltrans’ policy to not withhold retention proceeds on federally-funded projects between Caltrans and its prime contractors, and its contractors and their subcontractors. In 2008, the Legislature passed and Governor Schwarzenegger signed into law SB 593 (Margett), Chapter 341, which extended this practice and prohibited Caltrans from withholding retention proceeds to its contractors for work performed on any project until January 1, 2014. Prior to the enactment of SB 593, Caltrans managed a complex and administratively burdensome bifurcated contract payment system that provided for the withholding of retention proceeds on projects that did not include federal funds, and excluded retention proceeds on federally-funded projects. While state-funded projects account for a small percentage of Caltrans projects, SB 593 afforded Caltrans some degree of administrative efficiency and cost savings by eliminating the need to have a two-tiered contract payment system.
In 2014, the Legislature enacted AB 1671 (Huffman), Chapter 290, which extended the retention prohibition sunset from 2014 to January 1, 2020. Caltrans has not reported any compromise of the state’s interests as a result of the prohibition against retention, while contractors have benefited greatly. This bill eliminates the sunset and makes permanent the prohibition of Caltrans withholding retention proceeds to its contractors.
According to the author, “This bill will ensure Caltrans has a uniform contract payment system benefiting both contractors and the state in terms of time and cost-savings in contract administration. The prohibition on retention often goes unnoticed, but has an extremely positive impact on small and emerging construction businesses. It allows contractors to retain cash flow and to continue to bid on subsequent construction projects without having to obtain expensive lines of credit or having to operate on uncertain financial footing. This prevents delays in project completion and the resulting unnecessary costs to taxpayers.”
Writing in support of this bill, United Contractors states, “Retention can have detrimental impacts on the construction industry. Contractors have a financial obligation close to one hundred cents on the dollar. Such obligations include meeting payroll, paying employee benefits, paying material suppliers and all taxes on the value of the work completed. There are several other more meaningful contract requirements that provide assurances to a public entity over a project to bring it to satisfactory completion.”
Previous legislation. AB 1671 (Huffman), Chapter 290, Statutes of 2012, extended the retention prohibition sunset from 2014 to January 1, 2020.
SB 593 (Margett), Chapter 341, Statutes of 2008, prohibited Caltrans from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project until January 1, 2014.
REGISTERED SUPPORT / OPPOSITION:
Support
American Society of Civil Engineers-Region 9
American Subcontractors Association-California
Associated Builders and Contractors Northern California Chapter
Flasher Barricade Association
International Union of Operating Engineers, Cal-Nevada Conference
Union Roofing Contractors Association
United Contractors
Opposition
None received
Analysis Prepared by: Eric Thronson / TRANS. / (916) 319-2093
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | SB 197 |
THIRD READING
Bill No: SB 197
Introduced: 1/31/19
SENATE TRANSPORTATION COMMITTEE: 12-0, 3/26/19
AYES: Beall, Bates, Dodd, Galgiani, McGuire, Morrell, Roth, Rubio, Skinner, Stone, Umberg, Wieckowski
SENATE APPROPRIATIONS COMMITTEE: 6-0, 4/8/19
AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski
SUBJECT: Department of Transportation: retention proceeds
DIGEST:
This bill removes the Department of Transportation’s (Caltrans) sunset provision relative to withholding retention proceeds on public contracts, as specified.
Existing law:
- Prohibits Caltrans from withholding retention proceeds from a contractor performing work on a transportation project.
- Requires Caltrans to notify the appropriate committee of the Legislature if a contract has been compromised due to a retention not being withheld for a transportation project.
- Provides that Caltrans is required to implement the abovementioned prohibition until January 1, 2020.
This bill removes the sunset provision that prohibits Caltrans from issuing a retention proceed on a contract for a transportation project.
Comments
- Purpose. According to the author, “this bill makes permanent the prohibition on Caltrans from withholding retention proceeds from its contractors when making progress payments on public works projects. Further, it will ensure Caltrans has a uniform contract payment system benefiting both contractors and the state in terms of time and cost-savings in contract administration. The prohibition on retention often goes unnoticed, but has an extremely positive impact on small and emerging construction businesses. It allows contractors to retain cash flow and to continue to bid on subsequent construction projects without having to obtain expensive lines of credit or having to operate on uncertain financial footing. This prevents delays in project completion and the resulting unnecessary costs to taxpayers. Since the original law went into effect in 2008, Caltrans has not reported having experienced any issues with transportation projects as a result of the prohibition on retention in state law.”
- Retention proceeds. Typically, on public works projects, public agencies retain 5% of the proceeds of progress payments made to construction contractors. This is a tool that the contracting agency uses to ensure that contractors perform to the terms of their contract. When the project is completed to the satisfaction of the contracting agency, the contracting agency releases the retentions to the contractor. The prime contractor may extend the retention fees to subcontractors.
Caltrans does not withhold retention proceeds on federally funded projects on progress payments between Caltrans and its prime contractors, and its contractors and their subcontractors. SB 593 (Margett, Chapter 341, Statutes of 2008) prohibited Caltrans from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project until January 1, 2014. While state-funded projects account for a small percentage of Caltrans projects, SB 593 conformed both state and federal laws so there is zero withholding for all contracts, easing the financial administration of those contracts. AB 1671 (Huffman, Chapter 290, Statutes of 2012) extended the sunset date from 2014 to January 1, 2020. SB 197 simply removes the sunset provision.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, Caltrans will benefit from ongoing minor cost savings and continued administrative efficiencies as a result of this bill (State Highway Account).
California Chapters of the National Electrical Contractors Association
California Legislative Conference of the Plumbing, Heating, and Piping Industry
Flasher Barricade Association
Mason Contractors Association of California
Northern California Allied Trades
Sacramento Regional Builders Exchange
United Contractors
Wall and Ceiling Alliance
Western Wall and Ceiling Contractors Association
OPPOSITION: (Verified 4/10/19)
None received
Prepared by: Manny Leon / TRANS. / (916) 651-4121
4/10/19 14:59:01
**** END ****
SENATE COMMITTEE ON APPROPRIATIONS
Senator Anthony Portantino, Chair
2019 - 2020 Regular Session
SB 197 (Beall) - Department of Transportation: retention proceeds
Version: January 31, 2019 | Policy Vote: TRANS. 12 - 0 |
Urgency: No | Mandate: No |
Hearing Date: April 8, 2019 | Consultant: Mark McKenzie |
Bill Summary:
SB 197 would eliminate the January 1, 2020 sunset date on a provision that prohibits the Department of Transportation (Caltrans) from withholding retention proceeds on progress payments to contractors, as specified.
Fiscal Impact:
Caltrans will benefit from ongoing minor cost savings and continued administrative efficiencies as a result of this bill (State Highway Account). See Staff Comments.
Background:
Retention proceeds represent a percentage of the amount of a contract that is withheld from a progress payment by a public entity to a primary contractor, or payment by a primary contractor to one its subcontractors. Through retention, the public entity maintains a degree of financial control over a project. In general, at least 5% of project payments are withheld as retention proceeds until the contract is completed to the satisfaction of the public entity or primary contractor, respectively. Existing law, the State Contract Act, also requires contractors to file payment and performance bonds as security to guarantee satisfactory completion of work on state projects.
Existing federal law prohibits Caltrans from retaining fees on any projects that include federal funding (about 90% of all projects). Existing state law prohibits Caltrans from withholding retention proceeds from contractors on state-funded transportation projects until January 1, 2020, and requires Caltrans to report to the Legislature if the state’s interests have been compromised by this prohibition.
Proposed Law:
SB 197 would delete the January 1, 2020 sunset date on statutory provisions that prohibit Caltrans from withholding retention proceeds when making progress payments to a contractor for work performed on a transportation project.
Related Legislation:
SB 593 (Margett), Chap. 341/2008, enacted provisions that prohibit Caltrans from holding retention proceeds from contractors on transportation projects until January 1, 2014.
AB 1671 (Huffman), Chap. 290/2012, extended the sunset on provisions that prohibit Caltrans from holding retention proceeds from January 1, 2014 to January 1, 2020.
Staff Comments:
Prior to the enactment of SB 593, Caltrans managed a complex and administratively burdensome bifurcated contract payment system that provided for the withholding of retention proceeds on projects that did not include federal funds, and excluded retention proceeds on federally-funded projects. The provisions enacted by SB 593 and extended by AB 1671 have afforded Caltrans some degree of administrative efficiency and cost savings by eliminating the need to have a two-tiered contract payment system. This bill would allow Caltrans to continue to benefit from minor administrative savings resulting from a single contract payment system.
Staff notes that Caltrans has not reported any compromise of the state’s best interests as a result of the prohibition against retention.
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SENATE COMMITTEE ON TRANSPORTATION
Senator Jim Beall, Chair
2019 - 2020 Regular
Bill No: SB 197 Hearing Date: 3/26/19
Author: | Beall | ||
Version: | 1/31/2019 | ||
Urgency: | No | Fiscal: | Yes |
Consultant: | Manny Leon | ||
SUBJECT: Department of Transportation: retention proceeds
DIGEST: This bill removes the Department of Transportation’s (Caltrans) sunset provision relative to withholding retention proceeds on public contracts, as specified.
ANALYSIS:
Existing law:
- Prohibits Caltrans from withholding retention proceeds from a contractor performing work on a transportation project.
- Requires Caltrans to notify the appropriate committee of the Legislature if a contract has been compromised due to a retention not being withheld for a transportation project.
- Provides that Caltrans is required to implement the abovementioned prohibition until January 1, 2020.
This bill removes the sunset provision that prohibits Caltrans from issuing a retention proceed on a contract for a transportation project.
COMMENTS:
- Purpose. According to the author, “this bill makes permanent the prohibition on Caltrans from withholding retention proceeds from its contractors when making progress payments on public works projects. Further, it will ensure Caltrans has a uniform contract payment system benefiting both contractors and the state in terms of time and cost-savings in contract administration. The prohibition on retention often goes unnoticed, but has an extremely positive impact on small and emerging construction businesses. It allows contractors to retain cash flow and to continue to bid on subsequent construction projects without having to obtain expensive lines of credit or having to operate on uncertain financial footing. This prevents delays in project completion and the resulting unnecessary costs to taxpayers. Since the original law went into effect in 2008, Caltrans has not reported having experienced any issues with transportation projects as a result of the prohibition on retention in state law.”
- Retention Proceeds. Typically, on public works projects, public agencies retain 5% of the proceeds of progress payments made to construction contractors. This is a tool that the contracting agency uses to ensure that contractors perform to the terms of their contract. When the project is completed to the satisfaction of the contracting agency, the contracting agency releases the retentions to the contractor. The prime contractor may extend the retention fees to subcontractors.
Caltrans does not withhold retention proceeds on federally funded projects on progress payments between Caltrans and its prime contractors, and its contractors and their subcontractors. SB 593 (Margett), Chapter 341, Statutes of 2008, prohibited Caltrans from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project until January 1, 2014. While state-funded projects account for a small percentage of Caltrans projects, SB 593 conformed both state and federal laws so there is zero withholding for all contracts, easing the financial administration of those contracts. AB 1671 (Huffman), Chapter 290, Statutes of 2012, extended the sunset date from 2014 to January 1, 2020. SB 197 simply removes the sunset provision.
Related Legislation:
AB 1671, (Huffman), Chapter 290, Statutes of 2012 — Extended the retention prohibition sunset from 2014 to January 1, 2020.
SB 593 (Margett), Chapter 341, Statutes of 2008 — Prohibited Caltrans from withholding retention proceeds to its contractors when making progress payments for work performed on a public works project until January 1, 2014.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
POSITIONS: (Communicated to the committee before noon on Wednesday,
March 20, 2019.)
SUPPORT:
California Chapters of the National Electrical Contractors Association
California Legislative Conference of the Plumbing, Heating, and Piping Industry
Flasher Barricade Association
Northern California Allied Trades
Mason Contractors Association of California
Sacramento Regional Builders Exchange
United Contractors
Wall and Ceiling Alliance
Western Wall and Ceiling Contractors Association
OPPOSITION:
None received.
-- END --
Bill Author
Bill Co-Author(s):
