PA 16-104—HB 5328

General Law Committee

AN ACT CONCERNING PUBLIC WORK CONTRACT RETAINAGE AND ENFORCEMENT OF THE RIGHT TO PAYMENT ON A BOND

SUMMARY: This act generally lowers the maximum retainage allowed in state contracts from 10% to 7. 5%. (Retainage is the amount withheld from payments conditioned on substantial or final completion of work in accordance with a construction contract. ) The act prohibits state agencies, except the Department of Transportation, from withholding more than 7. 5% from any periodic or final payment properly due to the general or prime contractor. It also prohibits the contractor from withholding from a subcontractor more than the amount the agency withheld.

The act requires the retainage amount to be reduced to 5% when the contract is 50% complete. The payment to the contractor or subcontractor must be made within 90 days after a contractor or subcontractor submits a complete application for payment to the awarding authority demonstrating the contract is 50% complete.

Existing law requires public works contracts valued at more than $100,000 to require the general contractor to, among other things, furnish a payment bond from a surety company (CGS 49-41). The act requires the surety company, if it fails to respond to a claim, to indemnify the claimant (e. g. , subcontractor or supplier) for reasonable attorney's fees and costs incurred thereafter to recover any amount found to be due or owed. By law, sureties must pay or deny claims within 90 days.

The act specifies that a surety's failure to respond does not constitute a waiver of defenses that the surety or the principal of the bond may have or acquire to the claim, except for the undisputed amounts reached in a settlement.

EFFECTIVE DATE: July 1, 2016

OLR Tracking: DC; JKL; VR: tjo