AB 1037

Under current law, as the work progresses on a public construction project, the state or the local governmental unit makes payments to the contractors, but retains not more than 5 percent of the value of the work performed until 50 percent of the value of the work is completed. After 50 percent of the work is completed, additional amounts, not to exceed 10 percent, may be retained if the progress of the work is not satisfactory. A similar retainage requirement exists for subcontractors that perform mechanical, electrical, plumbing, or fire protection work for a construction project for the state. Under current law, all retainage amounts are retained by the prime contractor.

Under this bill, this retainage requirement extends also to a subcontractor that performs mechanical, electrical, plumbing, or fire protection work for a construction project for a local governmental unit.

The bill also decreases from 5 percent to 3 percent the initial maximum retainage for all retainage requirements between a subcontractor and a prime contractor and between a prime contractor and the state or a local governmental unit for a public construction project.