For decades, subcontractors have argued that the practice of “retainage” is a harmful and unnecessary burden on the consideration industry.
Retainage is the withholding of a portion, traditionally 10 percent, of a progress payment until the completion of the project. Currently, there is legislation being considered by the Florida legislature that would bring relief to subcontractors with regards to prompt pay and retainage.
This legislation, sponsored by Sen. Mike Bennett, R-Bradenton, and Rep. Ron Reagan, R-Sarasota, was responsible for sparking an agreement between the representatives of the American Subcontractors Association of Florida (ASAF), the Underground Utility Contractors of Florida (UUCF) and Florida’s community colleges to ensure that retainage is paid in a reasonable time to prime contractors and subcontractors for work they have properly completed.
“The subcontractors of Florida thank the Florida Council of Community College Presidents for their leadership on the issue of retainage,” said ASAF President Greg Doyle, Procrete Systems Inc., Pinellas Park, FL. “This policy change creates a more positive business environment that is beneficial both to the community colleges and the prime contractors and subcontractors that work on college construction projects.”
This agreement is a win-win for subcontractors, providing for the line item release of retainage 45 days after a subcontractor completes its work. This agreement is a substantial improvement over the actual provisions of the proposed legislation which, in the best of circumstances, will result in a reduction of retainage to 5 percent.
“I commend the community colleges for taking the lead in Florida and being progressive in their handling of construction retainage,” said Bennett.
The guideline adopted by the community college presidents puts the Florida system of community colleges in line with industry guidelines on retainage developed by major construction trade associations. These state, “Whenever practical … retainage should be eliminated or reduced.”
Joe Cook, UUCF president, applauded the Florida community colleges “for being on the cutting edge of retainage reform for the state.”
The council approved specific retainage provisions to be used in contracts between Florida’s 28 community colleges and their general contractors and to be used in contracts between the general contractors and their subcontractors. These provisions state that 45 days after a subcontractor completes its work, the subcontractor will be able to apply to the general contractor for release of all of its retainage.
The general contractor must include the payment request in its next payment application, and the owner must include the retainage in its next payment. An exception is made for contested items. General contractors and subcontractors have 10 days to pay their subcontractors for properly performed work.
For more information, visit www.facc.org.