BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1671
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: huffman
VERSION:
2/14/2012
Analysis by: Art Bauer FISCAL: yes
Hearing date: June 12, 2012
SUBJECT:
Transportation contract retentions
DESCRIPTION:
This bill extends the sunset date from January 1, 2014 to
January 1, 2020 on the section of the law prohibiting the
Department of Transportation (Caltrans) from withholding
retention proceeds on progress payments to contractors on
non-federally funded contracts.
ANALYSIS:
Typically, on public works projects, public agencies retain five
percent 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.
Existing state law prohibits Caltrans from retaining fees on
progress payments on non-federally funded construction contracts
until January 1, 2014, and requires Caltrans to notify the
Legislature if the state's interest has been compromised because
of the lack of retention fees. The state prohibition on
retention fees conforms to existing federal law prohibiting
Caltrans from retaining fees on federally funded construction
contracts.
This bill extends the prohibition on Caltrans retaining fees on
progress payments on non-federally fund construction contracts
until January 1, 2020.
COMMENTS:
AB 1671 (HUFFMAN) Page 2
1. Purpose . AB 593 (Margett), Chapter 341 of 2008, prohibited
Caltrans from retaining fees on state funded construction
contracts until January 1, 2014. SB 1671 extends the sunset
date until January 1, 2020. This bill does not apply to
services contracts.
2. Background . Retention fees represent a percentage of the
amount of a contract that Caltrans withholds from a progress
payment to a contractor by Caltrans. This practice allows
Caltrans to maintain a degree of financial control over a
project. Usually the retention fee is five percent of a
progress payment. Because prime contractors are required to
file payment and performance bonds to guarantee both the
completion of the work and to ensure that all workers and
subcontractors have been paid, the construction industry
argues retentions are unnecessary and may create cash flow
problems for some contractors.
Assembly Votes:
Floor: 72-0
Appr: 16-0
BP & CP: 9-0
POSITIONS: (Communicated to the committee before noon on
Wednesday,
June 6, 2012)
SUPPORT: Associated General Contractors (co-sponsor)
California Fence Contractors' Association
(co-sponsor)
Engineering Contractors' Association
(co-sponsor)
Flasher Barricade Association (co-sponsor)
Marin Builders' Association (co-sponsor)
Southern California Contractors Association
(co-sponsor)
United Contractors (co-sponsor)
Air Conditioning and Refrigeration
Contractors Association
Air Conditioning and Sheet Metal Association
American Subcontractors Association of
California
Building Industry Credit Association
California Concrete Contractors Association
California Landscape Contractors Association
California Landscape and Irrigation Council
AB 1671 (HUFFMAN) Page 3
California Legislative Conference
of the Plumbing, Heating and Piping
Industry
California Precast Concrete Association
Eberhard Roofing
National Electrical Contractors Association,
California Chapters
State Building and Construction Trades Council
OPPOSED: None received.