Thursday, May 20, 2010

Retainage Release Procedures Revised by Employment Security Department (WA)

Effective May 20, 2010, the Washington State Employment Security Department (ESD) has revised their procedures for what dollar size public works projects they are requiring public agencies to notify them of in order to obtain retainage releases at the end of the project. 

After a student in one of my classes recently told me about ESD's position of requiring releases for projects of $20,000 or more, I contacted ESD with my opinion that releases were only required for projects over $35,000, based on the provisions of RCW 60.28.051.  After internal discussions within ESD's management, they have now modified their practice to only require that public agencies notify them of public works projects over $35,000 (through the Department of Revenue who will continue to forward a copy of the Notice of Completion of Public Works Project to ESD. 

ESD's Past Practice:  ESD's position and practice up to this point has been to require public agencies to submit a Notice of Completion of Public Works Project form (Department of Revenue form) for those public works projects of $20,000 or more but less than $35,000.  On projects over $35,000, the Department of Revenue forwards a copy of the form to ESD after receiving it from public agencies.  

ESD Notification Only Required if Project Over $35,000:  Due to errors in legislation in both 2007 and 2009, an inconsistency cropped up in the law that has not been fixed yet.  On the one hand, one version of RCW 60.28.040 grants ESD the right to submit a claim against retainage for any public works project of $20,000 or more. (That's right, due to the complications of the legislative process, there are actually two contradictory versions of RCW 60.28.040 on the books now.)

However, RCW 60.28.051 only requires public agencies to notify ESD of projects over $35,000.  Thus, while ESD may have a claim against retainage on projects between $20,000 and $35,000, public agencies are not required to notify ESD of projects in this range. 

This problem with the State law applies to the Department of Revenue and Labor and Industries as well.  Both of these departments have gone on record only requiring public agencies to file the release forms for projects over $35,000.

Requests in the Pipeline:  For any Notice of Completion of Public Works Project that ESD has received prior to May 20, 2010, they will still review and either issue a release form, or if unemployment premiums are due, they will send a claim against the retainage to the public agency.  Effective May 20, 2010, however, ESD is not requiring that public agencies send the completion notice form to them for projects of $20,000 or more.  ESD commented to me that they will continue, upon voluntary requests by public agencies, to review release requests for projects of $20,000 or more, but that it is not required.

The Bottom Line:  Public agencies are required to obtain a release from ESD, L&I, and Department of Revenue for projects over $35,000 as part of the close-out process and release of retainage to the contractor. 

Confused?  If all of this is confusing, that's because it is...well...confusing, especially since the state law on it has been amended inconsistently.  If you have any questions about the details of this blog entry, please contact me

Training:  I have offered a number of times a six hour training class on "Public Works Contract Close-out:  Bonding, Retainage, and Claims."  If you are interested in such a class being taught again, either by your agency or if I offer it again independently, please contact me

No comments: