Tuesday, March 19, 2013

Flawed Retainage Bill Passes Washington State House of Representatives

Substitute House Bill 1420, which has unanimously passed the Washington State House of Representatives, has some good provisions to it as well as some errors and problematic provisions in it.  It is scheduled for a hearing before the Senate Committee on Transportation on Thursday, March 21, 2013 at 3:30 p.m.

No retainage on federal transportation funded projects:  The main purpose of the bill appears to be to fix previous legislation that provided that public works projects funded by federal transportation funds for "construction, alteration, repair, or improvement of any highway, road, or street," could not withhold retainage, but should rely on the protection of the contractor's payment bond.  This legislation was adopted to comply with federal U.S. DOT requirements.  The problem with the current law is that it does not also apply to other U.S. DOT funded projects that are not for "construction, alteration, repair, or improvement of any highway, road, or street."  SHB 1420 fixes this issue.

Affidavit of wages paid prior to acceptance:  For federally funded transportation projects for which no retainage is withheld (see above), the Affidavit of Wages Paid would need to be submitted by the contractor to the public agency prior to final acceptance.  This could end up delaying final acceptance for an indefinite period of time.  

Improper global search and replace:  SHB 1420 also makes numerous changes from "shall" to "must," and most of these are appropriate.  However, on page 5, line 33, "shall" is changed to "must," when it should have remained at "shall," as noted in the first change of "shall" to "must" below: 
"Whenever any board, council, commission, trustees, or body acting for the state or any county or municipality or any public body shall must contract with any person or corporation to do any work for the state, county, or municipality, or other public body, city, town, or district, such board, council, commission, trustees, or body shall must require the person or persons with whom such contract is made to make, execute, and deliver to such board, council, commission, trustees, or body a good and sufficient bond, with a surety company as surety..."
Withholding 50% retainage in lieu of a bond:  RCW 39.08.010 provides that for public works contracts of $35,000 or less, the payment and performance bond may not be required if the contractor requests that the agency "retain fifty percent of the contract amount for a period of thirty days after date of final acceptance, or until receipt of all necessary releases" from the three state agencies. 
  • Change 30 to 45 days:  The reference on Page 6, Line 26 of SHB 1420 should be changed from 30 days to 45 days.  Otherwise, it puts an agency at risk for releasing the retainage prior to the end of the claim filing period, which is 45 days after final acceptance.  This has been an historical problem with this provision, and since the law is being amended, now is the time to fix this.
  • Delete requirement for releases from state agencies:  The references on Page 6, Lines 27-30 to releases from the departments of Revenue, Employment Security, and Labor and Industries should be deleted.  According to RCW 60.28.051, for contracts less than $35,000, the three state departments listed do not provide releases.  In fact, if a public agency sends a release request to these state departments for a project less than $35,000, the state departments send back a letter noting that they do not provide releases for these smaller projects, per the state law.  Sections 3 and 4 of the bill appear to amend the same section of the RCW and corresponding changes should be made there also.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 

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