An amendment would require paying out all retainage within 60 days of substantial completion of a project, but it allows some funds to be withheld.
(Published May 13, 2019)
Sen. Jason Rarick (R-Brook Park), the original bill author, presented the amendment to the conference committee, stating that he will not seek any more changes to the retainage law if the current proposal becomes law, with very limited exception.
The retainage provision would require paying out all retainage within 60 days of substantial completion of a construction project, but it allows some funds to be withheld. State law currently allows the withholding of 5% retainage on construction projects.
The bill would require that at substantial completion, no retainage could be held, but the city could withhold: (1) 250% of the cost to correct or complete work known at the time of substantial completion, and (2) the greater of $500 or 1% of the value of the contract for “final paperwork.” Final paperwork is defined as documents required to fulfill contractual obligations such as tax forms, operation manuals, etc.
The adopted substantive changes include:
The League signed onto a letter with the Minnesota Department of Administration, Minnesota Department of Transportation, and the Metropolitan Airports Commission that brought up several concerns that culminate in the struggle of complying with the retainage provisions and being responsible stewards of taxpayer money used in public construction projects.
Some specific concerns included the difficulty in estimating the value of unfinished work, and in determining which contractor is responsible for a building system that is not working. Multiple contractors could be responsible for the system not working, so it is often difficult to withhold money from the right contractor.
Public entities were also concerned with the bill’s definition of “substantial completion,” as it is inconsistent with the definition used in some current contracts. Sen. Rarick testified that if this definition caused problems in the future, he would address this concern on behalf of public entities.
The Senate bill, SF 947, was referred to the Senate floor. It is possible that the bill could be voted on by the full body, separate from the omnibus jobs bill.
For more background information about this bill, read a previous Cities Bulletin article.
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