Retainage Reform Bill clears NC Senate

Reprinted with permission of The Triangle Construction News.

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TCN Staff writer

A coalition of construction trade associations has successfully lobbied the North Carolina Senate to pass the NC Retainage Reform Bill S1245. Several associations, including the Carolinas Associated General Contractors (CAGC) , the Associated Builders and Contractors (ABC) , and the American Subcontractors Association of the Carolinas (ASAC) joined in the effort to have the bill passed unanimously though there will likely be changes as it is reviewed by the House.

The legislation received third reading and approval in the Senate on May 3. In a memo to members, ASAC Executive Director Linda Burkett reported:

"We have just received good news from STAC (Specialty Trades Association Council) Lobbyist Harry Kaplan that Senate Bill1245 passed on the third reading this morning and has met the crossover deadline. According to Harry, we have crossed an important threshold, but we still have a lot more work to do."

In an interview, Kaplan said some municipalities, county governments, and architects still have concerns about the legislation, but they agreed that these issues can be worked out through discussions later.

"In next few weeks well get together with those folks in a big room somewhere, and work out any concerns remaining, we would seek to have a consensus and that everybody live with it."

The new legislation, if passed by the House, will, the ASAC says:

• Create a uniform system for all public construction projects;
• Prohibit retainage on public projects costing less than $300,000 -- to help small business.
• Caps retainage at five per cent on public construction projects worth more than $300,000;
• Restricts further retainage to be withheld, following completion of 50 per cent of a project, but only if the contractor/subcontractor has performed their work satisfactorily and on schedule;
• Allows the owner or general contractor to reinstate retainage if a contractor/subcontractor does not continue to perform satisfactorily or on schedule;
• Requires full payment, including all retainage, to be made within 45 days following substantial completion of a project, less authorized deductions;
• Allows the owner to withhold sufficient funds to complete and/or correct defects in the project;
• Permits line item release of retainage for early trades who have completed 100 per cent of their contract by 50 per cent completion of the job.

In a memo to association members, Kaplan and his lobbyist colleague Johnny Tillett say "all this bill does is implement the results of a year-long study by the Department of administration State Construction Office that parties from all sides participated in and attended."

As the legislation moved through the senate, associations -- especially the ASAC -- communicated urgent messages to members asking them to call legislators they thought may not be in favor of the new legislation.

Kaplan said senate sponsor Clark Jenkins (D-Edgecombe County) prevailed on his colleagues to pass the bill unanimously by the May crossover deadline, on the understanding that negotiations would continue to ensure everyone is satisfied with the final result. By meeting the deadline, the matter can be considered and approved by the House either this year or next year, he said.

"A lot of hard work remains to be done," Kaplan said.