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Committee backs cap on retention in public-works contracts to free small contractors' capital
Summary
The subcommittee passed AB 18 85 (recorded as AB 1885 in the hearing) to limit retention on public-works projects to 3.5% with a five-year sunset, with sponsors arguing the change would free working capital for small and mid-sized contractors; contractors and trade groups supported the bill and it was advanced to appropriations.
Assemblymember Carrillo presented AB 18 85 (also recorded as AB 1885), saying the bill would limit retention on public-works contracts to 3.5% and include a five-year sunset so the Legislature can review the change. "Retention effectively guarantees that the contractor does not have access to the free cash flow until long after the project has been completed," said Yeral Yal, CEO of Schemick Corporation, testifying for the Associated General Contractors and describing retention as a barrier for mid-sized and small contractors.
Speakers representing Build It and other contractor associations said retention ties up working capital and makes it costly for smaller firms to compete on public projects. Paul Pendergast of Build It said the change would expand access to public contracting for diverse and emerging firms and reduce financing costs that contractors currently face while waiting for retention releases.
Supporters argued modern performance and payment bond requirements have already reduced the original justification for large retention amounts and that Caltrans operates without withholding retention. The subcommittee moved AB 18 85 to the Appropriations Committee; no opposition testimony was recorded in the hearing.
