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New House Bill Impacts Contractors and Subcontractors Performing Public Work

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The Washington State House of Representatives recently passed a bill that would affect general and subcontractors performing public work.  The bill sets out to allow subcontractors to collect retention due to them on public contracts via a retention bond which they can now request of the general contractor.  The argument for the bill asserted that subcontractors on public projects are frequently forced to wait for months or even years to collect their retention when the general contractor ultimately completes the contract.  This has long been a burden on cash flow for a subcontractor. Under the bill, if it is signed into law, subcontractors will now be allowed to request a retention bond and receive their retention before the contract is completed.  At any time prior to the formal acceptance of a project, a subcontractor may request the general contractor to submit a bond to the public owner for that portion of the contractor’s retainage pertaining to the subcontractor.  The bond must be from a bonding company that meets the standards established by the owner and in a form also acceptable by the owner.  The subcontractor is responsible for any bond premium paid but is entitled to payment of their portion of retention within 30 days of the request.

The supporters of the bill argue that the law would help keep subcontractors in business because of cash flow improvements.  It would also shift more risk away from subcontractors which could lead to attract more bidders on public works contracts.  Opponents of the bill, including the AGC of Washington, argued that it will place an administrative burden on both general contractors and sureties and may have unintended consequences when disputes later arise that involved the subcontractor.  The practical outcomes of the bill, once law, are uncertain but will be a very hot topic in the upcoming months.  The bill was passed by the House on March 7th and by the Senate on April 12th.

House Bill Report HB 1538 (a brief summary):

http://lawfilesext.leg.wa.gov/biennium/2017-18/Pdf/Bill%20Reports/House/1538%20HBR%20CB%2017.pdf

 

Bill in detail:

http://lawfilesext.leg.wa.gov/biennium/2017-18/Pdf/Bills/House%20Passed%20Legislature/1538-S.PL.pdf