Public contracts: retention: architecture or engineering services., the official text

An act to add Section 7204 to the Public Contract Code, relating to public contracts.

LEGISLATIVE COUNSEL'S DIGEST

Existing law imposes various requirements regarding the formation, content, and enforcement of public works contracts. Existing law generally requires that retention proceeds withheld from payment by a public entity be released within 60 days after the date of completion of the work of improvement, except as specified in case of a dispute. Existing law limits the allowable amount of retention proceeds withheld in a contract between a public entity and the original contractor, a contract between the original contractor and a subcontractor, and a contract between subcontractors, as specified. Existing law defines “public entity” differently for these various purposes.
This bill would prohibit any retention payments from exceeding 5% of the payment for contracts under design-bid-build, and amendments thereto, entered into on or after January 1, 2027, directly between a public entity and an individual or legal entity permitted by law to practice the profession of architecture or engineering. The bill would require any retention withheld to be released no later than 60 days after completion of services under contract. The bill would define terms for its purposes, including “public entity.”

The people of the State of California do enact as follows:

SECTION 1.
Section 7204 is added to the Public Contract Code, to read:
7204.
(a) For contracts under design-bid-build, and amendments thereto, entered into on or after January 1, 2027, directly between a public entity and a firm, any retention payments to the firm for services shall not exceed 5 percent of the payment.
(b) Any retention withheld pursuant to subdivision (a) shall be released no later than 60 days upon completion of the firm’s services under contract, regardless of whether the project for which the services were provided has been completed.
(c) For purposes of this section, the following definitions shall apply:
(1) “Firm” means an individual, firm, partnership, corporation, association, or other legal entity permitted by law to practice the profession of architecture or engineering.
(2) “Public entity” means the state, including every state agency, office, department, division, bureau, board, or commission, the California State University, the University of California, a city, county, city and county, including charter cities and charter counties, district, special district, public authority, political subdivision, public corporation, or nonprofit transit corporation wholly owned by a public agency and formed to carry out the purposes of the public agency.