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Retention Rates | 29

Retention Rates
New CA Measure Reforms Retention Rates
SACRAMENTO, CA

Subcontractors will possibly be treated more fairly when being paid for public works projects when AB 2084 becomes law this January. Authored by California Assembly Member Gary Miller (R-Diamond Bar) and supported by the California Landscape Contractors Association (CLCA), AB 2084 requires equitable pass-through of retention rates on public works contracts. The retention rate specified in the contract between the public entity and the original contractor may no longer be exceeded in a contract between the original contractor and a subcontractor, or in a contract between a subcontractor and any subcontractor thereunder. AB 2084 also prohibits any of the parties from requiring any other party to waive the right not to be subjected to a higher retention rate. In addition, AB 2084 increases the amount of the payment bond on public works contracts and shortens-- from 60 days to 45 days-- the maximum time allowed for the public entity's payment of retention proceeds.

According to the CLCA, the American Subcontractors Association of California estimates that the new law will add a billion dollars to the annual cash flow of public works subcontractors in California.