Florida Senate - 2019 CS for SB 246 By the Committee on Governmental Oversight and Accountability; and Senator Hooper 585-02352-19 2019246c1 1 A bill to be entitled 2 An act relating to public construction; amending s. 3 218.735, F.S.; revising the amounts of retainage that 4 local governmental entities and contractors may 5 withhold from progress payments for any construction 6 services contract; amending s. 255.05, F.S.; revising 7 requirements for Department of Management Services 8 rules governing certain contracts; amending s. 9 255.078, F.S.; revising the amounts of retainage that 10 certain public entities and contractors may withhold 11 from progress payments for any construction services 12 contract; specifying nonapplicability of the act; 13 providing an effective date. 14 15 Be It Enacted by the Legislature of the State of Florida: 16 17 Section 1. Subsection (8) of section 218.735, Florida 18 Statutes, is amended to read: 19 218.735 Timely payment for purchases of construction 20 services.— 21 (8)(a) With regard to any contract for construction 22 services, a local governmental entity may withhold from each 23 progress payment made to the contractor an amount not exceeding 24 510percent of the payment as retainage until 50-percent 25 completion of such services. 26 (b) After 50-percent completion of the construction 27 services purchased pursuant to the contract, the local 28 governmental entity must reduce to 2.55percent the amount of 29 retainage withheld from each subsequent progress payment made to 30 the contractor. For purposes of this subsection, the term “50 31 percent completion” has the meaning set forth in the contract 32 between the local governmental entity and the contractor or, if 33 not defined in the contract, the point at which the local 34 governmental entity has expended 50 percent of the total cost of 35 the construction services purchased as identified in the 36 contract together with all costs associated with existing change 37 orders and other additions or modifications to the construction 38 services provided for in the contract. However, notwithstanding 39 this subsection, a municipality having a population of 25,000 or 40 fewer, or a county having a population of 100,000 or fewer, may 41 withhold retainage in an amount not exceeding 510percent of 42 each progress payment made to the contractor until final 43 completion and acceptance of the project by the local 44 governmental entity. 45 (c) After 50-percent completion of the construction 46 services purchased pursuant to the contract, the contractor may 47 elect to withhold retainage from payments to its subcontractors 48 at a rate higher than 2.55percent. The specific amount to be 49 withheld must be determined on a case-by-case basis and must be 50 based on the contractor’s assessment of the subcontractor’s past 51 performance, the likelihood that such performance will continue, 52 and the contractor’s ability to rely on other safeguards. The 53 contractor shall notify the subcontractor, in writing, of its 54 determination to withhold more than 2.55percent of the 55 progress payment and the reasons for making that determination, 56 and the contractor may not request the release of such retained 57 funds from the local governmental entity. 58 (d) After 50-percent completion of the construction 59 services purchased pursuant to the contract, the contractor may 60 present to the local governmental entity a payment request for 61 up to one-half of the retainage held by the local governmental 62 entity. The local governmental entity shall promptly make 63 payment to the contractor, unless the local governmental entity 64 has grounds, pursuant to paragraph (f), for withholding the 65 payment of retainage. If the local governmental entity makes 66 payment of retainage to the contractor under this paragraph 67 which is attributable to the labor, services, or materials 68 supplied by one or more subcontractors or suppliers, the 69 contractor shall timely remit payment of such retainage to those 70 subcontractors and suppliers. 71 (e) This section does not prohibit a local governmental 72 entity from withholding retainage at a rate less than 51073 percent of each progress payment, from incrementally reducing 74 the rate of retainage pursuant to a schedule provided for in the 75 contract, or from releasing at any point all or a portion of any 76 retainage withheld by the local governmental entity which is 77 attributable to the labor, services, or materials supplied by 78 the contractor or by one or more subcontractors or suppliers. If 79 a local governmental entity makes any payment of retainage to 80 the contractor which is attributable to the labor, services, or 81 materials supplied by one or more subcontractors or suppliers, 82 the contractor shall timely remit payment of such retainage to 83 those subcontractors and suppliers. 84 (f) This section does not require the local governmental 85 entity to pay or release any amounts that are the subject of a 86 good faith dispute, the subject of a claim brought pursuant to 87 s. 255.05, or otherwise the subject of a claim or demand by the 88 local governmental entity or contractor. 89 (g) The time limitations set forth in this section for 90 payment of payment requests apply to any payment request for 91 retainage made pursuant to this section. 92 (h) Paragraphs (a)-(d) do not apply to construction 93 services purchased by a local governmental entity which are paid 94 for, in whole or in part, with federal funds and are subject to 95 federal grantor laws and regulations or requirements that are 96 contrary to any provision of the Local Government Prompt Payment 97 Act. 98 (i) This subsection does not apply to any construction 99 services purchased by a local governmental entity if the total 100 cost of the construction services purchased as identified in the 101 contract is $200,000 or less. 102 Section 2. Paragraph (f) of subsection (1) of section 103 255.05, Florida Statutes, is amended to read: 104 255.05 Bond of contractor constructing public buildings; 105 form; action by claimants.— 106 (1) A person entering into a formal contract with the state 107 or any county, city, or political subdivision thereof, or other 108 public authority or private entity, for the construction of a 109 public building, for the prosecution and completion of a public 110 work, or for repairs upon a public building or public work shall 111 be required, before commencing the work or before recommencing 112 the work after a default or abandonment, to execute and record 113 in the public records of the county where the improvement is 114 located, a payment and performance bond with a surety insurer 115 authorized to do business in this state as surety. A public 116 entity may not require a contractor to secure a surety bond 117 under this section from a specific agent or bonding company. 118 (f) The Department of Management Services shall adopt rules 119 with respect to all contracts for $200,000 or less, to provide: 120 1. Procedures for retaining up to 510percent of each 121 request for payment submitted by a contractor and procedures for 122 determining disbursements from the amount retained on a pro rata 123 basis to laborers, materialmen, and subcontractors, as defined 124 in s. 713.01. 125 2. Procedures for requiring certification from laborers, 126 materialmen, and subcontractors, as defined in s. 713.01, before 127 final payment to the contractor that such laborers, materialmen, 128 and subcontractors have no claims against the contractor 129 resulting from the completion of the work provided for in the 130 contract. 131 132 The state is not liable to any laborer, materialman, or 133 subcontractor for any amounts greater than the pro rata share as 134 determined under this section. 135 Section 3. Subsections (1), (2), (3), and (5) of section 136 255.078, Florida Statutes, are amended to read: 137 255.078 Public construction retainage.— 138 (1) With regard to any contract for construction services, 139 a public entity may withhold from each progress payment made to 140 the contractor an amount not exceeding 510percent of the 141 payment as retainage until 50-percent completion of such 142 services. 143 (2) After 50-percent completion of the construction 144 services purchased pursuant to the contract, the public entity 145 must reduce to 2.55percent the amount of retainage withheld 146 from each subsequent progress payment made to the contractor. 147 For purposes of this section, the term “50-percent completion” 148 means the definition that is providedhas the meaning set forth149 in the contract between the public entity and the contractor or, 150 if not defined in the contract, the point at which the public 151 entity has expended 50 percent of the total cost of the 152 construction services purchased as identified in the contract 153 together with all costs associated with existing change orders 154 and other additions or modifications to the construction 155 services provided for in the contract. 156 (3) After 50-percent completion of the construction 157 services purchased pursuant to the contract, the contractor may 158 elect to withhold retainage from payments to its subcontractors 159 at a rate higher than 2.55percent. The specific amount to be 160 withheld must be determined on a case-by-case basis and must be 161 based on the contractor’s assessment of the subcontractor’s past 162 performance, the likelihood that such performance will continue, 163 and the contractor’s ability to rely on other safeguards. The 164 contractor shall notify the subcontractor, in writing, of its 165 determination to withhold more than 2.55percent of the 166 progress payment and the reasons for making that determination, 167 and the contractor may not request the release of such retained 168 funds from the public entity. 169 (5)NeitherThis section andnors. 255.077 do not prohibit 170prohibitsa public entity from withholding retainage at a rate 171 less than 510percent of each progress payment, from 172 incrementally reducing the rate of retainage pursuant to a 173 schedule provided for in the contract, or from releasing at any 174 point all or a portion of any retainage withheld by the public 175 entity which is attributable to the labor, services, or 176 materials supplied by the contractor or by one or more 177 subcontractors or suppliers. If a public entity makes any 178 payment of retainage to the contractor which is attributable to 179 the labor, services, or materials supplied by one or more 180 subcontractors or suppliers, the contractor mustshalltimely 181 remit payment of such retainage to those subcontractors and 182 suppliers. 183 Section 4. (1) This act does not apply to any contract for 184 construction services which is entered into or is pending 185 approval by a public entity, as defined in s. 255.072, Florida 186 Statutes, or to any construction services project advertised for 187 bid by the public entity, on or before July 1, 2019. 188 (2) The amendments made to ss. 255.05 and 255.078, Florida 189 Statutes, by this act do not apply to contracts executed under 190 chapter 337, Florida Statutes. 191 Section 5. This act shall take effect July 1, 2019.