ASA Supports 5% Retainage Cap and Retainage Bond Legislation in Washington

Last week, ASA sent a support letter to the House and Senate Labor Committees in Washington state regarding legislation (HB 1524/SB 5528) that would extend the 5% retainage cap for all public construction projects to private construction projects, along with extending the use of retainage bonds in lieu of retainage for all public construction projects to all private construction projects.

Retainage is often 10-15% for a construction project and this high retainage limits a subcontractor’s ability to take on new projects, pay high wages to current employees, hire new employees, buy equipment and maintain cash flow.  High retainage means subcontractors must often borrow money for operating costs and it gives general contractors significant negotiating leverage over subcontractors.  Fair retainage and the ability to bond helps smaller subcontractors and women-and-minority- owned subcontractors better compete for projects and grow their businesses.

Bonding provides subcontractors with improved cash flow, the ability to compete for additional contracts and increase high-wage jobs.  In other states, fair retainage caps and bonding have lowered construction costs (about 1-1.5% cost reduction based on a decrease in retainage from a 10% to a 5% cap). 14 other states have instituted similar 5% (or less) caps on retainage for private contracts.  Last year, Colorado accomplished this legislative endeavor and our ASA Chapter in that state championed it.