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South Florida

Florida Senate passes bill to lower retainage on public construction projects

If signed into law, state and local governments will hold onto a flat 5%

Florida Senate Passes Construction Retention Bill (Credit: iStock)
Florida Senate Passes Construction Retention Bill (Credit: iStock)

UPDATED, March 3, 10:14 a.m.: Construction firms working on public projects may breathe a little easier now that the Florida Senate passed a bill that lowers the percentage of funds that can be retained.

The bill, which was passed unanimously last week, changes the allowable rate of retainage on public construction projects to a flat rate of 5 percent for the duration of a public project. Currently, owners — in this case local or state governments — can retain up to 10 percent per monthly payment until the project is 50 percent completed, or as determined by the contract. After half of the project is completed, the retainage rate falls to 5 percent.

If the governor signs the bill into law, it would be a flat 5 percent for the entire duration of the project. That means contractors will be able to access more of their funds in a shorter period of time during construction, allowing contractors to avoid cash flow issues.

Florida House Bill 101 will now head to Gov. Ron DeSantis’ desk for his signature. It would go into effect Oct. 1.

The change could lead to an increase in smaller firms taking on public projects, and could eventually seep into private development, said Carol Bowen, chief lobbyist for the Associated Builders and Contractors of Florida.

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“Final closeouts of projects can take a fairly lengthy period of time. It becomes a cash flow issue,” Bowen said. “Larger companies can often self sustain to cover their costs. … Smaller companies are not going to have the fiscal strength to cover that lost funding for an endless amount of time.”

Plus, Bowen said, most public construction projects are bonded and insured, which means that retainage “has always been that third level of protection.”

The bill, which was filed in August, was sponsored by Florida Representative Alex Andrade and Senator Edward Hooper.

In Miami-Dade, public projects include the recent $600 million renovation of the Miami Beach Convention Center, and the $800 million redesign of I-395. Earlier this year, Clark Construction, the contractor on the Miami Beach Convention Center project, sued the city of Miami Beach, alleging the city still owes about $90 million for unpaid work.

Last year, the governor signed House Bill 7123 into law, which lowered the tax on commercial leases in Florida by 0.2 percent, to 5.5 percent.

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