New Law in Florida Lowers Upfront Payment for Government Construction Jobs

– House Bill 101, signed by Florida Governor Ron DeSantis, reduces the maximum retainage rate on government construction projects in Florida from 10% for the first half of a project and 5% for the remainder, to a flat 5% throughout the duration of the project.
– The changes to the Local Government Prompt Payment Act and the Florida Prompt Payment Act will become effective on October 1, 2020, and will apply to construction services contracts advertised for bid or entered into by state or local government entities in Florida after October 1, 2020.
– Retainage, also known as retention, is a common construction practice where a portion of each progress payment is withheld from the contractor until the project is substantially complete. This is done to protect the owner from potential project problems, but can also cause cash-flow issues for contractors and subcontractors. – For construction contracts valued at more than $200,000, Florida law currently allows state or local government entities to withhold up to 10% of a progress payment until 50% of the project is completed.
– After 50% completion, the government entity may only withhold 5% of a progress payment.
– Municipalities with a population of 25,000 or less and counties with a population of 100,000 or less are also allowed to withhold up to 10% of each progress payment until final completion and acceptance of the project.
– The new law reduces the maximum retainage rate on public construction projects to a flat 5%, regardless of the stage of completion of the project. – Florida has changed its retainage requirements for public construction projects.
– Contractors and subcontractors will now only have 5% retainage withheld from progress payments during the entire project, instead of 10% for the first 50% and 5% thereafter until completion.
– The change will result in additional cash flow to contractors and subcontractors much earlier during the course of the project.
– The new law was a top legislative priority for industry trade groups like the Associated Builders and Contractors of Florida.
– The new retainage requirements apply to all state and local government construction projects in Florida, with some exceptions for contracts entered into or pending approval before October 1, 2020, and contracts executed by the Florida Department of Transportation under Chapter 337, Florida Statutes.

https://www.jimersonfirm.com/blog/2020/10/new-florida-law-reduces-retainage-rate/