Retention Reform Coalition
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Support SB74 and HB1224
Federal policies permit contracting officers to only pay most of the bill and retain 10% of owed funds (called retainage) if there has been a problem on the federal government job. The federal government has the leverage to ensure full completion of the contract when a problem arises. In most cases, however, this isn’t necessary. In most cases, contractors are fully paid, cash flow is not limited and employers can continue to hire people without the pain of retainage.Illinois construction management, unfortunately, has an across-the-board policy of only paying most of the bill and retaining the funds whether or not a problem arises. This is overkill and leads to cash flow problems for contracting businesses, restricting employment growth. The bills harmonize Illinois with federal policies to use retention only when there is a problem with a specific contract.Passing these bills SB74 and HB1224 and limiting retainage to only when there is a problem on a specific project will be a major benefit to Illinois contractors working on state projects.
Retainage hurts contractors - that hurts our economy
Retainage means the agency building the project only pays 90% of the bill each month. The contractor pays all costs (labor, supplies) and is owed the full bill, but as a policy, the agency chooses to retain 10% of the bill in case something goes wrong down the road. That has a major negative financial impact on employers. The agency retains 10% of the funds (sometimes 5%) until the project is completely done, which can take months or even years. Contractors regularly have hundreds of thousands of dollars owed to them which means they can't grow or hire as much while they are carrying that debt waiting for a project to close out. Retainage is a jobs killer.
Targeted pain
Instead of imposing financial pain on all contractors for all projects, the federal government only imposes the pain of retainage when there is a problem on a specific project. Then there is a reason for the pain of retainage, because it is used to make sure a problem project gets done correctly. And it doesn't burden the vast majority of projects and contractors when everything is going well. See Federal Acquisition Regulation 32.103
The Retention Reform Coalition
A coalition of organizations respectfully requesting federal-style retention policies in Illinois, including the Hispanic American Construction Industry Association, the Federation of Women Contractors, Black Contractors Owners and Executives, Chicagoland Chamber of Commerce, Hire360, US Minority Contractors Association, Electrical Contractors Association, Chicagoland Association of General Contractors and the Association of Asian American Construction Enterprises.
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