GOVERNMENT CONTRACT RETAINAGE
The legislation requires that retainage withheld by governmental units must be paid within 60 days of being retained, which includes the accrued interest. In cases where retainage is withheld during the last pay period of a project, the payment timeline extends to 120 days. This provision aims to enhance cash flow for contractors, especially smaller businesses that may struggle with liquidity due to delayed payments. Moreover, it aims to create consistency in how retainage is handled across various governmental units, potentially simplifying compliance for contractors working on multiple projects.
SB2729, introduced by Senator Ram Villivalam, establishes the Government Contract Retainage Act, designed to standardize the process of retainage in construction contracts within governmental units in Illinois. The bill defines 'retainage' as a portion of payment withheld from contractors or subcontractors to ensure completion of construction projects as specified in their contracts. Notably, it mandates that interest on any retained amounts will accrue monthly at a rate set by the State Treasurer, ensuring contractors can benefit while waiting for retained payments.
A point of contention within the discussions surrounding SB2729 is its limitation on home rule powers, which could restrict local governmental units' ability to enact their own regulations regarding retainage. Critics of the bill may argue that this centralization of authority could lessen the responsiveness of local governments to specific community needs. As retainage practices can vary significantly based on project type and local economic conditions, some localities may feel that this legislation could hinder their ability to create tailored solutions that best serve their constituents.