87R13745 CJC-F
By: Shine, Bell of Kaufman, Darby, H.B. No. 692
Bell of Montgomery, et al.
Substitute the following for H.B. No. 692:
By: Paddie C.S.H.B. No. 692
A BILL TO BE ENTITLED
AN ACT
relating to retainage requirements for certain public works
construction projects.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Subchapter B, Chapter 2252,
Government Code, is amended to read as follows:
SUBCHAPTER B. [INTEREST ON] RETAINED PUBLIC WORKS CONTRACT PAYMENTS
SECTION 2. Section 2252.031, Government Code, is amended by
amending Subdivision (5) and adding Subdivision (6) to read as
follows:
(5) "Retainage" means the percentage [part] of a
public works contract payment withheld by a governmental entity to
secure performance of the contract.
(6) "Warranty period" means the period of time
specified in a contract during which certain terms applicable to
the warranting of work performed under the contract are in effect.
SECTION 3. Section 2252.032, Government Code, is amended to
read as follows:
Sec. 2252.032. RETAINAGE. (a) A governmental entity
shall:
(1) include in each public works contract a provision
that establishes the circumstances under which:
(A) the public works project that is the subject
of the contract is considered substantially complete; and
(B) the governmental entity may release all or a
portion of the retainage for:
(i) substantially completed portions of the
project; or
(ii) fully completed and accepted portions
of the project;
(2) maintain an accurate record of accounting for:
(A) [deposit in an interest-bearing account] the
retainage withheld on [of a public works contract that provides for
retainage of more than five percent of the] periodic contract
payments; and
(B) the retainage released to the prime
contractor for a public works contract [payment]; and
(3) for a public works contract described by
Subsection (c), [(2)] pay any remaining retainage described by
Subdivision (2)(A) and the interest earned on the retainage to the
prime contractor on completion of the contract.
(b) Except as provided by Subsection (h), if the total value
of a public works contract is $1 million or more, a governmental
entity may not withhold retainage in an amount that exceeds five
percent of the contract price and the rate of retainage may not
exceed five percent for any item in a bid schedule or schedule of
values for the project, including materials and equipment delivered
on-site to be installed.
(c) For a competitively awarded contract with a value of $10
million or more, and for a contract that was awarded using a method
other than competitive bidding, a governmental entity and prime
contractor may agree to deposit in an interest-bearing account the
retainage withheld on periodic contract payments.
(d) If, for the purpose of fulfilling an obligation of a
prime contractor under a contract described by Subsection (b), the
prime contractor enters into a subcontract:
(1) the prime contractor may not withhold from a
subcontractor a greater percentage of retainage than the percentage
withheld from the prime contractor by the governmental entity under
Subsection (b); and
(2) a subcontractor who enters into a contract with
another subcontractor to provide labor or materials under the
contract may not withhold from that subcontractor a greater
percentage of retainage than the percentage that may be withheld
from the subcontractor as determined under Subdivision (1).
(e) A governmental entity may not withhold retainage:
(1) after completion of the contract by the prime
contractor, including during the warranty period; or
(2) for the purpose of requiring the prime contractor,
after completion of the contract, to perform work on manufactured
goods or systems that were:
(A) specified by the designer of record; and
(B) properly installed by the contractor.
(f) On application to a governmental entity for final
payment and release of retainage, the governmental entity may
withhold retainage if there is a bona fide dispute between the
governmental entity and the prime contractor and the reason for the
dispute is that labor, services, or materials provided by the prime
contractor or the prime contractor's subcontractors were not
provided in compliance with the contract or if the surety on any
outstanding surety bond executed for the contract does not agree to
the release of retainage. If there is no bona fide dispute between
the governmental entity and the prime contractor and neither party
is in default under the contract, the prime contractor is entitled
to:
(1) cure any noncompliant labor, services, or
materials; or
(2) offer the governmental entity a reasonable amount
of money as compensation for any noncompliant labor, services, or
materials that cannot be promptly cured.
(g) Subsection (f) may not be construed to limit:
(1) a person who is a party to a public works contract
from pursuing another remedy available to the person under other
applicable law; or
(2) the withholding of any offsets from retainage as
provided by the terms of the public works contract.
(h) For purposes of this subsection, a project is considered
formally approved if the project is the subject of a resolution
approving an application for financial assistance adopted by the
Texas Water Development Board before September 1, 2019, for any
part of the project's financing. Subsection (b) of this section
does not apply to a governmental entity that receives financial
assistance under Section 15.432 or 15.472, Water Code, for a
project that is formally approved by the Texas Water Development
Board. A governmental entity described by this subsection shall
deposit in an interest-bearing account the retainage withheld under
a public works contract that provides for retainage that exceeds
five percent of the periodic contract payments.
SECTION 4. The changes in law made by this Act apply only to
a contract to which Subchapter B, Chapter 2252, Government Code,
applies that is entered into on or after the effective date of this
Act. A contract to which Subchapter B, Chapter 2252, Government
Code, applies that is entered into before the effective date of this
Act is governed by the law in effect when the contract was entered
into, and the former law is continued in effect for that purpose.
SECTION 5. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2021.