87R2030 CJC-F
 
  By: Creighton S.B. No. 1097
 
 
 
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
  that may be 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. If there is no such 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 a person
  who is a party to a public works contract from pursuing another
  remedy available to the person under other applicable law.
         (h)  Subsection (b) does not apply to a governmental entity
  that receives financial assistance from a fund described by Section
  15.432 or 15.472, Water Code, for a project formally approved for
  that assistance by the Texas Water Development Board before
  September 1, 2019. 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.