State Finance and Procurement - Retention Proceeds
Summary
SB 835 would amend Maryland’s State Finance and Procurement law governing retainage on State construction procurement contracts. The bill keeps the existing rule that, when a contractor provides 100% payment and performance security, retainage on the contract generally may not exceed 5% of the total amount. It also preserves the ability of a primary procurement unit, the Maryland Transportation Authority, contractors, and subcontractors to withhold additional amounts when they reasonably believe it is necessary because of performance concerns.
The core change in the bill is a new deadline for payment of undisputed retention proceeds. Under the bill, retainage that is not in dispute and is held by a State unit or contractor must be paid within 90 days after substantial completion, as defined by the applicable contract or subcontract. The bill also requires that, if retainage is held in an interest-bearing escrow account, each retainage payment must include a pro rata share of the interest earned. The bill takes effect October 1, 2025.
Impact
SB 835 would directly amend § 13-225 of the State Finance and Procurement Article. Its practical effect is to speed up the release of undisputed retainage on State construction projects, improving cash flow for contractors and subcontractors while preserving existing protections for the State and for parties with performance disputes. It also clarifies that interest earned on escrowed retainage must be passed through proportionally when retainage is paid.
Sentiment
The available record shows no committee transcript, vote tally, or recorded floor debate, so there is no documented public sentiment in the materials provided. Based on the bill’s structure, it appears designed as a contractor-payment and procurement-administration measure rather than a controversial policy change, but the absence of recorded discussion means support or opposition cannot be reliably characterized from the provided context.
Contention
The main point of potential contention is the balance between faster payment to contractors and subcontractors versus retaining enough leverage for State units and contractors to protect against incomplete or deficient performance. The bill leaves intact the ability to withhold additional amounts for reasonable performance concerns, but it imposes a firm 90-day deadline for undisputed retainage, which may be viewed by some procurement officials as limiting flexibility. Contractors and subcontractors are likely to favor the bill because it reduces delayed payment, while State procurement entities may focus on ensuring that the new deadline does not interfere with project closeout or dispute resolution.