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July 8, 2014

Contractors say 'hold back' deal will boost economy

After lengthy negotiations that broke down altogether at points, subcontractors and general contractors in Massachusetts have reached agreement on legislation reducing the amount of money held back by project owners on certain private sector construction projects to assure that work is satisfactorily completed.  

Legislation being newly pitched to lawmakers as a workable compromise also lays out a timeline and process for closing out payments on projects with values above $3 million.  

According to Associated Subcontractors of Massachusetts (ASM) and the Associated General Contractors of Massachusetts (AGC), the bill’s passage before formal sessions end for the year on July 31 “will ensure that millions of dollars that is now sitting in banks is freed up and available for direct investment into the state’s economy.” 

The two groups say the proposed legislation, drafted after lawmakers urged the groups to work out their differences, would bring the “retainage” amounts on private construction projects over $3 million down to 5 percent from the current practice of 10 percent. 

In a letter to senators obtained by the News Service, Monica Lawton of ASM and Robert Petrucelli of AGC said 10 percent “is too much and it’s held too long, which can create serious cash flow problems.” 

The heads of both groups said most states, including the Commonwealth of Massachusetts, have a 5 percent retainage rate on construction projects, and “many” other states have a 5 percent rate on private projects, including Connecticut.

In a statement, Sen. Michael Rodrigues, the compromise bill’s lead sponsor, said, “I know first-hand the impact that withholding retainage has on a small business.  Lowering the amount withheld to 5 percent, along with the job completion commitments we’ve included, is the right move for Massachusetts.”

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