Briefing: Contractor 'holdbacks'
Some two-and-a-half years after legislation was first proposed, subcontractors and general contractors in Massachusetts finally reached a compromise this month over the amount of money to be held back on private-sector construction projects of more than $3 million.
Why did it take so long to resolve the differences?
A bill proposed by the Associated Subcontractors of Massachusetts (ASM) in January 2012 ran into heavy opposition from the Associated General Contractors of Massachusetts (AGC), the Building Owners and Managers Association (BOMA), the Massachusetts Bankers Association, the Boston Society of Architects (BSA) and commercial real estate development group NAIOP. A major point of contention was a provision requiring that money be released to subcontractors within 30 days of a project's substantial completion, which AGC and others felt wasn't enough time to assess the quality of work. A legislative committee asked the ASM and AGC to work out their differences last summer, and the compromise bill is the product of more than eight months of negotiations.
What does the compromise do?
The bill would reduce the amount of money held back on applicable construction projects from 10 percent to 5 percent. ASM's CEO, Monica Lawton, said subcontractors — who have to pay for all construction materials and labor — must obtain an outside line of credit to cover the 10 percent gap, which covers the lifetime of a project. This can create serious cash-flow problems, she said. The bill also establishes a methodical process to close out projects that will allow subcontractors to see their money in as little as 90 days. That's an improvement from current waiting times, which can range from six months to more than a year, Lawton said.
What are the prospects for passage?
Even with the AGC on board, opposition still persists. The BSA is comfortable with the new compromise, said AGC President and CEO Robert Petrucelli, while the NAIOP, BOMA and Mass. Bankers continue to have concerns. Greater Boston Real Estate Board President Greg Vasil told State House News Service that the safeguards for property owners in the event of faulty work weren't sufficient. Nonetheless, the bill came to the floor of the State Senate on July 15, and Petrucelli hopes it will be signed into law before the Legislature closes up shop for the year in early August.
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