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New Washington State Law Regarding Public Works Projects

This past summer a new law took effect in Washington that will make it easier and more appealing for a general contractor to accept a smaller public works project. Until now, if a general contractor was performing work with a total contract value equal to or less than $35,000 or less, the public body would require either a payment and performance bond for the full amount of the contract, or else the public body would retain 50% of the contract amount to secure your performance. The half of the contract that was withheld wouldn’t be released until the LATER of (a) 30 days after final acceptance of the project, or (b) the public body receives all necessary releases from the department of revenue, L&I, and the employment security department. With the passage of the new statute, where a public contract is for $150,000 or less, the public body will accept either a payment and performance bond for the full amount of the contract, OR, instead of the bond, the public body will retain 10% of the contract amount. The retainage is still held for the later of 30 days after acceptance or after receipt of the necessary releases described above.

While the above described change is beneficial to contractors, it certainly creates some additional exposure to building material suppliers and subcontractors. That is because a far greater number of public works contracts will be unbonded, and the only type of security available, other than seeking payment from the customer, will be a retainage claim. As you probably know, the retainage would only cover claims up to 10% of the contract value, so there may not be enough funds to satisfy all claims for unpaid balances.

If you would like to discuss this change at greater length, or ways to protect yourself if you do choose to participate, please feel free to call us at 206.626.5444.

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