Public Act 103-570 (effective January 1, 2024), amended the Public Construction Bond Act, 30 ILCS 550/1, in two ways that will affect school construction projects. First, the minimum cost of a contract for any public work needed to trigger payment and performance bond requirements was temporarily increased from $50,000, to $150,000. The increased threshold will be in place until January 1, 2029, at which point it will be reduced back to $50,000.
Second, the amendments place new limitations on the ability of local governmental units to withhold certain payments from contractors as retainage on a public works project for which the bond requirements discussed above apply. For applicable projects, local governmental units may not withhold retainage from any payment to a contractor in an amount in excess of 10% of any payment made prior to the date of completion of 50% of the contract for the public work. When the contract is 50% completed, local government units shall reduce the retainage so that no more than 5% is withheld from a payment. After the contract is 50% complete, no more than 5% of the amount of any subsequent payments made under the contract may be withheld as retainage. Contractors of local governmental units (and their subcontractors) must follow the same limitations for payments to their own subcontractors.
Keep these new requirements in mind when preparing bid documents and other contract documents for school construction projects going forward. At the same time, even if an existing contract allows a higher retainage amount, the new limits on retainage will apply to public works projects for which the bond requirements discussed above apply.
Source: Public Act 103-570
