Legal Alerts

Governor Schwarzenegger vetoed SB 802 which would have limited the retention that could be held on a public construction project to 5%. BB&K has monitored SB 802 for several months and many of our public agency clients wrote letters to the Governor encouraging his veto, which came on October 11.

On October 12, the Governor posted the following veto message:

To the Members of the California State Senate: I am returning Senate Bill 802 without my signature. Under current law, public entities, at a minimum, must retain 5 percent of a payment to a contractor completing a public works project. This bill would restrict the State's ability to retain more than 5 percent of payment and no more than 5 percent of the public work contract price. When a contractor fails to complete a public works project, the public entity needs recourse to ensure that the project gets completed. Public works contracts have a higher level of risk as public entities usually have to accept the low bidder. Though there are options available to the State to go after a contractor who fails to complete the terms of a public works contract, retaining portions of payment to the contractor provides incentive for the contractor to complete the project. While I am sympathetic with the concerns of subcontractors, the State's responsibility is to protect the taxpayer to make certain that public works projects are completed correctly and within budget; limiting the retention amount hampers the State's ability to do that. For these reasons, I am returning this bill. Sincerely, Arnold Schwarzenegger

If you have any questions regarding the vetoed legislation, the current laws related to retention or other public contracting matters, please contact Mary Beth Coburn or your BB&K Municipal, Special District or School Law attorney.