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SB 835

Secretary of State; requiring submission of certain agency actions for review; requiring board to abide by certain recommendations. Effective date.

2025 Regular Session Introduced by Julie Daniels and 1 co-sponsor

Mandates undisputed retention proceeds on State construction contracts be paid within 90 days after substantial completion, boosting small subcontractors' cash flow.

Referred to Civil Judiciary
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Bill Summary · SB 835

Summary — SB 835: State Finance and Procurement — Retention Proceeds

Status: Introduced (Jan 28, 2025). Assigned to Budget & Taxation. Proposed effective date: October 1, 2025 (if enacted).
Statutory location: Article — State Finance and Procurement, §13‑225 (Annotated Code of Maryland).

Main purpose

Require prompt payment of undisputed retainage (retention proceeds) on State construction contracts: specifically, mandate that undisputed retention amounts held by a State unit or by a contractor be paid within 90 days after the contract’s date of substantial completion (as defined in the applicable contract or subcontract).

Key provisions

  • Amends §13‑225 of the State Finance & Procurement Article.
  • Adds explicit requirement: “UNDISPUTED RETENTION PROCEEDS … SHALL BE PAID WITHIN 90 DAYS AFTER THE DATE OF SUBSTANTIAL COMPLETION, AS DEFINED BY THE APPLICABLE CONTRACT OR SUBCONTRACT.”
  • Leaves intact existing retainage framework: where a contractor has furnished 100% payment and performance security, retainage may not exceed 5% of the contract amount; primary procurement units and the Maryland Transportation Authority may withhold additional amounts reasonably necessary to protect the State’s interest; retainage in escrow must include pro rata interest on payments.
  • Conforms to current definitions of payment/performance security found elsewhere in law (Title 17, Subtitle 1).

Who would be affected

  • State procurement units and agencies that manage construction contracts (payors).
  • Prime contractors and subcontractors working on State construction projects (payees).
  • Small construction firms — likely to benefit from earlier receipt of retained funds.
  • Potential indirect effects on taxpayers/agencies if contract closeout practices change.

Fiscal and operational impact

  • Fiscal note: No expected change in State revenues. However, State expenditures may increase in some cases. Paying retainage at substantial completion rather than final completion (i.e., before punch‑list items are finished) could reduce contractors’ incentives to promptly finish remaining work, possibly forcing agencies to hire third parties to complete outstanding items — resulting in double payments for some project components. A reliable aggregate estimate is not provided.
  • Small businesses that are subcontractors may see meaningful cash‑flow improvements because retainage would be released earlier.

Procedural / timing notes

  • Draft adds the 90‑day payment requirement into current retainage statutory language and would take effect October 1, 2025.
  • If enacted, agencies will need to adjust contract administration and closeout procedures to implement the new timing requirement and manage risks associated with earlier release of retainage.

Compiled from official sources — confirm details with the bill’s official record.

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