New Bonding and Retainage Requirements under the Public Construction Bond Act
Jan 5, 2024
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The Public Construction Bond Act, 30 ILCS 550/1 et seq. (the “Bond Act”) was recently amended by Public Act 103-570, effective January 1, 2024. The Bond Act requires all public bodies to provide performance and payment bonds on public works projects of a certain amount. Prior to Public Act 103-570, performance and payment bonds were required for public works projects over $50,000. As of January 1, 2024, the public body’s duty to require performance and payment bonds is now triggered when a public works project exceeds $150,000. 30 ILCS 550/1. Local government units, which include every county, township, municipality, municipal corporation, community college district, school district, forest preserve district, park district, fire protection district, sanitary district, and library district, may require bonds for projects $150,000 and lower, provided the agency requires the bonds by resolution or ordinance. Id. As an important note, changes to the Bond Act as outlined in this paragraph are valid through January 1, 2029, at which time the dollar amount triggering the bond requirement reverts to projects over $50,000. Id.
The Bond Act also now sets forth certain limits on amounts that can be withheld by a public body from payments due to contractors, or “retainage”. Those limits apply to all public work projects over $150,000. Both the owner and the contractors on a public works project over $150,000 must comply with the following retainage limits when issuing payment: (1) prior to completion of 50% of the contract, the public body and contractor may not withhold more than 10% retainage; (2) upon 50% completion of the contract, retainage must be reduced so that no more than 5% is held; and (3) after 50% completion of the contract, no more than 5% of any subsequent payments made under the contract may be withheld. 30 ILCS 550/1. Id. Prior to this amendment to the Bond Act, there were no limitations or restrictions on how public bodies used retainage.
Please contact your Robbins Schwartz attorney with any questions regarding the recent amendments to the Public Construction Bond Act, 30 ILCS 550/1 et seq.
