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Government Adopts AIA Plan for Reforming Retainage Rules
 
 

From the March 25, 2010 Angle

After a four-year effort, the federal government has adopted the AIA’s recommendations to change rules that retainage on architectural and engineering services discretionary. Previously, contracting officers could withhold ten percent of an architect’s or engineer’s fees for federal projects until the work was deemed satisfactorily complete. This went far beyond what is customary for other services and was particularly burdensome for small firms because it restricted cash flow.

The AIA initially brought this issue to the Small Business Administration (SBA) in 2008, and as a result, it was identified as one of the SBA’s final top 10 regulations for suggested reform. Florida architect Paul Renker, AIA, who first raised the issue with the AIA in 2006, testified in support of changing retainage rules in 2008 before the House Small Business Committee.

Under the new rule, this retainage will be optional and can be assessed at a rate less than ten percent. Federal agencies will have the discretion to review the contractor’s past performance to determine this figure. Additionally, the original regulation provided that contractors “may” release the excess retainage following substantial completion. As requested by the AIA, the new rule clarifies this to provide that “any amounts retained ‘should’ not be held over beyond the satisfactory completion of the instant contract.”

   

For additional information, contact Andrew Goldberg, Assoc. AIA, senior director, Federal Relations.

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