Federal contracting officers will no longer be required to withhold 10% of fees for architectural and engineering services, following a four-year effort of industry lobbying.
Published in March by the Federal Acquisition Regulation Council, the new rule says retainage is discretionary. If contracting officers choose to require retainage, it can be set below 10%.
The new rule also clarifies that “any amounts retained should not be held over beyond the satisfactory completion” of the contract. Previously, retainage could be held until completion.
Small businesses applaud the change. “This is a big win at a time when there is a lot of federal government work coming out, especially for smaller firms that can’t afford to have money held back for months or years,” says Paul Mendelsohn, vice president of government and community relations at the American Institute of Architects, which spearheaded the effort. The American Council of Engineering Cos. and the National Society of Professional Engineers also backed AIA.
AIA was alerted to the issue by Paul Renker, principal of Renker Eich Parks Architects in St. Petersburg, Florida. Renker, a former president of AIA’s Tampa Bay chapter, learned about the rule in 2006 when his firm was selected to design a new, 166,000-sq-ft, $30.5-million Job Corps Center in St. Petersburg for the U.S. Dept. of Labor.
The firm received its first payment for services 220 days after the start of fee negotiations; however, retainage was held approximately 500 days after the contract’s notice to proceed.
The new rule took effect on April 19. Mendelsohn says the process of getting it changed was “lightning fast” by Washington standards.