The U.S. Dept. of Transportation has issued a new final rule that makes changes in requirements for contract retainage. The retainage revisions are contained in a broader rule on DOT's disadvantaged business enterprise program, which was published in the Federal Register on June 16. The new final rule is basically the same as the proposed regulation DOT published in May, 2001.

The changes take effect on July 16.

The new rule says agencies that receive U.S. DOT funds--which include state DOTs and local transit authorities--must require prime contractors to pay subcontractors within 30 days after the primes receive payments from those agencies.

The regulation gives agencies three retainage options:

--they can decline to hold retainage from primes and bar primes from retaining funds from their subs;

--they may decline to hold retainage from primes, but permit primes to retain payments from subs as long as the primes release that retainage to subs "within 30 days after the subcontractor's work is satisfactorily completed";

--they may hold retainage from primes, but have "prompt and regular incremental acceptances of portions of the prime contract," and release portions of those funds to the prime incrementally. Primes would be obligated to pay retainage to their subs "for satisfactory completion of the accepted work within 30 days after [an agency's] payment to the prime contractor."

Officials with construction groups--both contractors and subcontractors--say they’re pleased with the final retainage provision.

"We like what they've done," says Brian Deery, senior director of the Associated General Contractors' highway and transportation division.

Greg Smith, the American Road & Transportation Builders Association's vice president for environmental and regulatory affairs, says, "We see [the regulation] as a big plus. We think it's going to probably lift some of the…financial burdens on contractors."

David Mendes, a spokesman for ASA, says, "We're pretty happy. We see this as a victory." Mendes says that with the three retainage options in the rule, he doesn’t see "any threat to the payment protections for subcontractors. I think that there's more flexibility, which is good, but the ultimate aim of quick release of retainage is still there…and we like that."

ARTBA's Smith notes that DOT also has revised DBE rules for trucking companies, which had been used to meet many DBE goals. DOT says its 1999 final rule provided that firms would get full DBE credit for services provided by trucks the DBE firm owns and workers it employs. But services provided by trucks the DBE leases would only earn credit for fees that the DBE gets for those leased services.

The new regulation says DBE trucking firms are entitled to credits based on the dollar volume of work done by twice the number of trucks it owns.