5.__Secured releases.__Under a contract made for public improvement, the contractor may withdraw retained funds upon depositing with the Treasurer of State or the owner negotiable public securities or certificates of deposit greater in value than the amount withdrawn.

6.__Authority of treasurer or public owner.__The Treasurer of State or public owner shall pay over to the contractor all net income from the escrowed securities as it is received.__The Treasurer of State or public owner may contract with a suitable financial institution for custodial care and servicing of any securities deposited pursuant to this section.

7.__Deductions.__An amount deducted by the public owner pursuant to the terms of the contract from the retained payments due the contractor must be deducted first from that portion of the retained payments for which no security has been substituted and then from the proceeds of any deposited security. In the latter case, the contractor is entitled to receive interest, coupons or income only from those securities that remain after such amount has been deducted.

8.__Assignments.__An assignment of retained payments made by the contractor must be honored by the party holding the securities as part of the procedure to accomplish the substitution of securities under this section, provided that such assignment will not be made without prior notification to the contracting agency of the State and the party holding securities.__ Such assignment may not impair the equitable rights of the contractor's surety in the retained payments or in the securities substituted in the event of the contractor's default in the performance of the contract or in the payment of labor and material bills or other obligations covered by that surety's bond.

9.__Environmental control costs.__A contract made for a public improvement must include the cost of environmental control measures required for execution of the contract, provided the cost of environmental control activity that is required by legislation or rule passed or adopted after the date on which bids are received for the project for which the contract is made or awarded is paid for in an equitable manner.

10.__Daily financial incentive.__The Director of the Bureau of General Services may approve contracts with a provision for a daily financial incentive for projects completed before the scheduled date when it can be demonstrated that the early completion will result in a financial savings to the public owner.__The financial incentive may not exceed the projected daily rate of savings to the public owner.

Sec. 2. Application. This Act applies to public construction contracts in which substantial completion is reached on or after September 31, 2001.

SUMMARY

This bill replaces the current law authorizing retention of part of the contract price for any public improvement contract. Under the change proposed in this bill, the process allows a 5% retainage until substantial completion of the work, at which time the public owner and the contractor agree on a punch list. The retainage may then be 1 1/2 times the value of the punch list work and is reduced proportionately as punch list work is completed.