Full Text of SR0541 103rd General Assembly
SR0541 103RD GENERAL ASSEMBLY | | | SR0541 | | LRB103 34974 ECR 64868 r |
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| 1 | | SENATE RESOLUTION | 2 | | WHEREAS, State law forces contractors who do construction | 3 | | for government agencies to lend money back to their government | 4 | | clients at a zero percent interest rate pursuant to retention | 5 | | laws; and | 6 | | WHEREAS, Under retention laws, for every pay period after | 7 | | the project bill is approved, the government agency pays only | 8 | | 90% of the bill; and | 9 | | WHEREAS, The government agency keeps 10% of the bill, | 10 | | which is known as the retention or retainage; and | 11 | | WHEREAS, The government agency will pay back this forced | 12 | | loan months or even years after the contractor has performed | 13 | | the work and paid for all the supplies and labor required; and | 14 | | WHEREAS, The forced loan of retainage has an enormous | 15 | | impact on contractors' ability to grow; and | 16 | | WHEREAS, Instead of improving access to capital, the | 17 | | retention law drains capital from employers; and | 18 | | WHEREAS, Defenders of retention laws argue that without | 19 | | the leverage of keeping the contractors in debt from the costs |
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| 1 | | they have incurred for doing the approved work for agencies, | 2 | | the agencies wouldn't be able to require contractors to | 3 | | perform to the agencies' satisfaction; and | 4 | | WHEREAS, Agencies have many other tools to manage | 5 | | contractors, including, but not limited to, their existing | 6 | | vigorous approval and verification process for every pay | 7 | | period or invoice, liquidated damages clauses if a contractor | 8 | | doesn't perform, warranties on all work performed by | 9 | | contractors, and a more nuanced contract for those few | 10 | | circumstances where the quality of the work needs to be | 11 | | verified later; and | 12 | | WHEREAS, Retention takes 10% of the contract value from | 13 | | all contractors as a forced loan from everyone, whether the | 14 | | subcontractor simply delivered materials or the prime | 15 | | contractor is working on a complicated project that needs some | 16 | | later examination; and | 17 | | WHEREAS, Under State law, this forced loan drops to 5% of | 18 | | the contract value halfway through the project until close | 19 | | out, a paperwork exercise that can take months after the work | 20 | | is performed; and | 21 | | WHEREAS, Sometimes, government agencies are understaffed | 22 | | and aren't able to close out a project in a reasonable period |
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| 1 | | of time, or some required paperwork isn't in from one vendor, | 2 | | leading all the contractors to suffer with a forced loan until | 3 | | the agency is satisfied; and | 4 | | WHEREAS, Retention is a punishing, blunt, and expensive | 5 | | policy; and | 6 | | WHEREAS, Subcontractors will regularly and successfully | 7 | | complete major work, fronting all the money for supplies and | 8 | | labor, only to be caught waiting for the prime contractor to | 9 | | pay out while they muddle through a retention dispute with a | 10 | | government agency, putting the subcontractor in debt; | 11 | | therefore, be it | 12 | | RESOLVED, BY THE SENATE OF THE ONE HUNDRED THIRD GENERAL | 13 | | ASSEMBLY OF THE STATE OF ILLINOIS, that we urge all | 14 | | stakeholders and policymakers to collaborate and consider how | 15 | | to best upgrade public works law in 2024 from the | 16 | | across-the-board, capital-draining policy of retention that | 17 | | takes money from all contractors on all projects to a more | 18 | | efficient, nuanced, and tailored approach that protects | 19 | | government agencies without forcing cash-strapped contractors | 20 | | to go into debt by providing no interest loans to their | 21 | | government clients. |
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