By Hank Kita, STA Executive Director
Recently, I reached out to our STA membership seeking support for state legislation that would be of benefit to construction subcontractors throughout the State of New York. Specifically, I am asking our membership to support S.2394 (Breslin)/A.3552 (Cusick), which deals with the issue of “substantial completion” on public projects. This legislation was passed back in June and now awaits the approval of the Governor. The bill was developed and advocated for by the Empire State Subcontractors Association (ESSA), of which the STA is a member.
S.2394/A.3552 defines substantial completion on public projects and would require public owners to provide the contractor with a complete punch list within 45 business days after substantial completion has been reached. This legislation would also require the contractor to provide subcontractors with their portions of the punch list within 7 days after receiving the punch list from the public owner.
This legislation is much needed because the term “substantial completion” is not defined in the law. This has resulted in many public owners, particularly at the local level, abusing the process and holding retainage for months or even up to a year after a project has been fully occupied or utilized for its intended purpose. Retainage is not intended to serve as a warranty, although many public owners misuse retainage for that very purpose. The rightful purpose of retainage is to assure contract performance. Virtually all public projects require contractors to provide contractual guarantees in addition to performance bonds. These, and not retainage, are the owner protections that are intended to survive contract completion. Defining substantial completion in S.2394/A.3552, will make it clear that when the project is substantially complete, public owners must reduce retainage to no more than two times the value of the punch list and an amount necessary to satisfy any claims, liens or judgments which have not been discharged.
In addition, requiring public owners to provide contractors with a complete punch list within 45 business days after substantial completion of the project has been reached will allow companies to promptly complete the punch list, close out the project, and receive, on a timely basis, final payment for the remaining retainage being held. Some public owners have a reputation and history of prolonging the procedure for completing the punch list for many months or even years after a project has been fully occupied or utilized. Receiving new “punch list” items from a public owner three or four years after project completion is an unacceptable
practice because those items don’t generally represent remaining items of work to be completed by the contractor in accordance with his contract, they represent routine maintenance of the facility due to normal wear and tear of use.
I ask all STA members to send a letter of support to the Governor’s Office as soon as possible. A copy of such a letter of support is provided here. Please complete the letter and send it to the STA on your letterhead to the attention of Samantha Sweeney at email@example.com. It is only through your support and action that we can persuade the Governor to sign this important legislation.