SB1205 - Public contracts: retention: architecture or engineering services.

Amended IN Assembly August 21, 2026 Amended IN Assembly August 13, 2026 Amended IN Senate April 09, 2026 Amended IN Senate March 24, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Senate Bill No. 1205 Introduced by Senator Valladares February 19, 2026 An act to add Section 7204 to the Public Contract Code, relating to public contracts. LEGISLATIVE COUNSEL'S DIGEST SB 1205, as amended, Valladares. Public contracts: retention: architecture or engineering services. Existing law imposes various requirements regarding the formation, content, and enforcement of public works contracts. Existing law generally requires that retention proceeds withheld from payment by a public entity be released within 60 days after the date of completion of the work of improvement, except as specified in case of a dispute. Existing law limits the allowable amount of retention proceeds withheld in a contract between a public entity and the original contractor, a contract between the original contractor and a subcontractor, and a contract between subcontractors, as specified. Existing law defines “public entity” differently for these various purposes. This bill would prohibit any retention payments from exceeding 5% of the payment for contracts under design-bid-build, and amendments thereto, entered into on or after January 1, 2027, directly between a public entity and an individual or legal entity permitted by law to practice the profession of architecture or engineering, unless the public entity makes a finding that the project is substantially complex and therefore requires a higher retention amount and the public entity includes in the contract details explaining the basis for the finding and the actual retention amount. except for specific projects where, among other things, a finding has been made that the project is substantially complex and requires a higher retention amount. The bill would require any retention withheld to be released no later than 60 days after completion of services under contract. The bill would define terms for its purposes, including “public entity.” Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 7204 is added to the Public Contract Code, to read: 7204. (a) For contracts under design-bid-build, and amendments thereto, entered into on or after January 1, 2027, directly between a public entity and a firm, any retention payments to the firm for services shall not exceed 5 percent of the payment unless the public entity makes a finding that the project is substantially complex and therefore requires a higher retention amount than 5 percent and the public entity includes in the contract details explaining the basis for the finding and the actual retention amount. payment. (b) Notwithstanding subdivision (a), the retention proceeds withheld from any payment to a firm by an awarding entity set forth in paragraphs (1) to (5), inclusive, of subdivision (a) of Section 10106, may exceed 5 percent on specific projects for which the director of the department has made a finding prior to the bid that the project is substantially complex and therefore requires a retention amount higher than 5 percent and the department includes in the bid documents details explaining the basis for the finding and the actual retention amount. (c) Notwithstanding subdivision (a), the retention proceeds withheld from any payment to a firm by the awarding entity of a city, county, city and county, including charter cities and charter counties, district, special district, public authority, political subdivision, public corporation, or nonprofit transit corporation wholly owned by a public agency and formed to carry out the purposes of the public agency, may exceed 5 percent on specific projects where the governing body of the public entity or designee, including, but not limited to, a general manager or other director of an appropriate department, has approved a finding, on a project-by-project basis, during a properly noticed and normally scheduled public hearing, and prior to the bid, that the project is substantially complex and therefore requires a retention amount higher than 5 percent and the awarding entity includes in the bid documents details explaining the basis for the finding and the actual retention amount. (d) Any finding by a public entity that a project is substantially complex shall include a description of the specific project and why it is a unique project that is not regularly, customarily, or routinely performed by the agency or licensed contractors. (b) (e) Any retention withheld pursuant to subdivision (a) shall be released no later than 60 days upon completion of the firm’s services under contract, regardless of whether the project for which the services were provided has been completed. (c) (f) For purposes of this section, the following definitions shall apply: (1) “Firm” means an individual, firm, partnership, corporation, association, or other legal entity permitted by law to practice the profession of architecture or engineering. (2) “Public entity” means the state, including every state agency, office, department, division, bureau, board, or commission, the California State University, the University of California, a city, county, city and county, including charter cities and charter counties, district, special district, public authority, political subdivision, public corporation, or nonprofit transit corporation wholly owned by a public agency and formed to carry out the purposes of the public agency.