Creates the State Agency Retainage Act. Provides that, if a State agency determines that satisfactory progress has not been achieved by a contractor or subcontractor during any period for which a payment is to be made, a percentage of the payment may be retained by the State agency. Prohibits the amount of retainage under the Act from exceeding 10% of the amount of any and all draw amounts submitted and approved under the terms of the contract until the contract is 50% completed. Prohibits retainage of more than 5% of the contract of the amount of any and all draw amounts submitted and approved under the terms of the contract for the duration of the contract. Authorizes retainage to be adjusted as the contract approaches completion to recognize better than expected performance, the ability to rely on alternative safeguards, and other factors. Further provides that on completion of all contract requirements, amounts retained under the Act must be paid promptly. Defines the terms "retainage" and "State agency". Amends the State Prompt Payment Act. Specifies that the State Prompt Payment Act does not apply to retainage withheld under the State Agency Retainage Act.
House Floor Amendment No. 3: Replaces everything after the enacting clause with the provisions of the introduced bill with the following changes. Deletes the provisions that amended the State Prompt Payment Act. Provides that "retainage" does not include moneys withheld from grants to entities for capital improvements to non-State property. Provides that, if the contractor or subcontractor has displayed unsatisfactory performance on previous State agency projects resulting in a low performance score or suspension of prequalification, the State agency may apply retainage from the beginning of the project. Provides that, notwithstanding any other provision of law, if a State agency has not withheld retainage from a payment to a contractor on a project, then that contractor may not withhold retainage from a payment to a subcontractor for the same project. Provides that, if a State agency has withheld retainage from a contractor under the Act, then the contractor may withhold retainage from a payment to a subcontractor, but only to the extent that the amount retained from payment to the contractor by the State agency is attributable to a failure on the part of the subcontractor to make satisfactory progress with respect to the subcontractor's contractual obligations. Specifies that the Act's limitations on retainage from subcontracts apply only to subcontracts that are entered into on or after the Act's effective date of the Act in connection with a State construction contract that is subject to the Act. Effective July 1, 2026.
Senate Committee Amendment No. 1: Replaces everything after the enacting clause. Amends the Public Construction Bond Act. Provides that, before the completion of 50% of the contract for public works, the State or a local governmental unit, except for the Department of Transportation, may not withhold retainage from any payment to a contractor who furnishes the bond or bond substitute required by the Act in an amount in excess of 10% of any payment made before the date of completion of 50% of the contract for public works. Provides that, when a contract for public works is 50% complete, the State or the local governmental unit, except for the Department of Transportation, shall reduce the retainage so that no more than 5% is held. Allows a State agency, subject to these limitations, to withhold as retainage a portion of the moneys from the payment of a contract that is entered into on or after the effective date of the amendatory Act if and only if the State agency determines that satisfactory progress has not been achieved by a contractor or subcontractor during any period for which a payment is to be made. Requires satisfactory progress to be clearly provided for in the contract between the State agency and the contractor or subcontractor. Provides that retainage may not be used as a substitute for good contract management, and the State agency may not withhold funds without cause. Provides that determinations to retain and the specific amount to be withheld must be made by the State agency on a case-by-case basis based on the performance of milestones under the current contract as provided for in the contract between the State agency and the contractor. Prohibits a contractor from withholding retainage from a subcontractor except to the extent a State agency has withheld retainage from the contractor which is attributable to that subcontractor's subcontract. Defines "retainage". Provides that nothing in the amendatory Act may be construed to modify any provision of the State Prompt Payment Act or the Local Government Prompt Payment Act. Effective June 1, 2027.
Senate Floor Amendment No. 3: Provides that the provision does not apply to the Illinois State Toll Highway Authority.

Statutes affected:
Introduced: 30 ILCS 540/1
Enrolled: 30 ILCS 550/1