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Memorandum in Opposition - A.796/S.2931

This memo is submitted by Energy Coalition New York in opposition to the subject legislation which would require release of retainage to material suppliers on both public and private construction contracts.

Energy Coalition New York consists of New York State's major gas and electric utility companies: Central Hudson Gas & Electric Corporation, Consolidated Edison Company of New York Inc., National Fuel Gas Distribution Corporation, National Grid, New York State Electric & Gas Corporation, Orange and Rockland Utilities, Inc., and Rochester Gas and Electric Corporation. Coalition companies collectively employ more than 32,000 people, service more than 8.5 million customers and pay more than $3 billion in state and local taxes, assessments and fees. The member companies annually invest billions of dollars to make capital improvements to the electric and natural gas infrastructure located in New York State.

Under current law, retainage is subject to negotiation between the utilities and the contractor. The safe completion of the construction contract is the responsibility of the contractor working with subcontractors and suppliers. This bill would undo negotiated retainage by providing an exemption for materials which are delivered and accepted at the construction site by requiring a release of the percentage of retainage applicable to such materials.

Retainage is a prudent business practice that provides an incentive for completion of the construction contract, and in the event of default, such funds are used to complete the work. Retainage typically represents a minimal portion of the amount to be paid under the construction contract.

Payment to material suppliers of a portion of retainage upon delivery bears no relation as to whether the contractor or subcontractor has made payment to the material supplier for such material. In addition, there is no guarantee that material delivered is appropriate, especially if it needs to be installed. This bill also creates an administrative burden based on the calculation and payment of the appropriate proportion of the retainage. In some cases the amount of such payment may be negligible.

There is no sound public policy basis for revising retainage requirements for material suppliers. Retainage should remain subject to negotiation between the parties. 

Based on the foregoing, it is respectfully requested that this legislation not receive favorable consideration.