SB 1205 Clears the Legislature, Bringing Retention Reform Within Reach

AIA California-sponsored SB 1205 (Valladares) has passed both houses of the California Legislature unanimously and is headed to Governor Gavin Newsom’s desk.

The bill represents an important step toward creating fairer and more consistent retention practices for architects and engineers working on California public projects. After advancing through the legislative process with strong bipartisan support, SB 1205 now awaits the Governor’s consideration.

Bringing Fairness to Retention Practices

Architects and engineers provide professional services throughout the design and delivery of public projects, yet some public agencies withhold significant portions of their payments as retention — sometimes at rates substantially higher than those applied to construction contractors.

SB 1205 addresses this inequity by establishing clearer standards for retention on design professional services contracts.

For qualifying design-bid-build contracts between public entities and architecture or engineering firms, SB 1205 would:

• Limit retention to 5 percent, providing greater consistency with retention standards already applied to contractors on public projects.
• Require retained funds to be released within 60 days after the design professional completes their contractual services, rather than allowing payment to remain tied to completion of the overall construction project.
• Amendments in the Assembly added similar language that is in place for contractors surrounding flexibility for public agencies on substantially complex projects while establishing greater transparency around the use of higher retention.

These reforms recognize a straightforward principle: design professionals should be paid for their work when their contractual obligations are complete.

For architecture firms, particularly small and mid-sized practices, excessive retention can mean significant amounts of earned revenue remaining unavailable long after services have been provided. That can affect cash flow, staffing and a firm’s ability to take on new work.

An Issue Brought Forward by Our Members

SB 1205 is also an example of how the experiences and expertise of AIA California members can translate into meaningful statewide policy change.

We are especially grateful to Debra Gerod, FAIA, who first brought the issue of excessive retention to AIA California’s attention. Her experience helped identify a problem facing design professionals working on public projects and provided the foundation for our effort to pursue a legislative solution.

From there, AIA California worked with members, policymakers and stakeholders to develop an approach that would provide greater fairness for design professionals while recognizing the needs of public agencies.

Thank You to Our Legislative Partners and Members

AIA California is grateful to Senator Suzette Martinez Valladares and her staff for authoring SB 1205 and shepherding it through the legislative process.

We also thank the AIA California members who shared their experiences, provided technical expertise and supported the bill throughout its journey through the Legislature. Their participation helped demonstrate that excessive retention is not simply a contractual concern — it has real consequences for architecture firms doing business with public agencies throughout California.

With passage by both houses of the Legislature, SB 1205 has cleared its biggest legislative hurdle and now heads to Governor Newsom’s desk for consideration.

We are proud to see an issue raised by an AIA California member advance all the way through the California Legislature — and we are grateful to everyone who helped bring SB 1205 to this important milestone.

AIA California will keep members informed when Governor Newsom takes action on this bill.