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News Abstract
By: PointLine Media Research & Editorial Team
June 3, 2026
Colorado has enacted a new law, House Bill 26-1311, providing contractors and subcontractors with an alternative to traditional retainage practices on private construction projects. This legislation allows for the use of surety bonds instead of cash being withheld from payments.
The new measure takes effect on August 12, 2026, applying to contracts established from that date forward. Previously, property owners, general contractors, and subcontractors could hold up to 5% of a project's value as retainage until completion, often causing cash flow issues for those performing the work.
Under HB 26-1311, contractors or subcontractors can now submit a retainage bond, issued by an approved surety, in place of the withheld funds. If the bond meets statutory requirements, the project owner or general contractor must accept it and release the corresponding retained money.
Furthermore, a "flow-down" mechanism ensures that once a property owner accepts a retainage bond from a contractor, that contractor is then obligated to accept similar bonds from any of their subcontractors. This law specifically excludes publicly owned projects.
The construction industry frequently grapples with cash flow challenges, particularly for smaller firms managing large projects. Retainage, while intended to protect owners, often ties up significant capital that contractors and subcontractors have already earned, impacting their ability to cover ongoing labor, materials, and operational costs. This new Colorado law reflects a growing trend towards modernizing payment practices and risk allocation within construction.
By introducing a bond option, the legislation offers a practical solution to alleviate financial pressure on project participants without removing the essential guarantee for owners that work will be completed to standard. It aims to balance the need for financial security with the operational realities of construction businesses.