Colorado's New HB 26-1311 Enhances Construction Cash Flow Via Retainage Bonds

GTTP

Colorado's HB 26-1311 introduces retainage bonds for private construction projects.
Contractors and subcontractors can now post a surety bond instead of having 5% retainage withheld.
The new law mandates acceptance of qualifying bonds by property owners and prime contractors.
This change aims to significantly improve cash flow and risk allocation for construction firms.

Impact - Why it Matters

This new Colorado law significantly alters construction project financing by allowing retainage bonds, thereby freeing up crucial capital for contractors and subcontractors. It shifts financial risk, fosters greater liquidity, and mandates new compliance for property owners, fundamentally reshaping cash flow management across the state's private construction sector.

Summary

A significant legislative update is set to reshape financial practices within Colorado's private construction sector. Volpe Law LLC urges contractors, subcontractors, and property owners to understand House Bill 26-1311. Signed by Governor Jared Polis on May 7, 2026, and effective August 12, 2026, this new law fundamentally alters how retainage works for new contracts, promising substantial impact on industry cash flow and risk allocation.

Traditionally, up to 5% of completed work could be withheld as retainage, often causing financial strain. Under HB 26-1311, contractors or subcontractors can now submit a retainage bond from a licensed surety instead of withheld funds. If the bond meets statutory requirements, property owners or prime contractors must accept it, releasing the retained money. A crucial "flow-down" mechanism also obligates contractors to accept similar bonds from their subcontractors.

"This law offers a vital way for contractors and subs to keep their cash working," notes Ben Volpe, founding attorney at Volpe Law LLC. This change enhances liquidity and operational flexibility. All parties should familiarize themselves with the new bond requirements to ensure compliance and leverage this transformative legislation. Volpe Law LLC offers guidance to navigate these crucial changes.

Colorado's New HB 26-1311 Enhances Construction Cash Flow Via Retainage Bonds

GTTP

Colorado's HB 26-1311 introduces retainage bonds for private construction projects.
Contractors and subcontractors can now post a surety bond instead of having 5% retainage withheld.
The new law mandates acceptance of qualifying bonds by property owners and prime contractors.
This change aims to significantly improve cash flow and risk allocation for construction firms.