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Recent Amendments will Impact School District Construction Projects

Education K-12 Education

Recent changes to Illinois law will impact the way school districts administer their summer construction projects. The Public Construction Bond Act has been amended effective January 1, 2024, to increase the threshold at which performance and payment bonds are required. The Act has also been amended to limit the amount of retainage that can be withheld on public works projects. A separate change to the Criminal Code that took effect last year increased the threshold at which change orders must be approved by a public body or its designee.

The Public Construction Bond Act (30 ILCS 550) requires school districts and other public bodies to obtain performance and payment bonds for construction projects over a specified dollar amount. Previously, the threshold was any public works project over $50,000. As of January 1, P.A. 103-0570 increased this threshold to projects exceeding $150,000. Public bodies may require performance and payment bonds for projects below the $150,000 threshold, provided they do so by resolution or ordinance. This provision is set to expire on January 1, 2029, at which time the threshold will revert to projects exceeding $50,000.

A new provision has also been inserted into the Public Construction Bond Act regarding the retainage on public construction projects over $150,000. Prior to 50% completion of a project, the retainage withheld by a public body on any payment may not exceed 10%. Upon 50% completion, the retainage must be reduced to 5%, and no more than 5% of any future payment may be withheld. This same requirement applies to contractor payments to subcontractors.

Finally, the threshold for obtaining approval for change orders was increased effective last year. P.A. 102-1119 amended the Illinois Criminal Code (720 ILCS 5). Article 33E of the Criminal Code deals with public contracts. Section 9 makes it a class 4 felony for any person employed by a public body and authorized to approve change orders to knowingly grant a change order without first obtaining a written determination from the public body or its designee that the circumstances giving rise to the need for the change order were not reasonably foreseeable at the time the contract was signed, or that the change is germane to the original contract, or that the change order is in the best interest of the public body. Previously, this requirement applied to any change order or series of change orders that increased or decreased the cost of a public contract by more than $10,000 or that altered the time of completion by more than 30 days. Now, the threshold for obtaining approval is a change order or series of change orders increasing or decreasing the cost by more than $25,000 or altering the time of completion by more than 180 days.

If you have any questions regarding this decision or any construction matter, please contact the author of this alert or any Franczek attorney.