Effective July 1, 2024, the Mississippi Legislative enacted multiple statutory changes applicable to the construction industry, including (1) an increase to the monetary threshold requiring public bidding, (2) new delivery methods available for Mississippi Department of Transportation (MDOT) projects, and (3) perhaps most significantly, new laws applicable to retainage on private non-residential projects.
A. Threshold for Public Bidding Increased to $75,000
Under prior law, public contracts that were less than $50,000 were exempt from public bidding requirements. Effective July 1, 2024, the threshold is now $75,000.
B. Construction Management and Other Delivery Methods on MDOT Projects
Effective July 1, 2024, MDOT may use alternative delivery methods, including, but not limited to, (1) design-build, (2) progressive design-build, and (3) a construction manager. See Miss. Code Ann. § 65-1-85(11). Prior the change, only design-build was available, and it was subject to several restrictions that have since been removed.
Further, prior to the amendment, hiring a construction manager was not expressly authorized. Notably, the amendment allows MDOT to hire a construction manager without following the requirements for hiring construction managers for other types of public construction projects. For instance, other public construction projects are still limited to construction manager at risk (CMAR) where the total cost of the project is $25 million or more, and the governing board or authority explains why using the delivery method satisfies the public need better than the traditional design-bid-build method. See Miss. Code Ann § 31-7-13.2.
C. New Retainage Law Applicable to Non-Residential Private Projects
Mississippi has long had retainage laws applicable to public projects only. Private parties were free to contract for any retainage amounts or terms. However, non-residential private contracts over $10,000 entered into on or after July 1, 2024, are now subject to statutory retainage requirements. The definition of excluded “residential” contracts includes not only single-family residential projects, but also multi-family residential projects consisting of 16 or fewer residential units.
Under the new law, the retained funds cannot exceed 5% of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site. This applies to retainage held by owners, contractors, and subcontractors. If more than 5% is withheld, interest at the rate of 1% per month will accrue on the amount withheld.
Additionally, an owner must release all retainage to a contractor for completed work no later than 60 days after final completion of the work if all necessary certificates of occupancy have been issued. The contractor must then release and pay retainage to its subcontractors and subcontractors must release and pay retainage to their sub-subcontractors for work completed pursuant to the requirements of Section 87-7-5 of the Mississippi Code (public project retainage laws). That Section requires retainage to be paid downstream within 15 days of receiving retainage from the owner. Failure to do so is subject to a one-half of one percent (0.5%) penalty per day, up to a maximum penalty of fifteen percent (15%) of the outstanding balance due.
Parties are still free to contract for conditions precedent to receiving payment, but they cannot contractually agree to waive interest provided for in the new retainage law. If retainage is not paid in accordance with this new law, then the person seeking payment may sue the party it has direct contractual privity with for payment. The prevailing party in such suit is entitled to recover its reasonable attorneys’ fees, court costs, and reasonable expenses from the other party.
