Retainage Surety Bond Construction Contracts

Contractors get bond option with premium costs

Colorado limits money held back on private construction contracts to 5% of the price of completed work. Contractors and subcontractors can replace that withheld money with a bond worth no more than 5% of their earned money. The owner, contractor, or subcontractor receiving a qualifying bond must accept it and release the money it covers. The bond must come from an insurer licensed in Colorado and guarantee contract performance and payment to laborers, suppliers, and subcontractors. Any required financial strength rating cannot exceed A- on the AM Best scale. When an owner accepts a contractor's bond, the contractor must accept a substantially equivalent bond from a subcontractor. Contractors providing bonds to release withheld money can withhold subcontractors' shares of the bond premium. The bond and its proceeds remain subject to construction claims and liens with the same legal priority. The bond option excludes publicly owned property, including public-private partnerships. These changes apply to contracts created on or after the effective date, scheduled for August 12, 2026. A timely referendum petition delays that date until voter approval and the governor's official declaration of the vote.