Colorado's New Retainage Bond Law Means Contractors Don't Have to Wait for That Last 5%

Retainage has always worked the same way on a construction job: the client holds back a slice of every payment, usually 5 to 10 percent, until the whole project wraps up. You do the work now, and a chunk of what you earned sits with someone else for months. Colorado just gave contractors and subcontractors a way to get that cash moving without waiting for the final walkthrough.

What HB 26-1311 actually changes

Governor Jared Polis signed House Bill 26-1311 on May 7, 2026, and it took effect August 12, 2026. The law amends Colorado’s retainage statutes to let a contractor or subcontractor on a qualifying private construction project post a retainage surety bond instead of having that percentage withheld from each payment.

The bond can cover up to 5% of the money earned on the contract. Once you tender a bond that meets the statutory requirements, the property owner, contractor, or subcontractor holding the retainage has to accept it and release the funds it covers. A subcontractor can require the contractor above them to post a like bond for their own portion too, so the option flows down the chain instead of stopping at the top.

The bond option caps at 5% of money earned, regardless of what a contract’s underlying retainage percentage was set at. Source: Colorado General Assembly, HB 26-1311.

Where the bond option does and doesn’t apply

This only covers private construction contracts entered into on or after August 12, 2026. Projects owned by a public entity, including public-private partnerships, are excluded entirely, so a contractor working a mix of public and private jobs needs to track which contracts actually qualify. A bond you post for a private job earned before the effective date does not retroactively unlock retainage already withheld under the old terms.

A bond costs money, but it costs less than waiting

Buying a retainage surety bond is not free. An insurer licensed in Colorado issues it for a premium, typically a small percentage of the bond amount. What you are paying for is access to cash now instead of access to cash whenever the project closes out, sometimes months after your last invoice on the job. For a contractor who already has capital tied up in materials, payroll, and the next job’s mobilization costs, that trade is often worth the premium.

Whether it is worth it for a specific job comes down to simple math: compare the bond premium against how long that retainage would otherwise sit unpaid, and against what that same cash is worth to you sitting in a bank account instead of a client’s ledger.

Progress payments still need their own discipline

A retainage bond changes what happens to the held-back percentage. It does not change the discipline of getting the rest of every invoice paid on schedule in the first place. Progress billing on a multi-month project still depends on sending each draw on time and following up the moment a payment slips past its due date, bond or no bond.

Set up BillyPaid’s recurring invoices for the progress payments on a job like this, and every draw goes out on the same schedule automatically, so the retainage bond you posted is not the only part of your cash flow working in your favor.