What Is Retainage in Construction and Why Is It Important?

Retainage on Private Projects:

§ 8-29-3. Timely payments to contractors and subcontractors; noncompliance with chapter; percentage of retainage on payments.

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(a) When a contractor has performed pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials, to the owner or owner’s representative, the owner shall timely pay the contractor by mailing via first class mail or delivering the amount of the pay request or invoice in accordance with the payment terms agreed to by the owner and the contractor, the agreed upon payment terms must be specified in all contract documents, but if payment terms are not agreed to, then within 30 days after receipt of the pay request or invoice.

(b) When a subcontractor has performed pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials to a contractor in sufficient time to allow the contractor to include the application, request, or invoice in his or her own pay request submitted to an owner, the contractor shall timely pay to the subcontractor in accordance with the payment terms agreed to by the contractor and subcontractor, but if payment terms are not agreed to, then within seven days of receipt of payment from owner by mailing via first class mail or delivering the amount received for the subcontractor’s work and materials based on work properly completed or service properly provided under the contract.

(c) When a sub-subcontractor has performed labor or supplied materials for a subcontractor pursuant to his or her contract and submits an application or pay request for payment or an invoice for materials to a subcontractor in sufficient time to allow the subcontractor to include the application, request, or invoice in his or her own pay request submitted to a contractor, the subcontractor shall timely pay the sub-subcontractor in accordance with the payment terms agreed to by the subcontractor and sub-subcontractor but if payment terms are not agreed to, then within seven days of receipt of payment from contractor by mailing via first class mail or delivering the amount received for the sub-subcontractor’s work and materials based on work properly completed or service properly provided under the contract.

(d) If the owner, contractor, or subcontractor does not make payment in compliance with this chapter, the owner, contractor, or subcontractor shall be obligated to pay his or her contractor, subcontractor, or sub-subcontractor interest at the rate of one percent per month (12% per annum) on the unpaid balance due.

(e) A contractor who receives a payment under subsection (a) or otherwise, from an owner in connection with a contract shall pay each of its subcontractors the portion of the owner’s payment to the extent of that subcontractor’s interest in the owner’s payment. The payment shall include interest, if any, that is attributable to work properly performed or materials suitably stored by that subcontractor if payment for stored materials is provided for in the contract. The payment required by this subsection shall be made not later than the seventh day after the date the contractor receives the owner’s payment.

(f) The percentage of retainage on payments by the contractor to the subcontractor shall not exceed the percentage of retainage on payments made by the owner to the contractor. Any percentage of retainage on payments made by contractor to the subcontractor that exceeds the percentage of retainage on payments made by the owner to the contractor shall be subject to interest to be paid by the contractor to the subcontractor at the rate of one percent per month (12% per annum).

(g) The percentage of retainage on payments by the subcontractor to the sub-subcontractor shall not exceed the percentage of retainage on payments made by the contractor to the subcontractor. Retainage on payments made by the subcontractor to the sub-subcontractor that exceeds the percentage of retainage on payments made by the contractor to the subcontractor shall be subject to interest paid at the rate of one percent per month (12% per annum).

(h) For the purposes of this chapter, retainage means that money, or other security as agreed to by the parties to a construction contract, earned by the contractor, subcontractor or lower tier sub-subcontractor, or supplier for work properly performed or materials suitably stored if payment for stored materials is provided for in the contract, which has been retained by the owner conditioned on final completion and acceptance of all work in connection with a project or projects by the contractor, subcontractor or lower tier sub-subcontractor, or supplier.

(i) A construction contract on any project in this state may provide for the owner’s withholding of retainage from payments to its contractor for work performed by that contractor on a construction project. There shall be retained not more than 10 percent of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site, and after 50 percent completion has been accomplished, no further retainage shall be withheld. If an owner withholds an amount greater than that allowed by this subsection, the owner shall be liable to the contractor for interest accruing on the excess amount withheld at the rate of one percent per month. Nothing herein is intended to limit or alter the paying party’s right to withhold or not approve payment on grounds set forth in the parties’ contract or the grounds set forth in Section 8-29-4 or otherwise for work not properly performed or payment not earned; rather, this section is intended only to establish a maximum amount of retainage, establish the timing for release of retainage, and provide for the payment of interest for improperly held retainage.

(j) A construction contract on any project in this state may provide for the contractor’s withholding of retainage from payments to its subcontractors for work performed by the subcontractors on a construction project. There shall be retained not more than 10 percent of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site, and after 50 percent completion has been accomplished, no further retainage shall be withheld. If a contractor withholds an amount greater than that allowed by this subsection, the contractor shall be liable to the subcontractor for interest accruing on the excess amount withheld at the rate of one percent per month.

(k) A construction contract on any project in this state may provide for the subcontractor’s withholding of retainage from payments to its sub-subcontractors or material suppliers for work performed by such sub-subcontractors or material suppliers on a construction project. There shall be retained not more than 10 percent of the estimated amount of work properly done and the value of materials stored on the site or suitably stored and insured off-site, and after 50 percent completion has been accomplished, no further retainage shall be withheld. If a subcontractor withholds an amount greater than that allowed by this subsection, the subcontractor shall be liable to the sub-subcontractor or material supplier for interest accruing on the excess amount withheld at the rate of one percent per month.

(l)

(1) The owner shall release and pay retainage to the contractor for work completed on any construction contract no later than 60 days after the completion of the contractor’s work defined in its contract with the owner, or no later than 60 days after substantial completion of the project, whichever occurs first, and in both events, with all necessary certificates of occupancy having been issued. The contractor shall release and pay retainage to its subcontractors for work completed pursuant to the terms of this chapter.

(2) For the purposes of this subsection, substantial completion means the stage in the progress of the project when the project or designated portion thereof is sufficiently complete in accordance with the contract documents with all necessary certificates of occupancy having been issued so that the owner may occupy or utilize the project for its intended purpose.

(m) The provisions of subsections (h) through (l) shall not apply to any construction project for or by an electric utility regulated by the Public Service Commission...

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H4: Retainage on Private Projects:

N/A

 Alaska does not have a statute outlining retainage for private projects.

Retainage on Public Projects: 

§ 36.90.210. Required contractual terms

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Universal Citation: AK Stat § 36.90.210 (2013)

(a) The prime contractor and a subcontractor on a public construction or public works contract must include in a subcontract between the prime contractor and subcontractor for the public construction or public works a clause that requires the prime contractor to pay

(1) the subcontractor for satisfactory performance under the subcontract within eight working days after receiving payment from which the subcontractor is to be paid;

(2) the subcontractor all retainage due under the subcontract within eight working days after final payment is received from the state or political subdivision or after the notice period under AS 36.25.020 (b) expires, whichever is later;

(3) the subcontractor interest on an amount that is not paid in accordance with (1) of this subsection for the period beginning on the day after the required payment date and ending on the day on which payment of the amount due is made; the interest shall be computed at an interest rate that is equal to the amount set out in AS 45.45.010 (a);

(4) interest on retainage withheld from the subcontractor at an interest rate that is equal to the amount set out in AS 45.45.010 (a).

(b) A subcontractor on a public construction or public works contract must include in each subcontract under which a person agrees to provide the subcontractor with services, other than as an employee, or supplies to be used in the public construction or public works project a clause that requires the subcontractor to pay

(1) the person for satisfactory performance under the subcontract within eight working days after receiving payment from which the person is to be paid;

(2) the person all retainage due under the subcontract with the person within eight working days after the subcontractor receives its share of the state-held retainage from the prime contractor or another subcontractor;

(3) the person interest on an amount that is not paid in accordance with (1) of this subsection for the period beginning on the day after the required payment date and ending on the day on which payment of the amount due is made; the interest shall be computed at an interest rate that is equal to the amount set out in AS 45.45.010 (a);

(4) interest on retainage withheld from the person at an interest rate that is equal to the amount set out in AS 45.45.010 (a).

§ 36.90.250. Retainage

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(a) The state or a political subdivision of the state shall pay to the prime contractor interest on retainage, including warranty retainage, on a contract for public construction or public works at an interest rate that is equal to the amount set out in AS 45.45.010(a). Interest on retainage accrues from the date of approval of a pay request until the date of payment to the contractor.

(b) A political subdivision that has a population of 500 or less is exempt from the payment of interest under (a) of this section.

§ 45.45.010. Legal rate of interest; prepayment of interest

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Universal Citation: AK Stat § 45.45.010 (2019)

(a) The rate of interest in the state is 10.5 percent a year and no more on money after it is due except as provided in (b) of this section.

(b) Interest may not be charged by express agreement of the parties in a contract or loan commitment that is more than the greater of 10 percent or five percentage points above the annual rate charged member banks for advances by the 12th Federal Reserve District on the day on which the contract or loan commitment is made. A contract or loan commitment in which the principal amount exceeds $25,000 is exempt from the limitation of this subsection.

(c) [Repealed, § 3 ch 84 SLA 1973.]

(d) [Repealed, § 2 ch 94 SLA 1981.]

(e) [Repealed, § 4 ch 146 SLA 1974.]

(f) A bank, credit union, savings and loan institution, pension fund, insurance company, or mortgage company may not require or accept any percent of ownership or profits above its interest rate. This subsection does not apply to a loan if the principal amount of the loan is $1,000,000 or more and the term of the loan is five years or more, or to a negatively amortizing loan secured by owner-occupied real property originated under a program approved or sponsored by

(1) the federal government, including congressionally chartered national corporations; or

(2) the state if

(A) the real property that secures the loan is not subject to forced sale provided the owner has not violated the terms of the loan agreement including terms regarding

(i) payment of property taxes;

(ii) payment of hazard or fire insurance premiums;

(iii) keeping the property in reasonable repair;

(iv) not vacating the property for a period longer than 12 months;

(B) the owner may not be evicted from the real property that secures the loan unless a term of the loan agreement regarding a matter listed in (A)(i) - (iv) of this paragraph has been violated;

(C) neither the estate nor any heir of the former owner may be compelled to pay a deficiency judgment related to the loan; and

(D) the estate or an heir of the former owner has a right of first refusal and may either pay off the loan balance in full, if the former owner had equity in the property, or pay a sum not to exceed 95 percent of the value of the property at the time of exercise of the right of first refusal as determined by an independent real estate appraiser licensed under AS 08.87.

(g) Loan contracts and commitments covering one- to four-family dwellings may be prepaid without penalty, except federally insured loans that require a prepayment penalty.

(h) If the limitations on interest rates provided for in this section are inconsistent with the provisions of any other statute covering maximum interest, service charges, or discount rates, then the provisions of the other statute prevail.

Retainage on Private Projects:

§32-1182 Progress payments by owner; conditions; interest

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D. Except as provided in subsection F of this section, a billing or estimate for a progress payment shall be deemed certified and approved fourteen days after the owner receives the billing or estimate, unless before that time the owner or the owner's agent prepares and issues a written statement stating in reasonable detail the owner's reasons for not certifying or approving all or a portion of the billing or estimate. The owner is deemed to have received the billing or estimate when the billing or estimate is submitted to any person designated by the owner for receipt or for certification and approval of the billing or estimate. The owner may withhold from a progress payment a reasonable amount for retention. An owner may decline to certify and approve a billing or estimate or portion of a billing or estimate for any of the following reasons:

1. Unsatisfactory job progress.

2. Defective construction work or materials not remedied.

3. Disputed work or materials.

4. Failure to comply with other material provisions of the construction contract.

5. Third-party claims filed or reasonable evidence that a claim will be filed.

6. Failure of the contractor or a subcontractor to make timely payments for labor, equipment and materials.

7. Damage to the owner.

8. Reasonable evidence that the construction contract cannot be completed for the unpaid balance of the construction contract sum.

§32-1182(E). Progress payments by owner; conditions; interest

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 An owner may withhold from a progress payment only an amount that is sufficient to pay the direct costs and expenses the owner reasonably expects to incur to protect the owner from loss for which the contractor is responsible and that results from any reasons set forth in writing pursuant to subsection D of this section.

§32-1182(R). Progress payments by owner; conditions; interest

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On the written request of a subcontractor, the owner shall notify the subcontractor within five days after the issuance of a progress payment to the contractor. On the written request of a subcontractor, the owner shall notify the subcontractor within five days after the owner releases retention or makes the final payment to the contractor on the construction contract. A subcontractor's request pursuant to this subsection shall remain in effect for the duration of the subcontractor's work on the project.

Retainage on Public Projects:

§34-221(C). Contract with successful bidder; payments to contractor; security; recovery of damages by contractor for delay; progress payments

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The terms of a contract entered into pursuant to subsection A shall include the following items:

1. A surety company bond or bonds as required under this article.

2. The owner by mutual agreement may make progress payments on contracts of less than ninety days and shall make monthly progress payments on all other contracts as provided for in this paragraph. Payment to the contractor on the basis of a duly certified and approved estimate of the work performed during the preceding calendar month under such contract may include payment for material and equipment, but to insure the proper performance of such contract, the owner shall retain ten per cent of the amount of each estimate until final completion and acceptance of all material, equipment and work covered by the contract. An estimate of the work submitted shall be deemed approved and certified for payment after seven days from the date of submission unless before that time the owner or owner's agent prepares and issues a specific written finding setting forth those items in detail in the estimate of the work that are not approved for payment under the contract. The owner may withhold an amount from the progress payment sufficient to pay the expenses the owner reasonably expects to incur in correcting the deficiency set forth in the written finding. The progress payments shall be paid on or before fourteen days after the estimate of the work is certified and approved. The estimate of the work shall be deemed received by the owner on submission to any person designated by the owner for the submission, review or approval of the estimate of the work.

3. When the contract is fifty per cent completed, one-half of the amount retained including any securities substituted under paragraph 5 shall be paid to the contractor upon the contractor's request provided the contractor is making satisfactory progress on the contract and there is no specific cause or claim requiring a greater amount to be retained. After the contract is fifty per cent completed, no more than five per cent of the amount of any subsequent progress payments made under the contract may be retained providing the contractor is making satisfactory progress on the project, except that if at any time the owner determines satisfactory progress is not being made ten per cent retention shall be reinstated for all progress payments made under the contract subsequent to the determination.

4. Upon completion and acceptance of each separate building, public work or other division of the contract on which the price is stated separately in the contract, except as qualified in paragraph 5, payment may be made in full, including retained percentages thereon, less authorized deductions. In preparing estimates, the material and equipment delivered on the site to be incorporated in the job shall be taken into consideration in determining the estimated value by the architect or engineer.

5. Ten per cent of all estimates shall be retained by the agent as a guarantee for complete performance of the contract, to be paid to the contractor within sixty days after completion or filing notice of completion of the contract. Retention of payments by a purchasing agency longer than sixty days after final completion and acceptance requires a specific written finding by the purchasing agency of the reasons justifying the delay in payment. No purchasing agency may retain any monies after sixty days which are in excess of the amount necessary to pay the expenses the purchasing agency reasonably expects to incur in order to pay or discharge the expenses determined by the purchasing agency in the finding justifying the retention of monies. In lieu of the retention provided in this section, the agent, at the option of the contractor, shall accept as a substitute an assignment of time certificates of deposit of banks licensed by this state, securities of or guaranteed by the United States of America, securities of this state, securities of counties, municipalities and school districts within this state or shares of savings and loan associations authorized to transact business in this state, in an amount equal to ten per cent of all estimates which shall be retained by the agent as a guarantee for complete performance of the contract. In the event the agent accepts substitute security as described in this paragraph for the ten per cent retention, the contractor shall be entitled to receive all interest or income earned by such security as it accrues and all such security in lieu of retention shall be returned to the contractor by the agent within sixty days after final completion and acceptance of all material, equipment and work covered by the contract if the contractor has furnished the agent satisfactory receipts for all labor and material billed and waivers of liens from any and all persons holding claims against the work. In no event shall the agent accept a time certificate of deposit of a bank or shares of a savings and loan association in lieu of the retention specified unless accompanied by a signed and acknowledged waiver of the bank or savings and loan association of any right or power to setoff against either the agent or the contractor in relationship to the certificates or shares assigned.

6. In any instance where the agent has accepted substitute security as provided in paragraph 5, any subcontractor undertaking to perform any part of such public work shall be entitled to provide substitute security to the contractor upon terms and conditions similar to those described in paragraph 5, and such security shall be in lieu of any retention under the subcontract.

§34-609. Contracts for construction-manager-at-risk, design-build and job-order-contracting construction services; payments to contractor; security; recovery of damages by contractor for delay; progress payments

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Retainage on Private Projects:

N/A

Arkansas does not provide a retainage statue for private projects.

Retainage on Public Projects:

§ 22-9-501. Substitution of securities for retained payments - Contracts generally

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(a) Under any contract made or awarded by the state or by any public department or official thereof, including the construction, improvement, or repair of any and all ways, roads, or bridges with appurtenances which, by law, are under the supervision of the State of Arkansas or any political subdivision, the contractor may withdraw the whole, or any portion thereof, of the amount retained for payments to the contractor pursuant to the terms of the contract upon depositing with the Treasurer of State, except as provided in § 22-9-502, direct obligations of or obligations fully guaranteed by the federal government or any agency or department thereof, obligations of the State of Arkansas, obligations of any public housing authority, or certificates of deposit from federal or state banks or savings and loan associations.

(b) No amount shall be withdrawn in excess of the market value of the securities at the time of deposit or at the time of withdrawal.

H5 § 22-9-601. Definitions

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As used in this subchapter:

(1) "Construction contract" means a contract between a public agency and a prime contractor which obligates the prime contractor to construct, repair, replace, or maintain improvements for the public agency;

(2) "Cost of the project" means the sum the public agency originally agrees to pay the prime contractor for performance of the contract plus any other sums the public agency agrees to pay the prime contractor for extra-cost items included in the construction project which were not included in the original contract;

(3) "Prime contractor" means the party which, individually or in concert with other prime contractors, establishes a direct contractual relationship with the public agency obligating the prime contractor to construct improvements for the public agency. Where applicable under the law, the prime contractor shall be a contractor licensed and in compliance with Arkansas law;

(4) "Progress payments" means the monthly estimates submitted by the prime contractor to the public agency for payment of that portion of the work completed, including stored materials and equipment purchased; and

(5) "Public agency" means the State of Arkansas or any of its agencies, departments, or institutions or any political subdivision of the state, or taxing unit, and includes any nonprofit corporation or association receiving public funds in whatever form, including grants, loans, and subsidies.

§ 22-9-602. Exception

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The provisions of this subchapter shall not be applicable to contracts entered into by the State Highway Commission for the construction or maintenance of public highways, roads, or streets.

H5 § 22-9-603. Waiver

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The parties to a construction contract to which this subchapter is applicable shall have no authority to vary or waive the provisions of this subchapter by agreement of the parties.

H5 § 22-9-604. Procedure

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• (a)
  • (1)
    • (A) In the case of a construction contract entered into between a public agency and a contractor who is required to furnish a performance and payment bond, the contractor shall be entitled to payment of ninety-five percent (95%) of the earned progress payments when due, with the public agency retaining five percent (5%) to assure faithful performance of the construction contract.
    • (B)
      • (i) A public agency may forego withholding retainage of the progress payments if:
        • (a) The construction contract is fifty-percent (50%) complete;
        • (b) The contractor has provided the work in a satisfactory manner; and
        • (c) The design professional and public agency agree with and approve of subdivisions (a)(1)(B)(i)(a) and (b) of this section.
      • (ii) This subdivision (a)(1)(B) does not prohibit a public agency from withholding retainage throughout the project.
  • (2) If the construction contract allows for phased work in which completion may occur on a partial occupancy, any retention proceeds withheld and retained under this section shall be partially released within thirty (30) days under the same conditions under this section in direct proportion to the value of the part of the capital improvement completed.

• (b)
  • (1) In the case of a construction subcontract entered into between a contractor for a public agency and a subcontractor who is required by the contractor to furnish a performance and payment bond, the subcontractor shall be entitled to payment of ninety-five percent (95%) of the earned progress payments when due, with the contractor retaining five percent (5%) to assure faithful performance of the construction subcontract.
  • (2) Upon the approval of the contractor, if the subcontractor completes fifty percent (50%) of the construction subcontract the contractor shall not retain any further moneys.

• (c) All sums withheld by the public agency shall be paid to the contractor within thirty (30) days after the construction contract has been completed.

• (d) In the event the construction contract requires the contractor to purchase and furnish materials or equipment that will be stored on the job site or in a bonded warehouse by the contractor and used in the job as required by the construction contract, no retainage shall be withheld on that amount of the submitted progress payment pertaining to the cost of these stored materials or equipment.

H4: Retainage on Private Projects:

H5 § 8812: Retention Payment

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a) If an owner withholds a retention from a direct contractor, the owner shall, within 45 days after completion of the work of improvement, pay the retention to the contractor.

(b) If part of a work of improvement ultimately will become the property of a public entity, the owner may condition payment of a retention allocable to that part on acceptance of the part by the public entity.

(c) If there is a good faith dispute between the owner and direct contractor as to a retention payment due, the owner may withhold from final payment an amount not in excess of 150 percent of the disputed amount.

H4: Retainage on Public Projects:

§ 10261: Payments upon contracts; progress payments; withholding percentage of contract price; warrants; electronic transfer; complex projects requiring higher retention amount

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(a) Payments upon contracts shall be made as the department prescribes upon estimates made and approved by the department, but progress payments shall not be made in excess of 100 percent of the percentage of actual work completed plus a like percentage of the value of material delivered on the ground or stored subject to or under the control of the state, and unused, except as otherwise provided in this section. The department shall withhold not more than 5 percent of the contract price until final completion and acceptance of the project. However, at any time after 95 percent of the work has been completed, the department may reduce the funds withheld to an amount not less than 125 percent of the estimated value of the work yet to be completed, as determined by the department, if the reduction has been approved, in writing, by the surety on the performance bond and by the surety on the payment bond. The Controller shall draw his or her warrants upon estimates so made and approved by the department and the Treasurer shall pay them. The funds may be released by electronic transfer if that procedure is requested by the contractor, in writing, and if the department has, in place at the time of the request, the mechanism for the transfer.

(b) (1) Notwithstanding subdivision (a), when the director of the department has made a finding prior to the bid that a specified project is substantially complex and therefore requires a higher retention amount than 5 percent, and the department includes in the bid documents details explaining the basis for the finding and the actual retention amount, then payments upon contracts by the department shall be made as the department prescribes upon estimates made and approved by the department. However, progress payments shall not be made in excess of 95 percent of the percentage of actual work completed, plus a like percentage of the value of material delivered on the ground or stored, subject to, or under the control of the state, and unused, except as otherwise provided in this section. At any time after 95 percent of the work has been completed, the department may reduce the funds withheld to an amount not less than 125 percent of the estimated value of the work yet to be completed, as determined by the department, if the reduction has been approved, in writing, by the surety on the performance bond and by the surety on the payment bond. The Controller shall draw his or her warrants upon estimates so made and approved by the department and the Treasurer shall pay them with funds appropriated therefor. The funds may be released by electronic transfer if that procedure is requested by the contractor, in writing, and if the department has, in place at the time of the request, the mechanism for the transfer.

(2) Any finding by the director of a department that a project is substantially complex shall include a description of the specific project and why it is a unique project that is not regularly, customarily, or routinely performed by the agency or licensed contractors.

(c) This section shall remain in effect only until January 1, 2018, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2018, deletes or extends that date. 

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H4: Retainage on Private Projects:

H5 § 38-46-101. Definitions

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As used in this article 46, unless the context otherwise requires:

(1) “Contract” means a contract to construct, alter, or repair a structure on or improvement on real property.

(2) “Contractor” means a person that is a party to a contract with a property owner.

(3) “Property owner” means a private person with an interest, including a leasehold interest, in real property or in a real property fixture that has entered into a contract with a contractor.

(4) “Retainage” means a percentage of:

(a) a contract or subcontract price retained from a contractor or subcontractor as assurance that the contract or subcontract will be satisfactorily completed; or

(b) a supply agreement price as assurance that the goods, materials, or equipment meets the specifications necessary for satisfactory performance of a contract or subcontract.

(5)

(a) “Subcontract” means an agreement:

(I) To perform a portion of the work required by a contract; and

(II) To furnish or perform on-site labor, with or without furnishing materials.

(b) To be a subcontract, an agreement need not be made directly with a contractor; the agreement may be made with a subcontractor or a subsequent subcontractor.

(6) “Subcontractor” means a person that enters into a subcontract with a contractor, a subcontractor, or a subsequent subcontractor.

(7) “Subsequent subcontractor” includes a person who has signed a subcontract with a sub-subcontractor, a sub-sub-subcontractor, or any additional level of subcontractor.

(8) “Supply agreement” means an agreement to provide materials, goods, or equipment to a contractor or subcontractor.

H5 § 38-46-102. Applicability of article

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(1) Except as provided in subsection (2) of this section, this article 46 applies to:

(a) a contract that:

(I) Has a price of at least one hundred fifty thousand dollars; and

(II) Is made between a property owner and a contractor;

(b) a subcontract to a contract described in subsection (1)(a) of this section, notwithstanding that the subcontract price is less than one hundred fifty thousand dollars; and

(c) a supply agreement that is made to supply materials, goods, or equipment used to perform a contract notwithstanding that the supply agreement price is less than one hundred fifty thousand dollars.

(2) This article 46 does not apply to:

(a) a single contract that governs the building of either:

(I) One single-family dwelling; or

(II) One multifamily dwelling with no more than four family dwelling units; or

(b) a contract with a public entity, as defined in section 24-91-102 (3).

§ 38-46-103. Private construction contracts - retainage - conditions precedent

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(1) A property owner, Contractor, or subcontractor shall not withhold as retainage more than five percent of the price of the work completed under the contract or subcontract. Making a partial payment under this subsection (1) is not acceptance or approval of some of the work or of a waiver of defects in the work.

(2) This article 46 addresses only the amount of retainage that may be withheld by a property owner, contractor, or subcontractor and does not change, override, or invalidate any other provision in a contract, subcontract, or supply agreement. Such a provision includes, but is not limited to:

(a) a provision relating to timing of a payment, including final payment;

(b) a provision requiring satisfactory performance of the work of the Contract, Subcontract, or supply agreement before payment is due;

(c) a provision allowing a property owner, Contractor, or subcontractor to withhold payment or deduct from any payment otherwise due any backcharges or other amounts as authorized by the Contract, Subcontract, or supply agreement; or

(d) a provision relating to a condition precedent that must be satisfied before a payment is due to a contractor, Subcontractor, sub-Subcontractor, or supplier. A condition precedent includes a requirement that:

(I) a contractor must actually receive payment from the property owner to be obliged to make payment to a subcontractor or supplier; or

(II) a subcontractor must actually receive payment from the contractor to be obliged to make payment to a subsequent subcontractor or supplier.

§ 38-46-104. Lien waivers

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To receive payment under this article 46, the recipient of the payment must provide an executed lien waiver for amounts actually paid if required by the contract, Subcontract, or Supply agreement.

Retainage on Public Projects:

§ 24-91-103. Public entity; contracts; partial payments

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Retainage on Private Projects:

§ 42-158i. Definitions

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As used in sections 42-158i to 42-158n, inclusive, unless the context otherwise requires:

(1) “Owner” means any individual, corporation, nonprofit corporation, partnership, limited partnership, limited liability company or other business entity that is the owner of record or lessee of real property upon which construction, renovation or rehabilitation is to be or is being performed pursuant to a construction contract regarding such real property.

(2) “Construction contract” or “contract” means any contract for the construction, renovation or rehabilitation in this state on or after October 1, 1999, including any improvements to real property that are associated with such construction, renovation or rehabilitation, or any subcontract for construction, renovation or rehabilitation between an owner and a contractor, or between a contractor and a subcontractor or subcontractors, or between a subcontractor and any other subcontractor. “Construction contract” or “contract” does not include (A) any public works or other building contract entered into with this state, the United States, any other state, and any municipality or other political subdivision of this state or any other state, (B) a contract or project funded or insured by the United States Department of Housing and Urban Development, (C) a contract between an owner and a contractor for an amount of twenty-five thousand dollars or less or a subcontract which results from such a contract, or (D) a contract for a building intended for residential occupancy containing four or less units.

(3) “Retainage” means a sum withheld from progress payments to the contractor or subcontractor, otherwise payable to a contractor or subcontractor by an owner conditioned on substantial or final completion of all work in accordance with the terms of a written or verbal construction contract, but does not include any sum withheld due to the contractor’s or subcontractor’s failure to comply with construction plans and specifications.

§ 42-158j. Required contract provisions re timely payment of contractors, subcontractors and suppliers. Payment requisition statement. Remedy for untimely payments. Penalties. Escrow accounts. Withholding payments due because of disputes prohibited. Progress payments. Rights of action

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(a) Each construction contract shall contain the following provisions:

(1) A requirement that the owner pay any amounts due to any contractor in a direct contractual relationship with the owner, or due to any subcontractor or supplier in a direct contractual relationship with the contractor, whether for labor performed or materials furnished, not later than thirty days after the date any written request for such payment has been made to the owner by such contractor, subcontractor or supplier;

(2) a requirement that the contractor pay any amounts due any subcontractor or supplier, whether for labor performed or materials furnished, not later than twenty-five days after the date the contractor receives payment from the owner which encompasses labor performed or materials furnished by such subcontractor or supplier; and

(3) a requirement that the contractor shall include in each of its subcontracts a provision requiring each subcontractor and supplier to pay any amounts due any of its subcontractors or suppliers, whether for labor performed or materials furnished, not later than twenty-five days after the date such subcontractor or supplier receives a payment from the contractor which encompasses labor performed or materials furnished by such subcontractor or supplier.

(b) Each payment requisition submitted by a contractor or subcontractor in accordance with the requirements of subsection (a) of this section shall include a statement showing the status of all pending construction change orders, other pending change directives and approved changes to the original contract or subcontract. Such statement shall identify the pending construction change orders and other pending change directives, and shall include the date such change orders and directives were initiated, the costs associated with their performance and a description of any work completed. As used in this section, “pending construction change order” or “other pending change directive” means an authorized directive for extra work that has been issued to a contractor or a subcontractor.

(c)

(1) If payment is not made by an owner in accordance with the requirements of subdivision (1) of subsection (a) of this section or any applicable construction contract, such contractor, subcontractor or supplier shall set forth its claim against the owner through notice by registered or certified mail. All amounts due from the owner pursuant to this subsection and subdivision (1) of subsection (a) of this section shall be limited to the amount owed to the contractor by the owner for work performed under the contract at the date such notice is provided.

(2) If payment is not made by a contractor in accordance with the requirements of subdivision (2) of subsection (a) of this section or any applicable construction contract, the subcontractor or supplier shall set forth its claim against the contractor through notice by registered or certified mail.

(3) If payment is not made by a subcontractor or supplier in accordance with the provisions of subdivision (3) of subsection (a) of this section, the subcontractor or supplier to whom money is owed shall set forth its claim against the subcontractor or supplier who has failed to comply with the provisions of said subdivision (3) through notice by registered or certified mail.

(4) Ten days after the receipt of any notice specified in subdivisions (1), (2) and (3) of this subsection, the owner, contractor, subcontractor or supplier, as the case may be, shall be liable for interest on the amount due and owing at the rate of one per cent per month. Such interest shall accrue beginning on the date any such notice is received. In addition, such owner, contractor, subcontractor or supplier, upon written demand from the party providing such notice, shall be required to place funds in the amount of the claim, plus such interest of one per cent per month, in an interest-bearing escrow account in a bank in this state, provided such owner, contractor, subcontractor or supplier may refuse to place the funds in escrow on the grounds that the party making such demand has not substantially performed the work or supplied the materials according to the terms of the construction contract or that the funds so demanded are not due under the owner’s contract with the contractor. In the event that such owner, contractor, subcontractor or supplier refuses to place such funds in escrow and such owner, contractor, subcontractor or supplier is found to have unreasonably withheld payment due a party providing such notice, such owner, contractor, subcontractor or supplier shall be liable to the party making demand for payment of such funds and for reasonable attorneys’ fees plus interest on the amount due and owing at the rate of one per cent per month. In addition, any owner, contractor, subcontractor or supplier who is found to have withheld payments to a party providing such notice in bad faith shall be liable for ten per cent damages.

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H4: Retainage on Private Projects:

H5 N/A

Delaware does not provide a retainage statute for private projects

H4: Retainage on Public Projects:

H5 29 § 6516(3) 

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(3) The retainage, as allowed by § 6962(d)(5) of this title, shall be retained by the agency as a guarantee for complete performance of the contract, to be paid to the contractor within 60 days after completion or filing notice of completion of the contract or within 30 days of a required federal agency’s final approval or certification. Retention of payments by an agency longer than 60 days after final completion and acceptance requires a specific written finding by the agency of the reasons justifying the delay in payment. Such written finding shall be furnished by the agency within 10 days after completion or filing notice to the contractor or within 10 days of the required federal agency’s final approval or certification. No agency may retain any moneys after 60 days in an amount exceeding 150% of the necessary amount to pay the expenses the agency reasonably expects to incur in order to pay or discharge the expenses determined by the agency in the finding justifying the retention of moneys.

29 § 6962(c)(5):

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a. Based upon the submission provided for in paragraphs (c)(3) and (4) of this section, the Office Review Committee, which shall include at least 2 Office employees, shall assign a contractor or subcontractor the following classification or classifications and limits for the purpose of determining the types of projects for which a contractor or subcontractor is entitled to bid:

1. A trade(s) or work classification(s); and

2. The maximum contract dollar value for which the contractor subcontractor may submit a bid.

To effectuate these requirements of the prequalification process, the Office shall develop rules and regulations for assigning classifications and maximum dollar limits.

b. The classification shall be made, or prequalification may be denied, and notice thereof shall be sent to the contractor or subcontractor within 5 days of the determination made pursuant to paragraph (c)(5)a. of this section by registered or certified mail or other legally valid methods. Notice of prequalification classification or denial shall also be sent to the contracting agency if said agency is not the Office.

H5 29 § 6962(d)(5): Retainages and Substitution of Securities

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a. Based upon the submission provided for in paragraphs (c)(3) and (4) of this section, the Office Review Committee, which shall include at least 2 Office employees, shall assign a contractor or subcontractor the following classification or classifications and limits for the purpose of determining the types of projects for which a contractor or subcontractor is entitled to bid:

1. A trade(s) or work classification(s); and

2. The maximum contract dollar value for which the contractor subcontractor may submit a bid.

To effectuate these requirements of the prequalification process, the Office shall develop rules and regulations for assigning classifications and maximum dollar limits.

b. The classification shall be made, or prequalification may be denied, and notice thereof shall be sent to the contractor or subcontractor within 5 days of the determination made pursuant to paragraph (c)(5)a. of this section by registered or certified mail or other legally valid methods. Notice of prequalification classification or denial shall also be sent to the contracting agency if said agency is not the Office.

29 § 6962(d)(5): Retainages and Substitution of Securities

a) Authority to withhold contract retainage.

1. Agencies may retain a portion of the payments to be made to a contractor for work performed pursuant to a public works contract. The percentage of the value of work performed which may be retained shall be established for each particular contract in the contract bidding documents and shall be incorporated into the contract. The percentage retained shall be 5% of the value of the work completed by the contractor under the contract. Upon completion of the work under the contract, the agency may release 60% of the amount then retained. The balance of the amount retained will be held until:

A. All reports required of the contract are received;

B. All subcontractors in trades listed on the bid form are paid by the contractor, unless the amount owed to the subcontractor is disputed, in which case the agency may withhold 150% of the amount withheld by the contractor in its dispute with the subcontractor; and

C. Final payment is authorized by the agency.

2. The agency may, at its option, retain, temporarily or permanently, a small amount and may cause the contractor to be paid, temporarily or permanently, from time to time, such portion of the amount retained as it deems equitable. The contractor shall be paid for all work that is due to the contractor under the contract except for the amount retained.

3. The agency may at the beginning of each public works contract establish a time schedule for the completion of the project. If the project is delayed beyond the completion date due to the contractor’s failure to meet his or her responsibilities, the agency may forfeit all or part of retainage at its discretion.

b) Procedures requirement.–Agencies shall establish standard procedures and regulations for the administration of contract retainages prior to entering into contracts which require retainages. All agency procedures shall provide for contract retainage and substitution of securities for retainage.

c) Substitution of Securities.

1. The contractor under a public works contract, with the approval of the agency, may deposit securities as authorized by this section in substitution for monies being withheld from the contractor as retainage. Securities allowable for substitution of retainage shall be: United States Treasury Bonds, United States Treasury Notes, United States Treasury Certificates of Indebtedness or United States Treasury Bills; bonds or notes of the State; bonds of any political subdivision of the State; or certificates of deposit from state or national banks located in this State; or any letter of credit or other security approved by the agency.

2. The contractor shall have the right to withdraw and take all or portions of the monies being retained from the contractor under the contract by depositing securities in substitution for such monies. The contractor may do so only in accordance with the agency’s standard procedures and mechanisms. Such substitution shall be approved by the agency only if the aggregate market value of the securities are at least as great as the contract retainages being withdrawn.

3. A contractor may substitute cash for and receive back all or part of the securities on deposit from the contractor. The cash must at least have the same value as the market value of the securities received back from the agency.

4. The contractor shall be entitled to receive, in all events, all interest and income earned on the securities deposited by the contractor in substitution for contract retainage. If the securities deposited are in the form of coupon bonds, the agency or the escrow agent designated by it and holding the deposited securities shall deliver each coupon to the contractor as it matures.

5. All securities shall be released, delivered and paid over to the contractor at such time as cash monies being retained from the contractor would have been released, delivered and paid over to the contractor under the public works contract if there had been no substitution for the cash monies.

6. All costs of depositing and maintaining securities as provided for in this section shall be borne by the contractor.

7. No agency shall have any duty to invest monies being retained by it from a contractor under a public works contract in any interest-bearing account or to establish any procedures or mechanisms for any such investment.

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H4: Retainage on Private Projects:

H5 N/A

Florida does not provide a retainage statute for private projects.

H4: Retainage Statutes on Public Projects (Local Government):

H5 § 218.735. (Effective Until 10/1/2020) Timely payment for purchases of construction services

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(1) The due date for payment for the purchase of construction services by a local governmental entity is determined as follows:

(a) If an agent must approve the payment request or invoice before the payment request or invoice is submitted to the local governmental entity, payment is due 25 business days after the date on which the payment request or invoice is stamped as received as provided in s. 218.74(1). The contractor may send the local government an overdue notice. If the payment request or invoice is not rejected within 4 business days after delivery of the overdue notice, the payment request or invoice shall be deemed accepted, except for any portion of the payment request or invoice that is fraudulent or misleading.

(b) If an agent need not approve the payment request or invoice submitted by the contractor, payment is due 20 business days after the date on which the payment request or invoice is stamped as received as provided in s. 218.74(1).

A local governmental entity shall identify the agent or employee of the local governmental entity, or the facility or office, to which the contractor may submit its payment request or invoice. This requirement shall be included in the contract between the local governmental entity and contractor, or shall be provided by the local governmental entity through a separate written notice, as required under the contract, no later than 10 days after the contract award or notice to proceed. A contractor’s submission of a payment request or invoice to the identified agent, employee, facility, or office of the local governmental entity shall be stamped as received as provided in s. 218.74(1) and shall commence the time periods for payment or rejection of a payment request or invoice as provided in this subsection and subsection (2).

(2) If a payment request or invoice does not meet the contract requirements, the local governmental entity must reject the payment request or invoice within 20 business days after the date on which the payment request or invoice is stamped as received as provided in s. 218.74(1). The rejection must be written and must specify the deficiency and the action necessary to make the payment request or invoice proper.

(3) If a payment request or an invoice is rejected under subsection (2) and the contractor submits a payment request or invoice that corrects the deficiency, the corrected payment request or invoice must be paid or rejected on the later of:

(a) Ten business days after the date the corrected payment request or invoice is stamped as received as provided in s. 218.74(1); or

(b) If the local governmental entity is required by ordinance, charter, or other law to approve or reject the corrected payment request or invoice, the first business day after the next regularly scheduled meeting of the local governmental entity held after the corrected payment request or invoice is stamped as received as provided in s. 218.74(1).

(4) If a dispute between the local governmental entity and the contractor cannot be resolved by the procedure in subsection (3), the dispute must be resolved in accordance with the dispute resolution procedure prescribed in the construction contract or in any applicable ordinance, which shall be referenced in the contract. In the absence of a prescribed procedure, the dispute must be resolved by the procedure specified in s. 218.76(2).

(5) If a local governmental entity disputes a portion of a payment request or an invoice, the undisputed portion shall be paid timely, in accordance with subsection (1).

(6) If a contractor receives payment from a local governmental entity for labor, services, or materials furnished by subcontractors and suppliers hired by the contractor, the contractor must remit payment due to those subcontractors and suppliers within 10 days after the contractor’s receipt of payment. If a subcontractor receives payment from a contractor for labor, services, or materials furnished by subcontractors and suppliers hired by the subcontractor, the subcontractor must remit payment due to those subcontractors and suppliers within 7 days after the subcontractor’s receipt of payment. This subsection does not prohibit a contractor or subcontractor from disputing, pursuant to the terms of the relevant contract, all or any portion of a payment alleged to be due to another party if the contractor or subcontractor notifies the party whose payment is disputed, in writing, of the amount in dispute and the actions required to cure the dispute. The contractor or subcontractor must pay all undisputed amounts due within the time limits imposed by this section.

(7) Each contract for construction services between a local governmental entity and a contractor must provide for the development of a single list of items required to render complete, satisfactory, and acceptable the construction services purchased by the local governmental entity.

(a) The contract must specify the process for developing the list, including the responsibilities of the local governmental entity and the contractor in developing and reviewing the list and a reasonable time for developing the list:

1. For construction projects having an estimated cost of Less than $10 million, within 30 calendar days after reaching substantial completion of the construction services purchased as defined in the contract, or, if not defined in the contract, upon reaching beneficial occupancy or use; or

2. For construction projects having an estimated cost of $10 million or more, within 30 calendar days, or, if extended by contract, up to 60 calendar days after reaching substantial completion of the construction services purchased as defined in the contract, or, if not defined in the contract, upon reaching beneficial occupancy or use.

The contract must also specify a date for the delivery of the list of items, not to exceed 5 days after the list of items has been developed and reviewed in accordance with the time periods set forth in subparagraphs 1. and 2.

(b) If the contract between the local governmental entity and the contractor relates to the purchase of construction services on more than one building or structure, or involves a multiphased project, the contract must provide for the development of a list of items required to render complete, satisfactory, and acceptable all the construction services purchased pursuant to the contract for each building, structure, or phase of the project within the time limitations provided in paragraph (a).

(c) The final contract completion date must be at least 30 days after the delivery of the list of items. If the list is not provided to the contractor by the agreed upon date for delivery of the list, the contract time for completion must be extended by the number of days the local governmental entity exceeded the delivery date. Damages may not be assessed against a contractor for failing to complete a project within the time required by the contract, unless the contractor failed to complete the project within the contract period as extended under this paragraph.

(d) The failure to include any corrective work or pending items not yet completed on the list does not alter the responsibility of the contractor to complete all the construction services purchased pursuant to the contract.

(e) Upon completion of all items on the list, the contractor may submit a payment request for all remaining retainage withheld by the local governmental entity pursuant to this section. If a good faith dispute exists as to whether one or more items identified on the list have been completed pursuant to the contract, the local governmental entity may continue to withhold up to 150 percent of the total costs to complete such items.

(f) All items that require correction under the contract and that are identified after the preparation and delivery of the list remain the obligation of the contractor as defined by the contract.

(g) Warranty items or items not included in the list of items required under paragraph (a) may not affect the final payment of retainage as provided in this section or as provided in the contract between the contractor and its subcontractors and suppliers.

(h) Retainage may not be held by a local governmental entity or a contractor to secure payment of insurance premiums under a consolidated insurance program or series of insurance policies issued to a local governmental entity or a contractor for a project or group of projects, and the final payment of retainage as provided in this section may not be delayed pending a final audit by the local governmental entity’s or contractor’s insurance provider...

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Retainage on Private Projects:

§ 13-11-5. Withholding of payments and grounds therefor

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(a) Nothing in this chapter shall prevent the owner from withholding payment to its contractor because of the following: unsatisfactory job progress; defective construction which has not been remedied; disputed work; third-party claims filed or reasonable evidence that a claim will be filed; failure of the contractor or its subcontractor to make timely payments for labor, equipment, and materials; damage caused by the contractor to the owner, other contractors, or subcontractors; or reasonable evidence that the contract cannot be completed for the unpaid balance of the contract sum. In addition to the other bases for withholding set forth in this subsection, the owner may withhold a reasonable amount for retainage, provided that the retainage withheld by the owner shall not exceed the retainage percentage set forth in the contract between the contractor and the owner.

(b) Nothing in this chapter shall prevent the contractor or a subcontractor from withholding payment to a subcontractor for: unsatisfactory job progress; defective construction which has not been remedied; disputed work; third-party claims filed or reasonable evidence that a claim will be filed; failure of the subcontractor to make timely payments for labor, equipment, and materials; damage caused by the subcontractor to the owner, the contractor, or contractors or subcontractors; or reasonable evidence that the subcontract cannot be completed for the unpaid balance of the subcontract sum. In addition to the other bases for withholding set forth in this subsection, the contractor or the subcontractor, as the case may be, may withhold a reasonable amount for retainage, provided that the retainage withheld shall not exceed the percentage retained from the contractor by the owner on account of the subcontractor’s work.

§ 13-11-6. Pass through of payments from owner by contractor to subcontractor

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The contractor shall, within ten days from the contractor’s receipt of retainage from the owner, pass through payments to subcontractors and shall reduce each subcontractor’s retainage in the same manner as the contractor’s retainage is reduced by the owner, provided that the value of the subcontractor’s work complete and in place equals 50 percent of his or her subcontract value, including approved change orders and other additions to the subcontract value and, provided, further, that the work of the subcontractor is proceeding satisfactorily and, provided, further, that the subcontractor has provided or provides such satisfactory reasonable assurances of continued performance and financial responsibility to complete his or her work as the contractor in his or her reasonable discretion may require, including but not limited to a payment and performance bond.

Retainage on Public Projects:

H5 § 13-10-80(b)(2)(A): Progress Payments to be Made to Contractors on Periodic Basis

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(b) In any public works construction contract entered into on or after July 1, 2001, with an owner, as defined in paragraph (3) of subsection (a) of this Code section, such contract shall provide for the following:

(2)(A) Retainage to a maximum of 10 percent of each progress payment; provided, however, when 50 percent of the contract value including change orders and other additions to the contract value provided for by the contract documents is due and the manner of completion of the contract work and its progress are reasonably satisfactory to the owner’s authorized contract representative, the owner shall withhold no more retainage. At the discretion of the owner and with the approval of the contractor, the retainage of each subcontractor may be released separately as the subcontractor completes his or her work.

H5 §13-10-80(b)(2)(C):

(b) In any public works construction contract entered into on or after July 1, 2001, with an owner, as defined in paragraph (3) of subsection (a) of this Code section, such contract shall provide for the following:

(2)(C) At substantial completion of the work or such other standard of completion as may be provided in the contract documents and as the owner’s authorized contract representative determines the work to be reasonably satisfactory, the owner shall, within 30 days after invoice and other appropriate documentation as may be required by the contract documents are provided, pay the retainage to the contractor. If at that time there are any remaining incomplete minor items, an amount equal to 200 percent of the value of each item as determined by the owner’s authorized contract representative shall be withheld until such item or items are completed. The reduced retainage shall be shared by the contractor and subcontractors as their interests may appear.

H5 §13-10-81: Retained Amounts on Water and Sewer Contracts; Procedure for Payment

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(a) Any department, agency, or instrumentality of the state or any political subdivision of the state is authorized to insert in the specifications of all contracts relating to the installation, extension, improvement, maintenance, or repair of any water or sewer facility a clause providing for the retention of amounts not exceeding 10 percent of the gross value of the completed work as may be provided for in the contract; provided, however, that no amounts shall be retained on estimates or progress payments submitted after 50 percent of the work on the project has been completed if in the opinion of the department, agency, or instrumentality of the state or any political subdivision thereof such work is satisfactory and has been completed on schedule. This will not affect the retained amounts on the first 50 percent of the work on the project which may continue to be held to ensure satisfactory completion of the project. If, after discontinuing the retention, the department, agency, or instrumentality of the state or any political subdivision thereof determines that the work is unsatisfactory or has fallen behind schedule, retention may be resumed at the previous level. Retainage shall be invested at the current market rate and any interest earned on the retained amount by such department, agency, or instrumentality of the state or any political subdivision of the state shall be paid to the contractor when the project has been completed within the time limits specified and for the price specified in the contract, or in any amendments or change orders approved in accord with the terms of the contract, as certified pursuant to subsection (b) of this Code section.

(b) Final payment of the retained amounts to the contractor under the contract to which the retained amounts relate shall be made after certification by the engineer in charge of the project covered by the contract that the work has been satisfactorily completed and is accepted in accordance with the contract, plans, and specifications. Payment to the contractor of interest earned on the retained amounts shall be made after certification by the engineer in charge of the project covered by the contract that the work has been completed within the time specified and within the price specified in the contract.

(c) At substantial completion of the work and as the governmental entity’s authorized contract representative determines the work to be reasonably satisfactory, the governmental entity shall within 30 days after invoice and other appropriate documentation as may be required by the contract documents are provided pay the retainage to the contractor. If at that time there are any remaining incomplete minor items, an amount equal to 200 percent of the value of each item as determined by the governmental entity’s authorized contract representative shall be withheld until such item or items are completed.

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Retainage on Private Projects:

N/A

Hawaii does not provide a retainage statute for private projects.

Retainage on Public Projects:

§ 103-32.1: Contract provision for Retainage; Subcontractors

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(a) Any retainage provided for in this section or requested to be withheld by the contractor shall be held by the procurement officer.

(b) A dispute between a contractor and subcontractor of any tier shall not constitute a dispute to which the State or any county is a party, and there is no right of action against the State or any county. The State and a county may not be interpleaded in any judicial or administrative proceeding involving such a dispute.

(c) Any public contract may include a provision for the retainage of a portion of the amount due under the contract to the contractor to ensure the proper performance of the contract; provided that:

(1) The sum withheld by the procurement officer from the contractor shall not exceed five per cent of the total amount due the contractor and that, after fifty per cent of the contract is completed and progress is satisfactory, no additional sum shall be withheld; provided further that if progress is not satisfactory, the procurement officer may continue to withhold, as retainage, sums not exceeding five per cent of the amount due the contractor; and

(2) The retainage shall not include sums deducted as liquidated damages from moneys due or that may become due the contractor under the contract.

(d) Where a subcontractor has provided evidence to the contractor of:

(1) A valid performance and a payment bond for the project that is acceptable to the contractor and executed by a surety company authorized to do business in this State;

(2) Any other bond acceptable to the contractor; or

(3) Any other form of collateral acceptable to the contractor,

the retention amount withheld by the contractor from its subcontractor shall be not more than the same percentage of retainage as that of the contractor. This subsection shall also apply to the subcontractors who subcontract work to other subcontractors.

(e) This section shall not be construed to impair the right of a contractor or a subcontractor at any tier to negotiate, and to include in their subcontract, provisions that:

(1) Permit the contractor or subcontractor to retain, without cause, a specified percentage of no more than ten per cent of each progress payment otherwise due to a subcontractor for satisfactory performance under the subcontract, without incurring any obligation to pay a late payment interest penalty, in accordance with terms and conditions agreed to by the parties to the subcontract, giving such recognition as the parties deem appropriate to the ability of a subcontractor to furnish a performance bond and a payment bond, subject however, to the limitations of subsection (d); and

(2) Permit the contractor or subcontractor to make a determination that part or all of the subcontractor’s payment request may be withheld by the procurement officer in accordance with the subcontract agreement, without incurring any obligation to pay interest or a late payment penalty if a written notice of any withholding is issued to a subcontractor, with a copy to the procurement officer, specifying the following:

(A) The amount to be withheld;

(B) The specific causes for the withholding under the terms of the subcontract; and

(C) The remedial actions to be taken by the subcontractor to receive payment of the amounts withheld.

(f) A contractor may not request payment from the procurement officer of any amount withheld or retained in accordance with subsection (e) until such time as the contractor has determined and certified to the procurement officer that the subcontractor is entitled to the payment of such amount.

(g) The provisions of this section shall not be construed to require payment to subcontractors of retainage released to a contractor pursuant to an agreement entered into with the procurement officer meeting the requirements of section 103-32.2.

H5 § 103-32.2: Substitution of Retainage

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Any other law to the contrary notwithstanding, any public contract may provide that the procurement officer may enter into an agreement with the contractor which will allow the contractor to withdraw from time to time the whole or any portion of the sum retained under section 103-32.1 upon depositing with the procurement officer any general obligation bond of the State or its political subdivisions with a market value not less than the sum to be withdrawn; provided that the procurement officer may require that the total market value of such bond be greater than the sum to be withdrawn.

Retainage on Private Projects:

§ 29-115: Construction Contracts

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(1) This section is applicable with respect to all contracts entered into on or after July 1, 1990, between owners and original contractors relating to the construction of any private work of improvement.

(2)  In any contract relating to the construction of any private work of improvement, the retention proceeds withheld by the owner from the original contractor or by the original contractor from any subcontractor from any payment shall not exceed five percent (5%) of the payment and in no event shall the total retention withheld exceed five percent (5%) of the contract price. However, the five percent (5%) maximum that may be withheld does not apply if the original contractor or the subcontractor fails to provide a performance bond issued by a surety acceptable to the owner or original contractor if requested to do so by the owner or original contractor respectively. The five percent (5%) maximum shall not apply to any contract for the performance of a private work of improvement to residential real property consisting of one (1) to four (4) units occupied or to be occupied by the owner.

(3)  Within thirty-five (35) days from the date on which the work of improvement is substantially complete, as mutually agreed to by the parties to the contract, the retention withheld by the owner shall be reduced to the lesser of one hundred fifty percent (150%) of the estimated value of work yet to be completed in accordance with the contract or the retention then withheld by the owner, not to exceed five percent (5%) of the contract price.

Within thirty-five (35) days from the date of final completion of the work of improvement, the retention withheld by the owner shall be released, except in the event of a dispute between the owner and the original contractor, the owner may withhold from the final retention payment an amount not to exceed one hundred fifty percent (150%) of the estimated value of the issue in dispute. The owner may condition the final release of the retention upon receipt of satisfactory lien waivers from all persons with actual or potential lien claims on the work of improvement.

(4)  Subject to subsection (5) of this section, within ten (10) days from the time that all or any portion of the retention proceeds are received by the original contractor, the original contractor shall pay each of its subcontractors from whom retention has been withheld, each subcontractor’s share of the retention received. However, if a retention payment received by the original contractor is specifically designated for a particular subcontractor, payment of the retention shall be made to the designated subcontractor.

(5)  The original contractor shall not be required to pay the retention to a subcontractor if a bona fide dispute exists between the subcontractor and the original contractor. The amount withheld from the retention payment shall not exceed one hundred fifty percent (150%) of the estimated value of the work yet to be completed or issue in dispute.

(6)  It shall be against public policy for any party to require any other party to waive any provision of this statute.

H4: Retainage on Public Projects:

H5 § 54-1926: Performance and Payment Bonds Required of Contractors for Public Buildings and Public Works of the State, Political Subdivisions and other Public Instrumentalities

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Before any contract for the construction, alteration, or repair of any public building or public work or improvement of the state of Idaho, or of any county, city, town, municipal corporation, township, school district, public educational institution, or other political subdivision, public authority, or public instrumentality, or of any officer, board, commission, institution, or agency of the foregoing, is awarded to any person, he shall furnish to the state of Idaho, or to such county, city, town, municipal corporation, township, school district, public educational institution, or other political subdivision, public authority, or public instrumentality, or to such officer, board, commission, institution, or agency thereof, bonds which shall become binding upon the award of the contract to such person, who is hereinafter designated as “contractor”:

(1)  A performance bond in any amount to be fixed by the contracting body, but in no event less than eighty-five percent (85%) of the contract amount conditioned upon the faithful performance of the contract in accordance with the plans, specifications and conditions thereof. Said bond shall be solely for the protection of the public body awarding the contract.

(2)  A payment bond in an amount to be fixed by the contracting body but in no event less than eighty-five percent (85%) of the contract amount, solely for the protection of persons supplying labor or materials, or renting, leasing, or otherwise supplying equipment to the contractor or his subcontractors in the prosecution of the work provided for in such contract.

(3)  Public bodies requiring a performance bond or payment bond in excess of fifty percent (50%) of the total contract amount shall not be authorized to withhold from the contractor or subcontractor any amount exceeding five percent (5%) of the total amount payable as retainage. Further, the public body shall release to the contractor any retainage for those portions of the project accepted by the contracting public body and the contractors as complete within thirty (30) days after such acceptance. Contractors, contracting with subcontractors pursuant to contract work with a public body, shall not be authorized to withhold from the subcontractor any amount exceeding five percent (5%) of the total amount payable to the subcontractor as retainage. The contractor shall remit the retainage to the subcontractor within thirty (30) days after completion of the subcontract.

Each bond shall be executed by a surety company or companies duly authorized to do business in this state, or the contractor may deposit any of the type of government obligations listed in subsection (2)(h) of section 54-1901, Idaho Code, in lieu of furnishing a surety company performance or payment bond or bonds. In the case of contracts of the state or a department, board, commission, institution, or agency thereof the aforesaid bonds shall be payable to the state, or particular state agency where authorized. In case of all other contracts subject to this chapter, the bonds shall be payable to the public body concerned.

Said bonds shall be filed in the office of the department, board, commission, institution, agency or other contracting body awarding the contract.

Nothing in this section shall be construed to limit the authority of the state of Idaho or other public body hereinabove mentioned to require a performance bond or other security in addition to these, or in cases other than the cases specified in this chapter.

It shall be illegal for the invitation for bids, or any person acting or purporting to act, on behalf of the contracting body to require that such bonds be furnished by a particular surety company, or through a particular agent or broker.

H5 § 42-2944: Payments to Contractors

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Payments to contractors. During the construction of said improvement, said commissioners shall have the right to allow payment thereof, in installments as the work progresses, in proportion to the amount of work completed: provided, that no allowance or payment shall be made for said work to any contractor or subcontractor to exceed ninety per cent (90%) of the proportionate amount of the work completed by such contractor or subcontractor, and ten per cent (10%) of the contract price shall be reserved at all times by said board of commissioners until said work is wholly completed, and shall not be paid upon the completion of said work until ninety (90) days have expired for the presentation of all claims for labor performed and materials, goods, wares, merchandise and provisions furnished or used in the construction of said improvements. Upon the completion of said work and the payment of all claims hereinbefore provided for according to the terms and conditions of said contract, said commissioners shall accept said improvement and pay the contract price therefor

H4: Retainage on Private Projects:

H5 N/A

Indiana does not provide a specific retainage statute for private projects.

H4: Retainage on Public Projects:

H5 § 4-13.6-7-1: Application of Chapter

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The director may apply this chapter to public works projects with an estimated cost less than the amounts specified in section 2 or 7 of this chapter.

H5 § 4-13.6-7-2: Contract Provisions for Retainage of Payments; Escrow Accounts and Agreements

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(a) If the estimated cost of a public works project is one million dollars ($1,000,000) or more, the division shall include as part of the public works contract provisions for the retainage of portions of payments by the division to the contractor, by the contractor to subcontractors, and for the payment of subcontractors and suppliers by the contractor. The contract must provide that the division may withhold from the contractor sufficient funds from the contract price to pay subcontractors and suppliers as provided in section 4 of this chapter.

(b) A public works contract and contracts between contractors and subcontractors, if portions of the public works contract are subcontracted, may include a provision that at the time any retainage is withheld, the division or the contractor, as the case may be, may place the retainage in an escrow account, as mutually agreed, with:

(1) a bank;

(2) a savings and loan institution;

(3) the state of Indiana; or

(4) an instrumentality of the state of Indiana;

as escrow agent. The parties to the contract shall select the escrow agent by mutual agreement. The parties to the agreement shall enter into a written agreement with the escrow agent.

(c) The escrow agreement must provide the following:

(1) The escrow agent shall promptly invest all escrowed principal in the obligations that the escrow agent selects, in its discretion.

(2) The escrow agent shall hold the escrowed principal and income until it receives notice from both of the other parties to the escrow agreement specifying the percentage of the escrowed principal to be released from the escrow and the persons to whom this percentage is to be released. When it receives this notice, the escrow agent shall promptly pay the designated percentage of escrowed principal and the same percentage of the accumulated escrowed income to the persons designated in the notice.

(3) The escrow agent shall be compensated for its services as the parties may agree. The compensation shall be a commercially reasonable fee commensurate with fees being charged at the time the escrow fund is established for the handling of escrow accounts of like size and duration. The fee must be paid from the escrowed income of the escrow account.

(d) The escrow agreement may include other terms and conditions that are not inconsistent with subsection (c). Additional provisions may include provisions authorizing the escrow agent to commingle the escrowed funds held under other escrow agreements and provisions limiting the liability of the escrow agent.

H5 § 4-13.6-7-3: Amount of Retainage Withheld

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To determine the amount of retainage to be withheld, the division shall elect one (1) of the following options:

(1) To withhold no more than six percent (6%) of the dollar value of all work satisfactorily completed until the public work is fifty percent (50%) complete, and nothing further after that.

(2) To withhold no more than three percent (3%) of the dollar value of all work satisfactorily completed until the public work is substantially complete.

(b) Upon substantial completion of the work, the division shall withhold the following:

(1) If there are any remaining uncompleted minor items, until those items are completed, an amount equal to two hundred percent (200%) of the value of each item as determined by the architect-engineer.

(2) Any amounts required to be withheld under section 8(b) of this chapter.

H5 § 5-16-5.5-3.5: Retainage; Options to Determine Amount

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a) To determine the amount of retainage to be withheld, a state agency shall elect one (1) of the following options:

(1) Withhold no more than ten percent (10%) nor less than six percent (6%) of the dollar value of all work satisfactorily completed until the public work is fifty percent (50%) complete, and nothing further after that.

(2) Withhold no more than five percent (5%) nor less than three percent (3%) of the dollar value of all work satisfactorily completed until the public work is substantially complete.

b) If upon substantial completion of the work there are any remaining uncompleted minor items, an amount computed under section 6 of this chapter shall be withheld until those items are completed.

H5 § 36-1-12-14: Contracts in Excess of $200,000; Retainage of Portions of Payments; Escrow Agreements; Performance Bond; Payment on Substantial Completion; Actions Against Surety; Contracts Less Than $250,000

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(a) This section applies to public work contracts in excess of two hundred thousand dollars ($200,000) for projects other than highways, roads, streets, alleys, bridges, and appurtenant structures situated on streets, alleys, and dedicated highway rights-of-way. A board may require a contractor and subcontractor to include contract provisions for retainage as set forth in this section for contracts that are not more than two hundred thousand dollars ($200,000). This section also applies to a lessor corporation qualifying under IC 20-47-2 or IC 20-47-3 or any other lease-back arrangement containing an option to purchase, notwithstanding the statutory provisions governing those leases.

(b) A board that enters into a contract for public work, and a contractor who subcontracts parts of that contract, shall include in their respective contracts provisions for the retainage of portions of payments by the board to contractors, by contractors to subcontractors, and for the payment of subcontractors. At the discretion of the contractor, the retainage shall be held by the board or shall be placed in an escrow account with a bank, savings and loan institution, or the state as the escrow agent. The escrow agent shall be selected by mutual agreement between board and contractor or contractor and subcontractor under a written agreement among the bank or savings and loan institution and:

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Retainage on Private Projects:

N/A

Iowa does not provide a retainage statute for private projects.

Retainage on Public Projects:

§ 573.12. Payments and retention from payments on contracts

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1. Retention. Payments made under contracts for the construction of public improvements, unless provided otherwise by law, shall be made on the basis of monthly estimates of labor performed and material delivered, as determined by the project architect or engineer. The public corporation shall retain from each monthly payment not more than five percent of that amount which is determined to be due according to the estimate of the architect or engineer. The contractor may retain from each payment to a subcontractor not more than the lesser of five percent or the amount specified in the contract between the contractor and the subcontractor.

2. Prompt payment.

a.

(1) Interest shall be paid to the contractor on any progress payment that is approved as payable by the public corporation’s project architect or engineer and remains unpaid for a period of fourteen days after receipt of the payment request at the place, or by the person, designated in the contract, or by the public corporation to first receive the request, or for a time period greater than fourteen days, unless a time period greater than fourteen days is specified in the contract documents, not to exceed thirty days, to afford the public corporation a reasonable opportunity to inspect the work and to determine the adequacy of the contractor’s performance under the contract.

(2) Interest shall accrue during the period commencing the day after the expiration of the period defined in subparagraph (1) and ending on the date of payment. The rate of interest shall be determined as set forth in section 573.14.

b. A progress payment or final payment to a subcontractor for satisfactory performance of the subcontractor’s work shall be made no later than one of the following, as applicable:

(1) Seven days after the contractor receives payment for that subcontractor’s work.

(2) A reasonable time after the contractor could have received payment for the subcontractor’s work, if the reason for nonpayment is not the subcontractor’s fault. A contractor’s acceptance of payment for one subcontractor’s work is not a waiver of claims, and does not prejudice the rights of the contractor, as to any other claim related to the contract or project.

3. Interest payments.

a. If the contractor receives an interest payment under section 573.14, the contractor shall pay the subcontractor a share of the interest payment proportional to the payment for that subcontractor’s work.

b. If a public corporation other than a school corporation, county, or city retains funds, the interest earned on those funds shall be payable at the time of final payment on the contract in accordance with the schedule and exemptions specified by the public corporation in its administrative rules. The rate of interest shall be determined by the period of time during which interest accrues, and shall be the same as the rate of interest that is in effect under section 12C.6 as of the day interest begins to accrue.

§ 573.13. Inviolability and disposition of fund

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A public corporation shall not be permitted to plead noncompliance with section 573.12 and the retained percentage of the contract price, which in no case shall be more than five percent, constitutes a fund for the payment of claims for materials furnished and labor performed on the improvement and shall be held and disposed of by the public corporation as provided in this chapter

§ 573.14. Retention of unpaid funds

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1. The fund provided for in section 573.13 shall be retained by the public corporation for a period of thirty days after the completion and final acceptance of the improvement. If at the end of the thirty-day period claims are on file, the public corporation shall continue to retain from the unpaid funds a sum equal to double the total amount of all claims on file. The remaining balance of the unpaid fund, or if no claims are on file, the entire unpaid fund, shall be released and paid to the contractor.

2. The public corporation shall order payment of any amount due the contractor to be made in accordance with the terms of the contract. Except as provided in section 573.12 for progress payments, failure to make payment pursuant to this section, of any amount due the contractor, within forty days, unless a greater time period not to exceed fifty days is specified in the contract documents, after the work under the contract has been completed and if the work has been accepted and all required materials, certifications, and other documentations required to be submitted by the contractor and specified by the contract have been furnished the awarding public corporation by the contractor, shall cause interest to accrue on the amount unpaid to the benefit of the unpaid party. Interest shall accrue during the period commencing the thirty-first day following the completion of work and satisfaction of the other requirements of this subsection and ending on the date of payment. The rate of interest shall be determined by the period of time during which interest accrues, and shall be the same as the rate of interest that is in effect under section 12C.6, as of the day interest begins to accrue, for a deposit of public funds for a comparable period of time. However, for institutions governed pursuant to chapter 262, the rate of interest shall be determined by the period of time during which interest accrues, and shall be calculated as the prime rate plus one percent per year as of the day interest begins to accrue. This subsection does not abridge any of the rights set forth in section 573.16. Except as provided in sections 573.12 and 573.16, interest shall not accrue on funds retained by the public corporation to satisfy the provisions of this section regarding claims on file. This chapter does not apply if the public corporation has entered into a contract with the federal government or accepted a federal grant which is governed by federal law or rules that are contrary to the provisions of this chapter. For purposes of this subsection, “prime rate” means the prime rate charged by banks on short-term business loans, as determined by the board of governors of the federal reserve system and published in the federal reserve bulletin.

§ 573.15. Exception

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1. A person, firm, or corporation that has performed labor for or furnished materials, service, or transportation to a subcontractor shall not be entitled to a claim against the retainage or bond under this chapter unless the person, firm, or corporation that performed the labor or furnished the materials, service, or transportation does all of the following:

a. Notifies the principal contractor in writing with a one-time notice containing the name, mailing address, and telephone number of the person, firm, or corporation that performed the labor or furnished the materials, service, or transportation, and the name of the subcontractor for whom the labor was performed or the materials, service, or transportation were furnished, within thirty days of first performing the labor or furnishing the materials, service, or transportation for which a claim may be made. Additional labor performed or materials, service, or transportation furnished by the same person, firm, or corporation to the same subcontractor for use in the same construction project shall be covered by this notice.

b. Supports the claim with a certified statement that the principal contractor received the notice described in paragraph “a”.

2. This section shall not apply to highway, bridge, or culvert projects as referred to in section 573.28.

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Retainage on Private Projects:

N/A

Kansas does not provide a specific retainage statute for private projects.

Retainage on Public Projects:

16-1904 (a)  Retainage; release and withholding thereof; alternate security; failure to pay.

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Retainage shall not exceed 5% of the value of the contract or subcontract unless the owner or contractor determines that a higher rate of retainage is required to ensure performance of the contract. Retainage, however, shall not exceed 10% of the value of the contract or subcontract.

16-1904(d):

A contractor may withhold not more than 150% of the value of incomplete work, provided that the incomplete work is due to the fault of a subcontractor. Any amounts retained for incomplete work shall be paid within 45 days after completion of the work as part of the regular payment cycle.

16-1904(h):

An owner, contractor or subcontractor must release all remaining retainage on any undisputed payment due on a construction project within 30 days after substantial completion of the project as part of the regular payment cycle; however, if any contractor or subcontractor is still performing work on the project, an owner may withhold that portion of the retainage attributable to such work until 30 days after such work is completed.

16-1904(i):

If an owner, contractor or subcontractor fails to pay retainage, if any, pursuant to the terms of a contract for public construction or as required by this act, the owner, contractor or subcontractor shall pay interest to the contractor or subcontractor to whom payment was due, beginning on the first business day after the payment was due, at a rate of 18% per annum.

16-1904(j):

Nothing in this section shall prevent early release of retainage if it is determined by the owner, the contractor and the project architect or engineer, that a subcontractor has completed performance satisfactorily and that the subcontractor can be released prior to substantial completion of the entire project without risk or additional cost to the owner or contractor. Once so determined, the contractor shall request such adjustment in retainage, if any, from the owner as necessary to enable the contractor to pay the subcontractor in full, and the owner shall, as part of the next contractual payment cycle, release the subcontractor’s retainage to the contractor, who shall, as part of the next contractual payment cycle, release such retainage as is due to the subcontractor.

68-411. Partial payment on contracts; regulations for withholding.

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The secretary of transportation shall make partial payment to a contractor performing any road or bridge work under contract with it, as the work may progress, said partial payment not to be less than ninety percent (90%) of the contract price of the material delivered and work done and accepted. The secretary shall provide by regulation, to be made a part of all specifications, for the withholding of not more than ten percent (10%) of the full contract price of any such work until the work is satisfactorily completed and approved by the secretary and the provisions of the contract and bond therefor have been fully satisfied.

Retainage Statute:

§ 371.410. Retainage that may be withheld -- Release of retainage -- Substantial completion

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(1) Notwithstanding any provision of the Kentucky Revised Statutes to the contrary, until fifty percent (50%) of the construction project has been completed in accordance with the contract, a contracting entity, contractor, or subcontractor may withhold no more than ten percent (10%) retainage from the amount of any undisputed payment due, and retainage held after fifty-one percent (51%) of the construction project has been completed shall not be more than five percent (5%) of the total contract amount.

(2) Within thirty (30) days after substantial completion of a construction project, the contracting entity or contractor shall release the retainage less an amount equal to two hundred percent (200%) of the contracting entity’s reasonably estimated cost of the balance of any contractor’s or subcontractor’s contractually obligated, yet uncompleted, work remaining. The contracting entity’s agent shall determine the reasonably estimated cost due under this subsection. The contracting entity, contractor, and any subcontractor with work yet to be completed shall mutually agree with the schedule for completion of the work necessary for release of final payment. Within fifteen (15) business days after the retainage has been released by the contracting entity to the contractor, the contractor shall release to the subcontractors their proportional shares of the retainage. For purposes of this subsection, “substantial completion” is the point at which, as certified in writing by the contracting entity, a project is at the level of completion, in strict compliance with the contract, where:

(a) Necessary approval by public regulatory authorities has been given;

(b) The owner has received all required warranties and documentation; and

(c) The owner may enjoy beneficial use or occupancy and may use, operate, and maintain the project in all respects, for its intended purpose.

Partial use or occupancy shall not necessarily result in the project being deemed substantially complete and shall not be evidence of substantial completion.

(3) If a contracting entity, contractor, or subcontractor fails to pay retainage, if any, pursuant to the terms of a contract or as required in this section, the contracting entity, contractor, or subcontractor shall pay interest to the contractor or subcontractor to whom payment was due, beginning on the first business day after the payment was due, at the rate of twelve percent (12%) per annum

Retainage on Private Projects:

§ 9:4857: Escrow of Funds Due Under Contract; Procedures

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A. When, under the provisions of this Part, a contract in the amount of fifty thousand dollars or more is entered into between an owner and a contractor and if in accordance with the terms of such contract funds earned by the contractor are withheld as retainage by the owner from periodic payments due to the contractor then such funds shall be deposited by the owner into an interest bearing escrow account. The provisions of this Section shall not apply to a contract for a single family residence or double family residence. The provisions of this Section also shall not apply to a contract for the construction or improvement of the following types of industrial facilities that are, or will be, engaged in activities defined or classified under one or more of the following subsectors, industry groups, or industries of the 1997 North American Industry Classifications System (NAICS):

(1) 22111 electric power generation.

(2) 321 wood products manufacturing.

(3) 322 paper manufacturing.

(4) 324 petroleum and coal products manufacturing.

(5) 325 chemical manufacturing.

(6) 326 plastics and rubber products manufacturing.

(7) 331 primary metals manufacturing.

(8) 562211/562212 hazardous and solid waste landfills.

(9) 422710 bulk stations and materials.

(10) 486110 crude oil pipelines.

(11) 486910 refined petroleum products pipelines.

(12) 486210 natural gas pipelines.

(13) 486990 other pipelines.

(14) 211112 natural gas processing plants.

B. An escrow account under the provisions of this Section shall be located at a qualified financial institution and shall be under the control of an escrow agent. The escrow account and escrow agent shall be selected by mutual agreement between the owner and the contractor.

C. Upon completion of the work that is the subject of the contract, the funds, including any interest located in the escrow account shall be released from escrow under the following conditions:

(1) If there are no existing claims by the owner, the whole amount shall be paid to the contractor within three business days upon receipt by the escrow agent of a written release signed by the contractor and the owner.

(2) If there is a dispute between the owner and contractor and the contract does not provide for binding arbitration of such dispute:

(a) Undisputed amounts shall be released by the escrow agent within three business days of receipt of a notarized request of the contractor.

(b) Disputed amounts that are the subject of a judicial proceeding shall be released by the escrow agent within three business days of the receipt of a final order by the court. Upon receipt of the order of the court, the escrow agent shall pay the contractor or owner such amounts as are determined by the court.

(3) If there is a dispute between the owner and contractor and the contract provides for binding arbitration of such dispute, the following shall occur:

(a) Undisputed amounts shall be released by the escrow agent within three business days of receipt of a notarized request of the contractor.

(b) Disputed amounts that are the subject of binding arbitration under the contract shall be released by the escrow agent within three business days of the receipt of a final order by the arbitrator who has been selected by mutual agreement between the owner and the contractor. Upon receipt of the order of the arbitrator, the escrow agent shall pay the contractor or owner such amounts as are determined by the arbitrator under the rules as defined in the contract between the owner and the contractor.

D. Receipt by the escrow agent or the qualified financial institution in which the escrow account is maintained of what purports to be a written release signed by the contractor and owner, or an order by a court or arbitrator, shall be a full release and discharge of the escrow agent for transfer of funds to the contractor. Neither the escrow agent nor the qualified financial institution in which the escrow account is maintained shall be held liable to any party based on any claim that the written release is unauthorized, forged, or otherwise fraudulent.

E. Neither the escrow agent nor the qualified financial institution in which the escrow account is maintained pursuant to the provisions of this Section shall have any liability to the owner, contractor, or any other person when complying with the provisions of this Section.

H4: Retainage on Public Projects:

H5 § 38:2248: Provisions for Withholding Payment; Effect on Liability of Contractor or Agency; Punch List

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 A. No contracts for the construction, alteration, or repair of any public works executed in conformity with this Part shall provide that the state or any of its agencies, boards, or subdivisions or any other public entity letting such a contract may withhold payment of more than ten percent of the contract price on projects of less than five hundred thousand dollars, and five percent of the contract price on projects of five hundred thousand dollars or more until the expiration of forty-five days after the recordation of formal acceptance of such work, or notice of default by the contractor or subcontractor. Such provision for withholding of payment shall in no way change or affect the liability of the letting agency or of the contractor, subcontractor, or their sureties.

B. All public works contracts shall contain a clause stating that any punch list generated during a construction project shall include the cost estimates for the particular items of work the design professional has developed based on the mobilization, labor, material, and equipment costs of correcting each punch list item. The design professional shall retain his working papers used to determine the punch list items cost estimates should the matter be disputed later. The contracting agency shall not withhold from payment more than the value of the punch list. Punch list items completed shall be paid upon the expiration of the forty-five day lien period. The provisions of this Section shall not be subject to waiver, nor shall these provisions apply to the Department of Transportation and Development.

C. Notwithstanding any provision of law to the contrary, a public entity letting a public works construction contract for a flood protection project or for an integrated coastal protection project as defined in R.S. 49:214.2, as per the terms of the contract, may withhold liquidated damages from any payments or monies otherwise due to the contractor, taking into consideration all granted time extensions, after the expiration of the forty-five day period set forth in R.S. 38:2242(B).

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Retainage on Private Projects:

N/A

Maine does not provide a retainage statute for private projects.

Retainage on Public Projects:

5 § 1746: Retention of Part of Contract Price

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In any contract awarded for any public improvement the State shall withhold 5% of the money due the contractor until the project under the contract has been accepted by or for the State, except that when the contract has been substantially completed the State may, upon request, further reduce the amounts withheld if it deems it desirable and prudent.

Under any contract made or awarded by the State or by any public department or official thereof, including the construction, improvement or repair of any and all ways, roads or bridges with appurtenances which, by law, are under the supervision of the Department of Transportation, the contractor may, from time to time, withdraw the whole or any portion of the amount retained for payments to the contractor pursuant to the terms of the contract, upon depositing with the Treasurer of State: A negotiable certificate of deposit, United States treasury bonds, United States treasury notes, United States treasury certificates of indebtedness, United States treasury bills, or bonds or notes of the State of Maine or bonds of any political subdivision in the State of Maine. No amount shall be withdrawn in excess of the market value of the securities at the time of deposit or of the par value of such securities, whichever is lower.

Any amount deducted by the State, or by any public department or official thereof, pursuant to the terms of the contract, from the retained payments due the contractor, shall be deducted, first from that portion of the retained payments for which no security has been substituted, then from the proceeds of any deposited security. In the latter case, the contractor shall be entitled to receive interest, coupons or income only from those securities which remain after such amount has been deducted.

Any assignment of retained payments made by the contractor shall be honored by the Treasurer of State as part of the procedure to accomplish the substitution of securities under this section, provided that such assignment will not be made without prior notification to the contracting agency of the State and the Treasurer of State. Such assignment shall not impair the equitable rights of the contractor’s surety in the retained payments or in the securities substituted therefor in the event of the contractor’s default in the performance of the contract or in the payment of labor and material bills or other obligations covered by said surety’s bond.

Any contract made or awarded by the State, political subdivision or department or official thereof shall include the cost of necessary pollution control, if any, which will be required during the execution of the contract; provided the cost of pollution control activity which is required by legislation or regulation, passed or promulgated after the date on which bids are received for the project for which such contract is made or awarded, shall be paid for in an equitable manner.

The Director of the Bureau of General Services may approve contracts with a provision for daily financial incentive for projects completed before the scheduled date when it can be demonstrated that the early completion will result in a financial savings to the owner or to the State. The financial incentive may not be greater than the projected daily rate of savings to the owner or the State

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Retainage on Private Projects:

§9-304. Retention proceeds

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(a) In this section, “retention proceeds” means money earned but retained under the terms of a contract or subcontract:

(1) By an owner to guarantee performance of the contract by a contractor;

(2) By a contractor to guarantee performance of a subcontract by a subcontractor; or

(3) By a subcontractor to guarantee performance of a subcontract by another subcontractor.

(b) This section does not apply to:

(1) A contract in an amount less than $100,000; or

(2) A contract or subcontract for a project funded wholly or in part by or through the Department of Housing and Community Development.

(c) Except as provided in this section:

(1) If a contractor has furnished 100% security to guarantee the performance of a contract and 100% security to guarantee payment for labor and materials, including leased equipment:

(i) The retention proceeds under the terms of a contract may not exceed 5% of the contract price; and

(ii) The retention proceeds of any payment due under the terms of a contract from an owner to a contractor may not exceed 5% of the payment;

(2) The retention proceeds of any payment due under the terms of a contract from a contractor to a subcontractor may not exceed the percentage of retention proceeds from the owner to the contractor; and

(3) The retention proceeds of any payment due under the terms of a contract from a subcontractor to another subcontractor may not exceed the percentage of retention proceeds from the contractor to the subcontractor.

(d) This section may not be construed to prohibit the withholding of any amount due:

(1) From the owner to the contractor if the owner reasonably determines that the contractor’s performance under the contract provides reasonable grounds for withholding the additional amount;

(2) From the contractor to any subcontractor if the contractor reasonably determines that the subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount; or

(3) From a subcontractor to another subcontractor if the subcontractor determines that the other subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount.

(e) Undisputed retention proceeds retained by an owner under this section shall be paid within 90 days after the date of substantial completion, as defined by the applicable contract or subcontract.

H4: Retainage on Public Projects:

H5 § 17-110. Retention of percentage of total amount of contract as security

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(a) Subsections (b)(1) and (2), (c), and (d) of this section do not apply to an entity that is required to comply with the provisions of § 13-225 of this article.

(b)

(1) If a contractor has furnished 100% payment security and 100% performance security in accordance with this subtitle under a contract for construction awarded by a public body, the percentage specified in the contract for retainage may not exceed 5% of the total amount of the contract.

(2) In addition to retainage, a public body may withhold from payments otherwise due a contractor any amount that the public body reasonably believes necessary to protect the public body’s interest.

(3) Except as provided in paragraph (4) of this subsection, within 120 days after satisfactory completion of a contract for construction, a public body shall release any retainage due to the contractor.

(4) If there is a dispute or contract claim between the contractor and the public body concerning the satisfactory completion of a contract for construction, the public body shall release the retainage to the contractor within 120 days after the resolution of the dispute or contract claim.

(c)

(1) A contractor may not retain a percentage of payments due a subcontractor that exceeds the percentage of payments retained by the public body.

(2) Paragraph (1) of this subsection may not be construed to prohibit a contractor from withholding any amount in addition to retainage if the contractor determines that a subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount.

(d)

(1) A subcontractor may not retain a percentage of payments due a lower tier subcontractor that exceeds the percentage of payments retained from the subcontractor.

(2) Paragraph (1) of this subsection may not be construed to prohibit a subcontractor from withholding any amount in addition to retainage if the subcontractor determines that a lower tier subcontractor’s performance under the subcontract provides reasonable grounds for withholding the additional amount.

(e) This section may not be construed to limit the application of the remaining provisions of this subtitle.

Retainage on Private Projects:

149 § 29F. Payment of retainage in private construction projects

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(a) As used in this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:—

”Claim”, an allegation that a person seeking payment of retainage breached the person’s contract for construction for the project; provided, however, that a ”claim” shall be subject to the applicable dispute resolution procedure, notice and other requirements in the contract for construction.

”Contract for construction”, a contract for which a lien may be established under sections 2 or 4 of chapter 254 on a project for which the person whose contract with the project owner has an original contract price of not less than $3,000,000; provided, however, that ”contract for construction” shall not include a project containing or designed to contain at least 1 but not more than 4 dwelling units.

”Deliverable”, a project close-out document that shall be submitted by the person seeking payment of retainage under the person’s contract for construction; provided, however, that a lien waiver or release, which is a deliverable, shall comply with chapter 254; and provided further, that ”deliverable” shall not include any document affirming, certifying or confirming completion or correction of labor, materials or other items furnished or incomplete or defective work.

”Incomplete or defective work”, labor, materials or any other item required for full performance by a person seeking payment of retainage which remains to be furnished by the person under the person’s contract for construction or which has been furnished by the person but requires correction, repair, further completion, revision or replacement; provided, however, that ”incomplete or defective work” shall not include deliverables or labor, materials or any other item to be repaired or replaced after substantial or final completion pursuant to a warranty, guarantee or other contractual obligation to correct defective work after substantial or final completion.

”Person”, any natural person, joint venture, partnership, corporation or other business or legal entity who enters into a contract for construction.

”Prime contractor”, a person who enters into a contract for construction with the project owner.

”Retainage”, a portion or percentage of a payment due pursuant to a contract for construction that is withheld to ensure full performance of the contract for construction.

”Substantial completion”, the stage in the progress of the project when the work required by the contract for construction with the project owner is sufficiently complete in accordance with the contract for construction so that the project owner may occupy or utilize the work for its intended use; provided further, that ”substantial completion” may apply to the entire project or a phase of the entire project if the contract for construction with the project owner expressly permits substantial completion to apply to defined phases of the project.

(b) No contract for construction shall include retainage that exceeds 5 per cent of any progress payment.

(c) Not later than 14 days after reaching substantial completion, the prime contractor shall submit to the project owner a notice of substantial completion, substantially in the form provided in this subsection, stating the date on which the project was substantially complete.

FORM FOR NOTICE OF SUBSTANTIAL COMPLETION

NOTICE OF SUBSTANTIAL COMPLETION

Under M.G.L. c. 149, § 29F

For [project name]

To [project owner]:

The undersigned hereby gives notice that the project was substantially complete, as defined under M.G.L. c. 149, § 29F, on [date of substantial completion]. This notice is certified as made in good faith on [date of notice].

By___

[prime contractor]

Accepted:

By___

[project owner]

Dated: ___

(d) The project owner shall accept or reject the notice of substantial completion within 14 days of receipt of the notice. The project owner shall indicate its acceptance by signing the notice in the space provided and shall deliver the notice to the prime contractor within the same 14–day period. If the project owner fails to deliver the notice to the prime contractor within the 14–day period, the notice shall be deemed accepted. If the project owner rejects the notice of substantial completion, the project owner shall, within 14 days of receipt of the notice described in subsection (c), notify the prime contractor in writing of the rejection and include in the rejection the factual and contractual basis for the rejection and a certification that the rejection is made in good faith. A rejection of the notice shall be subject to the dispute resolution provisions of the contract for construction, which, notwithstanding any provision in the contract to the contrary, shall be commenced by the prime contractor within 7 days of receipt of the rejection of the project owner. The prime contractor and project owner shall prosecute the dispute resolution procedures diligently, expeditiously and in good faith. A notice of substantial completion not rejected by the project owner within 14 days of receipt of the notice and in accordance with this subsection shall be deemed accepted by the project owner. Upon an express or deemed acceptance of a notice of substantial completion, the date of substantial completion shall be the date stated in the prime contractor’s notice for all purposes and the acceptance shall be final and binding on the project owner and its successors and assignees.

(e) Not later than 14 days after the express or deemed acceptance of the notice of substantial completion or, in the case of a dispute, final and binding resolution of the dispute, the project owner shall submit to the prime contractor a written list describing all incomplete or defective work items and deliverables required of the prime contractor under the prime contractor’s contract for construction. The list shall be certified by the project owner as made in good faith. Not later than 21 days after the express or deemed acceptance of the notice of substantial completion or, in the case of a dispute, final and binding resolution of the dispute, the prime contractor shall submit to each person from whom the prime contractor is withholding retainage a written list describing all incomplete or defective work items and deliverables required by the person under the person’s contract for construction, which list may include items beyond those on the project owner’s list. The list shall be certified by the prime contractor as made in good faith.

(f) The project owner and prime contractor shall fulfill their obligations pursuant to subsections (c), (d) and (e) in good faith and in a timely manner. Except where the contract for construction shall provide for an earlier submission, following the expiration of 60 days after substantial completion or, in the case of a dispute under subsection (d), final and binding resolution of the dispute, a person may submit a written application for payment of retainage in the form required by the person’s contract for construction. An application for payment of retainage shall be accompanied by a written list identifying the incomplete or defective work items and deliverables on its received list that the person has completed, repaired and delivered. The list shall be certified by the person submitting the application for payment of retainage as made in good faith.

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Retainage on Private Projects:

N/A.

Michigan state law does not provide a specific retainage statute for private projects.

H4: Retainage on Public Projects:

§ 125.1563. Retaining portion of each progress payment to assure proper performance of construction contract; retainage; limitations; exceeding pro rata share of public agency's matching requirement; commingling and deposit of retained funds; releasing to contractor retainage and interest earned on retainage; irrevocable letter of credit.

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(1) To assure proper performance of a construction contract by the contractor, a public agency may retain a portion of each progress payment otherwise due as provided in this section.

(2) The retainage shall be limited to the following:

(a) Not more than 10% of the dollar value of all work in place until work is 50% in place.

(b) After the work is 50% in place, additional retainage shall not be withheld unless the public agency determines that the contractor is not making satisfactory progress, or for other specific cause relating to the contractor’s performance under the contract. If the public agency so determines, the public agency may retain not more than 10% of the dollar value of work more than 50% in place.

(3) The retained funds shall not exceed the pro rata share of the public agency’s matching requirement under the construction contract and shall not be commingled with other funds of the public agency and shall be deposited in an interest bearing account in a regulated financial institution in this state wherein all such retained funds are kept by the public agency which shall account for both retainage and interest on each construction contract separately. A public agency is not required to deposit retained funds in an interest bearing account if the retained funds are to be provided under a state or federal grant and the retained funds have not been paid to the public agency.

(4) Except as provided in section 4(7) and (8), retainage and interest earned on retainage shall be released to a contractor together with the final progress payment.

(5) At any time after 94% of work under the contract is in place and at the request of the original contractor, the public agency shall release the retainage plus interest to the original contractor only if the original contractor provides to the public agency an irrevocable letter of credit in the amount of the retainage plus interest, issued by a bank authorized to do business in this state, containing terms mutually acceptable to the contractor and the public agency.

Retainage on Private Projects:

N/A.

Minnesota state law does not provide a specific retainage statute for private projects.

Retainage on Public Projects:

§ 337.10: Building and Construction Contracts; Prohibited Provisions

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Subdivision 1. Application of laws of another state. — Provisions contained in, or executed in connection with, a building and construction contract to be performed inMinnesota making the contract subject to the laws of another state or requiring that any litigation, arbitration, or other dispute resolution process on the contract occur in another state are void and unenforceable.

Subdivision 2. Waiver of lien or claim. — Provisions contained in, or executed in connection with, a building and construction contract requiring a contractor, subcontractor, or material supplier to waive the right to a mechanics lien or to a claim against a payment bond before the person has been paid for the labor or materials or both that the person furnished are void and unenforceable. This provision shall not affect the validity of a waiver as to any third party who detrimentally relies upon the waiver.

Subdivision 3. Prompt payment to subcontractors. — A building and construction contract shall be deemed to require the prime contractor and all subcontractors to promptly pay any subcontractor or material supplier contract within ten days of receipt by the party responsible for payment of payment for undisputed services provided by the party requesting payment. The contract shall be deemed to require the party responsible for payment to pay interest of 1- 1/2 percent per month to the party requesting payment on any undisputed amount not paid on time. The minimum monthly interest penalty payment for an unpaid balance of $ 100 or more is $ 10. For an unpaid balance of less than $ 100, the party responsible for payment shall pay the actual penalty due to the party requesting payment. A party requesting payment who prevails in a civil action to collect interest penalties from a party responsible for payment must be awarded its costs and disbursements, including attorney fees incurred in bringing the action.

Subdivision 4.  Progress payments and retainages.

(a) Unless the building and construction contract provides otherwise, the owner or other persons making payments under the contract must make progress payments monthly as the work progresses. Payments shall be based upon estimates of work completed as approved by the owner or the owner’s agent. A progress payment shall not be considered acceptance or approval of any work or waiver of any defects therein.

(b) Unless the building and construction contract provides otherwise, an owner or owner’s agent may reserve as retainage from any progress payment on a building and construction contract an amount not to exceed five percent of the payment. An owner or owner’s agent may reduce the amount of retainage and may eliminate retainage on any monthly contract payment if, in the owner’s opinion, the work is progressing satisfactorily.

(c) This subdivision does not apply to contracts for professional services as defined in sections 326.02 to 326.15.

Subdivision 5.  Definition. — For the purpose of this section, “building and construction contract” has the meaning given the term in section 337.01.

§ 15.72: Progress Payments on Public Contracts; Retainage

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Subdivision 1. Monthly payments. — Unless the terms of the contract provide otherwise, a public contracting agency shall make progress payments on a public contract for a public improvement monthly as the work progresses. Payments shall be based upon estimates of work completed as approved by the public contracting agency. A progress payment shall not be considered acceptance or approval of any work or waiver of any defects therein.

Subdivision 2. Retainage. — A public contracting agency may reserve as retainage from any progress payment on a public contract for a public improvement an amount not to exceed five percent of the payment. A public agency may reduce the amount of the retainage and may eliminate retainage on any monthly contract payment if, in the agency’s opinion, the work is progressing satisfactorily.

§ 15.73: Alternative Form of Retainage

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Subdivision 1.Contractor’s option. — At the option of the contractor, retainage shall be paid to the contractor in accordance with this section.

Subdivsion 2. Security. — The contractor may deposit bonds or securities with the public contracting agency or in any bank or trust company to be held in lieu of cash retainage for the benefit of the public contracting agency. In that event the public agency shall reduce the retainage in an amount equal to the value of the bonds and securities and pay the amount of the reduction to the contractor. Interest on the bonds or securities shall be payable to the contractor as it accrues.

Subdivision 3. Approval required. — Bonds and securities deposited or acquired in lieu of retainage, as permitted by subdivision 2, shall be of a character approved by the commissioner of management and budget, including but not limited to:

(1)  bills, certificates, notes or bonds of the United States;

(2) other obligations of the United States or its agencies;

(3) obligations of any corporation wholly owned by the federal government; or

(4) indebtedness of the Federal National Mortgage Association.

Subdivision 4. Recovery of additional costs. — If the public agency incurs additional costs as a result of the exercise of the option described in this section, the agency may recover the costs from the contractor by reducing the final payment due under the contract. As work on the contract progresses, the agency shall, upon demand, inform the contractor of all accrued costs.

Retainage on Private Projects:

N/A

Mississippi state law does not provide a specific retainage statute for private projects.

Retainage on Public Projects:

H5 § 31-5-33(1): Amount of Retainage which May be Withheld; Exemptions

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(1) In any contract for the construction, repair, alteration or demolition of any building, structure or facility awarded by the State of Mississippi, or any agency, unit or department of the State of Mississippi, or by any political subdivision thereof, which contract provides for progress payments in installments based upon an estimated percentage of completion with a percentage of the contract proceeds to be retained by the state agency, unit or department, or by the political subdivision or contractor pending completion of the contract, such retainage shall be five percent (5%), and the amount retained by the prime contractor from each payment due the subcontractor shall not exceed the percentage withheld by the state, or any agency, unit or department of the state, or by any political subdivision thereof, from the prime contractor.

On any contract as described herein, of which the total amount is Two Hundred Fifty Thousand Dollars ($250,000.00) or greater, or on any contract with a subcontractor, regardless of amount, five percent (5%) shall be retained until the work is at least fifty percent (50%) complete, on schedule and satisfactory in the architect’s and/or engineer’s opinion, at which time fifty percent (50%) of the retainage held to date shall be returned to the prime contractor for distribution to the appropriate subcontractors and suppliers. Provided, however, that future retainage shall be withheld at the rate of two and one-half percent (21/2%).

§ 31-5-15: Withdrawal by Contractor of Amounts Retained on Public Contracts by Furnishing Different Security

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Under any public contract heretofore or hereafter made or awarded by the State of Mississippi, or any agency or department of the State of Mississippi, or by any political subdivision thereof, the contractor may, with the written consent of his or its surety, from time to time, withdraw the whole or any portion of the amount retained from payments due the contractor pursuant to the terms of the contract by depositing with the State Treasurer of the State of Mississippi, or the treasurer or secretary of the political subdivision of the State of Mississippi holding funds belonging to the contractor, the following security, or any combination thereof in an amount equal to or in excess of the amount so withdrawn, said securities to be accepted at the time of deposit at market value but not in excess of par value, to wit:

(1) U. S. Treasury Bonds, U. S. Treasury Notes, U. S. Treasury Certificates of Indebtedness, or U. S. Treasury Bills, or

(2) Bonds or notes of the State of Mississippi, or

(3) Bonds of any political subdivision of the State of Mississippi, or

(4) Certificates of deposit issued by commercial banks located in the State of Mississippi, provided that such certificate is negotiable or is accompanied by a power of attorney executed by the owner of the certificate in favor of the Treasurer of the State of Mississippi or of the treasurer or the secretary of the political subdivision involved, or

(5) Certificates of deposit issued by savings and loan associations located in the State of Mississippi, the accounts of which are insured by the Federal Savings and Loan Insurance Corporation, or whose accounts are insured by a company approved by the State Board of Savings and Loan Associations, provided that such certificate is made payable with accrued interest on demand and is accompanied by a power of attorney executed by the owner of the certificate in favor of the Treasurer of the State of Mississippi or the treasurer or secretary of the political subdivision involved, and provided that any such certificate from any of the savings and loan associations referred to in this subparagraph shall not be for an amount in excess of the maximum dollar amount of coverage of the Federal Savings and Loan Insurance Corporation.

The agency or department of the state shall notify the State Treasurer of the amount of deposit required and shall also notify the State Treasurer when to release the deposit. The political subdivision of the state shall notify its treasurer or secretary of the amount of deposit required and shall also notify him when to release the deposit.

The State Treasurer, or the secretary or treasurer of the political subdivision holding said security, shall, from time to time, collect all interest or income on the security so deposited and shall, by and with the written consent of contractor’s surety, pay the same when and as collected to the contractor or contractors who deposited said obligations. If the deposit be in the form of coupon bonds, the coupons as they respectively become due shall be delivered to the contractor.

If in the event of an overpayment to a contractor the contracting authority is unable to obtain reimbursement for such overpayments from the contractor, the chief administrative officer of the contracting authority shall notify the contractor, its surety and the State Treasurer or other holder of the security, of the nature of the overpayment and of the failure to obtain reimbursement. Upon such notification, the security holder shall retain the income on the deposited security until an amount equal to the overpayment is accumulated and paid to the contracting authority.

In the event the contractor shall default in the performance of the contract or any portion thereof, the securities deposited by him in lieu of retainage and all interest and coupons and income accruing on said securities after said default may be sold by the state or any agency or department thereof, or any political subdivision, and the proceeds of said sale used as if such proceeds represented the retainage provided for under the contract.

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