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Clarification on Texas Retainage on public projects

I have a public project, not with TxDOT nor wholesale water supply, with work valued under $400,000. Reading the FAQs, there is a statement that the Texas public retainage laws apply to projects valued more than $400,000. However, the very next answer states that the retainage applies on public work contracts valued at less than $5M and that the retainage cannot be more than 10-percent. Please clarify. If applicable, can the retainage be reduce and under what conditions?

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May 18, 2022

In Texas, a 10% retainage is mandated for any project exceeding $400,000. When retainage is required, it is 10% and no less than `10%. I am not clear what you mean by "reduce the retainage." However, under no circumstances can it be less that 10% if required.

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Oct 13, 2022

This is a bit late to help the anonymous contractor, but I wanted to weigh in because this pops up as a search result when you google public contracts and retainage. Mr. Santire is incorrect as to public projects. Texas Property Code 53.101(a), which generally requires an owner to retain 10% of either the contract price or the value of the work, only applies to "... work under an original contract for which a mechanic's lien may be claimed...". The policy behind this requirement, of course, is to both protect the Owner in the event the Contractor fails to perform as well as to provide a source of funds for subcontractors if the contractor fails to pay them. Contracts for public works projects, however, are not contracts for which a mechanic's lien may be claimed because one cannot file a mechanic's lien claim against public property. Instead, the Owner and subcontractors are protected by performance and payment bonds. This is not to say a governmental entity cannot require retainage in public works contracts. Texas Government Code 2252.032 is currently worded so as to make retainage optional (up to 5% or 10%, depending on the contract's value). Generally, however, most municipalities will still impose some level of retainage simply because it is easier to access the retainage money to resolve a dispute than to move against a performance bond.

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