What statute(s) identify the intent of retainage?

8 months ago

I cannot find the statute that describes retainage as a mechanism for the public body to use the retained monies as a way to get the job completed. I only see where the statutory language describes retainage as a trust fund to cover claims.

Chief Legal Officer Levelset
134 reviews

While Washington’s specific statutes do note that: “public bodies must reserve, a contract retainage not to exceed five percent of the moneys earned by the contractor as a trust fund for the protection and payment of: (i) The claims of any person arising under the contract; and (ii) the state with respect to taxes, increases, and penalties imposed . . . which may be due from such contractor” reading the above as the sole use of “retained funds” doesn’t necessarily consider some practical aspects.

Retained funds must be paid to a Washington contractor within 60 days of the completion of the work – since funds do not need to be released until the work is complete, this can serve as incentive to get the work complete.

In addition to the creation of a “trust fund” to ensure funds availability for the satisfaction of potential claims, Washington provides for other “prompt payment” deadlines. However, just as the retain age amounts are not required to be paid until after completion of the project, funds can withheld beyond the prompt payment deadlines when there is:

  1. A good faith dispute over the amount owed;
  2. Unsatisfactory performance; or
  3. Payment requests not in compliance with the contractual requirements (if notice of deficiency of payment request given to party requesting payment).

Each of these mechanisms provide payment protection to the parties on the project – but balance that with protecting the public entity’s interest in getting the project done.

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