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.
8. Notwithstanding any other provisions of this section, any contracting agency may deny the contractor on any public works contract permission to substitute securities for monies being held as retainages. This action shall be taken only for good cause and when the agency deems it to be in the best interest of the contracting agency. Written notice shall be given to the contractor and a hearing shall be held by the agency showing cause for such denial if requested in writing by the contractor. Denial of such substitution shall be for a stated period of time, not to exceed a period of 3 years, and shall continue until the end of the stated time period, or until the contractor has successfully completed all outstanding public works contracts without forfeiting any part of the retainage held by the agency, whichever occurs first.
Delaware Retainage FAQs
Summary of Delaware Retainage requirements and laws for Delaware construction projects including free forms, FAQs, resources and more.
Scott Wolfe Jr.