Washington Retainage Guide and FAQs

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Washington Retainage FAQs

Washington Retainage Overview

Washington Retainage Requirements


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Retainage Unregulated Icon
Retainage Limit

Not Regulated by State Law


Payment Period Not Regulated Icon
Pay Period

Not Regulated by State Law


NO
PROCESS
There's No Process to Recover

N/A


No Escrow Icon
Not Held In Escrow

In Washington, contractors and owners do not need to hold retainage funds in a separate escrow account.

Retainage 5% Icon
5 Percent

Retainage cannot exceed 5%. However, if the contract is $150K or less, 10% retainage can be withheld in lieu of a bond. Contractor may request that the retainage be reduced throughout the life of the project.


Payment Period 60 Days Icon
60 Day Pay Period

Retainage must be released with 60 days of completion. If retainage is being withheld at 10%, then released within 30 days of completion.


YES
PROCESS
The process to recover retainage is similar to the payment bond claim process.

Not specified

Retainage, also called “retention,” is an amount of money “held back” from a contractor or subcontractor during the course of a construction project. In general, retainage serves two main purposes:

  • To provide an incentive to the contractor or subcontractor to complete the project; &
  • To give the owner some protection against problems like liens, contractual defaults, delays, and more.

In most states, laws exist to regulate how the parties use the retainage concept, mostly protecting some parties against abuse of the tool from others. The following are resources, legal information, and answers to frequently asked questions about Washington’s retainage requirements.

Washington’s retainage limits and deadlines

Washington’s retainage statutes only apply to public works projects. On all other projects, retainage will be governed by the terms of the contract.

The amount of retainage that can be withheld on public projects is generally capped at 5%. However, if the contract is for $150,000 or less, retainage may be withheld at a higher rate of 10% instead of requiring the contractor to post a bond.

As far as the timing of the release of retainage, the public entity should release the retained funds within 60 days of completion of the project. Or, if the retainage withheld is 10% (in lieu of a bond), then retainage should be released within 30 days of completion. Once received, under WA prompt payment laws, retainage should be passed down the contracting chain (subs and suppliers) within 10 days of receipt.

Washington Retainage Frequently Asked Questions

Washington Retainage Private Projects FAQs

Does Washington limit the amount of retainage that can be withheld from a contractor?

Washington does not limit the amount of retainage that may be withheld on a private project. Therefore, retainage will be governed by the terms of the contract or subcontract.

Washington Retainage Public Projects FAQs

What types of public projects are governed by Washington’s retainage laws?

The statutes governing retainage in Washington apply to all public improvement contracts, with the exception of contracts for professional services such as surveying, inspections, testing, or any other architectural or engineering services.

Also, these regulations will not apply if the project is funded wholly, or in part, by federal transportation funds.

Does Washington limit the amount of retainage that can be withheld from a contractor?

Yes, the amount of retainage that can be withheld on a public works project is capped at 5% of each progress payment. However, if the project is $150K or less, the public entity can decide to retain 10% of each progress payment instead of requiring the contractor to post a bond.

Contractors may request that the retainage be reduced to the value of the work remaining uncompleted on the project.

How long can a party withhold retainage in Washington?

Generally, retainage is required to be released by the public entity within 60 days of completion of the project. If, however, the retainage withheld is 10% (in lieu of a bond), then retainage should be released to the prime contractor within 30 days after final acceptance. Furthermore, under Washington prompt payment laws, once payment has been received, subs and suppliers must be paid within 10 days.

Also, if a subcontractor completes the work under their subcontract in half the time provided in the general contract, the contracting entity can accept completion of the subcontract. If accepted, retainage will be released by the public entity within 45 days of acceptance.

Does Washington require retained funds to be deposited in a special account? Can securities be substituted?

The contractor can request that the retained funds be deposited in an interest bearing account or in escrow, the interest of which will be paid to the contractor.

Furthermore, contractors may submit a bond for all or a portion of the contract retainage from an authorized surety insurer.

For more on this see: Retention Bonds- An Alternative to Waiting for Retainage

Is there a specific notice required to recover retainage in Washington?

In some circumstances, yes. Any individual who supplies materials or leases equipment, regardless if labor is involved or not, should send a written notice to the owner.

This should ideally be sent within the first 60 days of furnishing labor and/or materials. It may be sent late, but will only protect rights of the 60 days preceding the notice. This notice is typically grouped with the public payment bond notice, as the requirements are nearly identical.

How can I make a claim to recover retainage in Washington?

A claim for retainage should be sent to the public entity within 45 days of completion of the contract work. Again, this is typically included in the payment bond claim as long as the claim specifically states that a claim is being made on the retainage funds as well.

The enforcement deadline is 4 months after the notice of the claim was filed with the public entity, and can also be grouped together with the payment bond claim; although the enforcement deadlines differ.

• See: How to Make a Washington Payment Bond Claim

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Washington Retainage Statutes

Getting informed about prompt payment laws is important. An examination of Washington’s retainage laws, the rules, and regulations related to the amount and timing of allowable retained payments is important to know your rights and responsibilities as a party on a construction project. Washington’s specific laws regarding public works projects can be found in: Wash. Rev. Code § 60.28.011, §60.28.015, and § 39.08.010; which are reproduced below. Updated as of 2020.

Retainage Statute on Private Projects

N/A

N/A

Retainage Statute on Public Projects

§ 60.28.011. Retained percentage - Public transportation projects - Labor and material lien created - Bond in lieu of retained funds - Termination before completion - Chapter deemed exclusive - Release of ferry contract payments - Projects of farmers home administration - General contractor/construction manager procedure - Definitions

(1)

(a) Except as provided in (b) of this subsection, public improvement contracts must provide, and 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 pursuant to Titles 50, 51, and 82 RCW which may be due from such contractor.

(b) Public improvement contracts funded in whole or in part by federal transportation funds must rely upon the contract bond as referred to in chapter 39.08 RCW for the protection and payment of:

(i) The claims of any person or persons arising under the contract to the extent such claims are provided for in RCW 39.08.010; and

(ii) the state with respect to taxes, increases, and penalties incurred on the public improvement project under Titles 50, 51, and 82 RCW which may be due. The contract bond must remain in full force and effect until, at a minimum, all claims filed in compliance with chapter 39.08 RCW are resolved.

(2) Every person performing labor or furnishing supplies toward the completion of a public improvement contract has a lien upon moneys reserved by a public body under the provisions of a public improvement contract. However, the notice of the lien of the claimant must be given within forty-five days of completion of the contract work, and in the manner provided in RCW 39.08.030.

(3) The contractor at any time may request the contract retainage be reduced to one hundred percent of the value of the work remaining on the project.

(a) After completion of all contract work other than landscaping, the contractor may request that the public body release and pay in full the amounts retained during the performance of the contract, and sixty days thereafter the public body must release and pay in full the amounts retained (other than continuing retention of five percent of the moneys earned for landscaping) subject to the provisions of chapter 39.12 RCW and this chapter.

(b) Sixty days after completion of all contract work the public body must release and pay in full the amounts retained during the performance of the contract subject to the provisions of chapter 39.12 RCW and this chapter.

(4) The moneys reserved by a public body under the provisions of a public improvement contract, at the option of the contractor, must be:

(a) Retained in a fund by the public body;

(b) Deposited by the public body in an interest bearing account in a bank, mutual savings bank, or savings and loan association. Interest on moneys reserved by a public body under the provision of a public improvement contract must be paid to the contractor;

(c) Placed in escrow with a bank or trust company by the public body. When the moneys reserved are placed in escrow, the public body must issue a check representing the sum of the moneys reserved payable to the bank or trust company and the contractor jointly. This check must be converted into bonds and securities chosen by the contractor and approved by the public body and the bonds and securities must be held in escrow. Interest on the bonds and securities must be paid to the contractor as the interest accrues.

(5) The contractor or subcontractor may withhold payment of not more than five percent from the moneys earned by any subcontractor or sub-subcontractor or supplier contracted with by the contractor to provide labor, materials, or equipment to the public project. Whenever the contractor or subcontractor reserves funds earned by a subcontractor or sub-subcontractor or supplier, the contractor or subcontractor must pay interest to the subcontractor or sub-subcontractor or supplier at a rate equal to that received by the contractor or subcontractor from reserved funds.

(6) A contractor may submit a bond for all or any portion of the contract retainage in a form acceptable to the public body and from an authorized surety insurer. The public body may require that the authorized surety have a minimum A.M. Best financial strength rating so long as that minimum rating does not exceed A-. The public body must comply with the provisions of RCW 48.28.010. At any time prior to final formal acceptance of the project, a subcontractor may request the contractor to submit a bond to the public owner for that portion of the contractor’s retainage pertaining to the subcontractor in a form acceptable to the public body and from a bonding company meeting standards established by the public body. The contractor may withhold the subcontractor’s portion of the bond premium. Within thirty days of receipt of the request, the contractor shall provide and the public body shall accept a bond meeting these requirements unless the public body can demonstrate good cause for refusing to accept it, the bond is not commercially available, or the subcontractor refuses to pay the subcontractor’s portion of the bond premium and to provide the contractor with a like bond. The contractor’s bond and any proceeds therefrom are subject to all claims and liens and in the same manner and priority as set forth for retained percentages in this chapter. The public body must release the bonded portion of the retained funds to the contractor within thirty days of accepting the bond from the contractor. Whenever a public body accepts a bond in lieu of retained funds from a contractor, the contractor must accept like bonds from any subcontractors or suppliers from which the contractor has retained funds. The contractor must then release the funds retained from the subcontractor or supplier to the subcontractor or supplier within thirty days of accepting the bond from the subcontractor or supplier.

(7) If the public body administering a contract, after a substantial portion of the work has been completed, finds that an unreasonable delay will occur in the completion of the remaining portion of the contract for any reason not the result of a breach thereof, it may, if the contractor agrees, delete from the contract the remaining work and accept as final the improvement at the stage of completion then attained and make payment in proportion to the amount of the work accomplished and in this case any amounts retained and accumulated under this section must be held for a period of sixty days following the completion. In the event that the work is terminated before final completion as provided in this section, the public body may thereafter enter into a new contract with the same contractor to perform the remaining work or improvement for an amount equal to or less than the cost of the remaining work as was provided for in the original contract without advertisement or bid. The provisions of this chapter are exclusive and supersede all provisions and regulations in conflict herewith.

(8) Whenever the department of transportation has contracted for the construction of two or more ferry vessels, sixty days after completion of all contract work on each ferry vessel, the department must release and pay in full the amounts retained in connection with the construction of the vessel subject to the provisions of RCW 60.28.021 and chapter 39.12 RCW. However, the department of transportation may at its discretion condition the release of funds retained in connection with the completed ferry upon the contractor delivering a good and sufficient bond with two or more sureties, or with a surety company, in the amount of the retained funds to be released to the contractor, conditioned that no taxes may be certified or claims filed for work on the ferry after a period of sixty days following completion of the ferry; and if taxes are certified or claims filed, recovery may be had on the bond by the department of revenue, the employment security department, the department of labor and industries, and the material suppliers and laborers filing claims.

(9) Except as provided in subsection (1) of this section, reservation by a public body for any purpose from the moneys earned by a contractor by fulfilling its responsibilities under public improvement contracts is prohibited.

(10) Contracts on projects funded in whole or in part by farmers home administration and subject to farmers home administration regulations are not subject to subsections (1) through (9) of this section.

(11) This subsection applies only to a public body that has contracted for the construction of a facility using the general contractor/construction manager procedure, as defined under RCW 39.10.210. If the work performed by a subcontractor on the project has been completed within the first half of the time provided in the general contractor/construction manager contract for completing the work, the public body may accept the completion of the subcontract. The public body must give public notice of this acceptance. After a forty-five day period for giving notice of liens, and compliance with the retainage release procedures in RCW 60.28.021, the public body may release that portion of the retained funds associated with the subcontract. Claims against the retained funds after the forty-five day period are not valid.

(12) The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.

(a) “Contract retainage” means an amount reserved by a public body from the moneys earned by a person under a public improvement contract.

(b) “Person” means a person or persons, mechanic, subcontractor, or materialperson who performs labor or provides materials for a public improvement contract, and any other person who supplies the person with provisions or supplies for the carrying on of a public improvement contract.

(c) “Public body” means the state, or a county, city, town, district, board, or other public body.

(d) “Public improvement contract” means a contract for public improvements or work, other than for professional services, or a work order as defined in RCW 39.10.210.

§ 60.28.015. Recovery from retained percentage - Written notice to contractor of materials furnished

Every person, firm, or corporation furnishing materials, supplies, or equipment to be used in the construction, performance, carrying on, prosecution, or doing of any work for the state, or any county, city, town, district, municipality, or other public body, shall give to the contractor of the work a notice in writing, which notice shall cover the material, supplies, or equipment furnished or leased during the sixty days preceding the giving of such notice as well as all subsequent materials, supplies, or equipment furnished or leased, stating in substance and effect that such person, firm, or corporation is and/or has furnished materials and supplies, or equipment for use thereon, with the name of the subcontractor ordering the same, and that a lien against the retained percentage may be claimed for all materials and supplies, or equipment furnished by such person, firm, or corporation for use thereon, which notice shall be given by (1) mailing the same by registered or certified mail in an envelope addressed to the contractor, or (2) by serving the same personally upon the contractor or the contractor’s representative and obtaining evidence of such service in the form of a receipt or other acknowledgment signed by the contractor or the contractor’s representative, and no suit or action shall be maintained in any court against the retained percentage to recover for such material, supplies, or equipment or any part thereof unless the provisions of this section have been complied with.

§ 39.08.010. Bond required - Conditions - Retention of contract amount in lieu of bond

(1)

(a) Whenever any board, council, commission, trustees, or body acting for the state or any county or municipality or any public body must contract with any person or corporation to do any work for the state, county, or municipality, or other public body, city, town, or district, such board, council, commission, trustees, or body must require the person or persons with whom such contract is made to make, execute, and deliver to such board, council, commission, trustees, or body a good and sufficient bond, with a surety company as surety, conditioned that such person or persons must:

(i) Faithfully perform all the provisions of such contract;

(ii) Pay all laborers, mechanics, and subcontractors and material suppliers, and all persons who supply such person or persons, or subcontractors, with provisions and supplies for the carrying on of such work; and

(iii) Pay the taxes, increases, and penalties incurred on the project under Titles 50, 51, and 82 RCW on:

(A) Projects referred to in RCW 60.28.011(1)(b); and/or

(B) projects for which the bond is conditioned on the payment of such taxes, increases, and penalties.

(b) The bond, in cases of cities and towns, must be filed with the clerk or comptroller thereof, and any person or persons performing such services or furnishing material to any subcontractor has the same right under the provisions of such bond as if such work, services, or material was furnished to the original contractor.

(2) The provisions of RCW 39.08.010 through 39.08.030 do not apply to any money loaned or advanced to any such contractor, subcontractor, or other person in the performance of any such work.

(3) On contracts of one hundred fifty thousand dollars or less, at the option of the contractor or the general contractor/construction manager as defined in RCW 39.10.210, the respective public entity may, in lieu of the bond, retain ten percent of the contract amount for a period of thirty days after date of final acceptance, or until receipt of all necessary releases from the department of revenue, the employment security department, and the department of labor and industries and settlement of any liens filed under chapter 60.28 RCW, whichever is later. The recovery of unpaid wages and benefits must be the first priority for any actions filed against retainage held by a state agency or authorized local government.

(4) For contracts of one hundred fifty thousand dollars or less, the public entity may accept a full payment and performance bond from an individual surety or sureties.

(5) The surety must agree to be bound by the laws of the state of Washington and subjected to the jurisdiction of the state of Washington.

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