§103-32.1 - Contract provision for retainage; subcontractors.

§103-32.1 Contract provision for retainage;
subcontractors. [Repeal and reenactment on July 1, 2011. L 2009, c
175, §14(2).] (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

(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. [L 1976, c 167, pt of §1; am L
1999, c 149, §7; am L 2000, c 222, §2; am L 2006, c 291, §3; am L 2009, c 175, §8]

Note

L Sp 1993, c 8, §54 purports to amend this section.