IC 5-16-5.5
    Chapter 5.5. Retainage, Bonds, and Payment of Contractors andSubcontractors

IC 5-16-5.5-1
Definitions
    Sec. 1. As used in this chapter:
    "State agency" means the state of Indiana or any commission oragency created by law.
    "Agent" shall include any board, commission, trustee, officer oragent which acts on behalf of a state agency.
    "Public building", "public work" and "public improvement" orcombinations thereof shall be construed to include all buildings,work or improvements the cost of which is paid for from publicfunds but shall not include highways, roads, streets, alleys, bridgesand appurtenant structures situated on streets, alleys, railroadprojects (as defined in IC 8-5-15-1) and dedicated highwayrights-of-way.
    "Substantial completion" shall be construed to mean the datewhen the construction of a structure or building is sufficientlycompleted, in accordance with the plans and specifications, asmodified by any completed change orders agreed to by the parties,so that the state agency can occupy the structure or building for theuse for which it was intended. Furthermore, the warranty period shallcommence no later than the date of substantial completion.
    "Contractor" shall mean any person, firm, limited liabilitycompany, or corporation who is party to a contract with a stateagency to construct, erect, alter or repair any public building or isany way involved in public work or public improvement.
    "Subcontractor" shall mean and include any person, firm, limitedliability company, or corporation who is a party to a contract with thecontractor and who furnishes and performs on-site labor on anypublic building, work or improvement. It also shall includematerialmen who supply contractors or subcontractors as containedherein.
    "Retainage" means any amount to be withheld from any paymentto a contractor or subcontractor pursuant to the terms of a contractuntil the occurrence of a specified event.
    "Escrowed principal" shall mean the value of all cash andsecurities or other property at the time placed in an escrow account.
    "Escrowed income" shall mean the value of all property held in anescrow account over the escrowed principal in such account.
(Formerly: Acts 1972, P.L.44, SEC.1.) As amended by Acts 1977,P.L.60, SEC.1; Acts 1981, P.L.57, SEC.12; P.L.8-1993, SEC.64;P.L.160-2006, SEC.5.

IC 5-16-5.5-2
Contracts governed by this chapter
    Sec. 2. To the extent that this chapter is applicable, all contractsbetween a contractor and a state agency concerning any public

building, work, or improvement entered into after May 1, 1972, andwhich contracts are in excess of two hundred thousand dollars($200,000) are to be governed by the provisions of this chapter, asare the rights and duties among the parties to the contract and anysubcontractors who do any work under the contract. A state agencymay elect to have a contract that is for not more than two hundredthousand dollars ($200,000) be governed by this chapter. Allcontracts governed by the provisions of this chapter shall includeprovisions for the retainage of portions of payments by a state agencyto contractors, by contractors to subcontractors, and for the paymentof subcontractors.
(Formerly: Acts 1972, P.L.44, SEC.1.) As amended by P.L.25-1986,SEC.91; P.L.133-2007, SEC.6.

IC 5-16-5.5-3
Retainage; escrow agreement
    Sec. 3. Any state agency which enters into a contract for anypublic building, work or improvement, and any contractorsubcontracting portions of such contract, which contracts containprovision for retainage shall include in their respective contracts aprovision that at the time any retainage is withheld, the state agencyand/or contractor shall place such retainage in an escrow account,with a bank, savings and loan institution, or the State of Indiana oran instrumentality thereof, as escrow agent selected by mutualagreement between the affected contract parties, pursuant to a writtenagreement among the bank or savings and loan institution, the stateagency, and the contractor as appropriate. The escrow agreementshall provide as follows:
    (a) The escrow agent shall promptly invest all escrowed principalin such obligations as shall be selected by the escrow agent in itsdiscretion.
    (b) The escrow agent shall hold the escrowed principal andincome until receipt of notice from the state agency and thecontractor, or the contractor and the subcontractor, specifying theportion or portions of the escrowed principal to be released from theescrow and the person or persons to whom such portion or portionsare to be released. Upon receipt of such notice the escrow agent shallpromptly remit the designated portion of escrowed principal and thesame proportion of then escrowed income to such person or persons.
    (c) The escrow agent shall be compensated for its services as theparties may agree on a commercially reasonable fee commensuratewith fees then being charged for the handling of escrow accounts oflike size and duration. The fee must be paid from the escrowedincome of the escrow account.
    (d) The agreement may include such other terms and conditionsnot inconsistent with the foregoing paragraphs (a), (b) and (c)including but not limited to provisions authorizing the escrow agentto commingle the escrowed funds with funds held pursuant to otherescrow agreements and limiting the liability of the escrow agent.
(Formerly: Acts 1972, P.L.44, SEC.1.) As amended by Acts 1977,

P.L.60, SEC.2.

IC 5-16-5.5-3.1
Escrow accounts; establishment and maintenance; fee; schedule
    Sec. 3.1. The treasurer of state may charge a reasonable fee forservices that the treasurer renders in connection with theestablishment and administration of escrow accounts. If the treasurercharges such fee, the treasurer shall prepare a fee schedule and makeit available to the contractor. Any fee must be paid by the contractorat the time the escrow account is established.
As added by P.L.69-1987, SEC.1.

IC 5-16-5.5-3.5
Retainage; options to determine amount
    Sec. 3.5. (a) To determine the amount of retainage to be withheld,a state agency shall elect one (1) of the following options:
        (1) Withhold no more than ten percent (10%) nor less than sixpercent (6%) of the dollar value of all work satisfactorilycompleted until the public work is fifty percent (50%)complete, and nothing further after that.
        (2) Withhold no more than five percent (5%) nor less than threepercent (3%) of the dollar value of all work satisfactorilycompleted until the public work is substantially complete.
    (b) If upon substantial completion of the work there are anyremaining uncompleted minor items, an amount computed undersection 6 of this chapter shall be withheld until those items arecompleted.
As added by Acts 1980, P.L.33, SEC.1. Amended by P.L.133-2007,SEC.7.

IC 5-16-5.5-4
Performance bond; incremented bonding; release or discharge ofsurety
    Sec. 4. At the time of entering into any contract covered by theprovisions of this chapter, the contractor shall furnish a validperformance bond which is acceptable to the state agency involvedin an amount equal to his total contract price. If it is acceptable to thestate agency involved, this performance bond may provide forincremental bonding in the form of multiple or chronological bondswhich, when taken as a whole, equal the total contract price. Thesurety on the bond shall not be released for a period of one (1) yearafter final settlement with the contractor. No change, modification,omission or addition in and to the terms or conditions of saidcontract, plans, specifications, drawings or profile or any irregularityor defect in said contract or in the proceedings preliminary to theletting and awarding thereof shall in any way affect or operate torelease or discharge the surety.
(Formerly: Acts 1972, P.L.44, SEC.1.) As amended by Acts 1978,P.L.15, SEC.3.
IC 5-16-5.5-5
Payment of subcontractor; certification of receipt
    Sec. 5. Within ten (10) days of the receipt of any payment by thestate agency or escrow agent, the contractor or escrow agent shallpay all subcontractors with whom he has contracted their share of thepayment the contractor received based upon the service performedby the subcontractor. The contractor shall furnish upon request asworn statement or certification at the time of payment to him thatthe subcontractor has received his share of the previous payment tothe contractor. The making of an incorrect certification may beconsidered a breach of contract by the state agency, and it mayexercise all of its prerogatives set out in the contract in addition tothe remedies for falsifying an affidavit. Such an action may alsoresult in a suspension of prequalification with the certification boardestablished under IC 4-13.6-3-3.
(Formerly: Acts 1972, P.L.44, SEC.1.) As amended by P.L.33-1983,SEC.16; P.L.24-1985, SEC.15.

IC 5-16-5.5-6
Payment of contractor; uncompleted minor items
    Sec. 6. The contractor shall be paid in full including all escrowedprincipal and escrowed income by the state agency and escrow agentwithin sixty-one (61) days following the date of substantialcompletion, subject to IC 1971, 5-16-5. If at that time there are anyremaining uncompleted minor items, an amount equal to twohundred percent (200%) of the value of each item as determined bythe architect-engineer shall be withheld until said item or items arecompleted.
(Formerly: Acts 1972, P.L.44, SEC.1.)

IC 5-16-5.5-7
Suit against surety; time limitation
    Sec. 7. All suits must be brought against a surety on a bondrequired by this chapter within one (1) year after the completion ofthe work or service in question.
(Formerly: Acts 1972, P.L.44, SEC.1.)

IC 5-16-5.5-8
Conflicting laws
    Sec. 8. This chapter shall not be construed as conflicting with anyother laws for the protection of labor, subcontractors or materialmen,but is supplemental thereto.
(Formerly: Acts 1972, P.L.44, SEC.1.)