IC 4-13.6-7
Chapter 7. Bonding, Escrow, and Retainages
IC 4-13.6-7-1 Application of chapter
Sec. 1. The director may apply the retainage provisions of this
chapter to public works projects with an estimated cost less than the
amount specified in section 2 of this chapter. As added by P.L.24-1985, SEC.7. Amended by P.L.133-2007, SEC.2.
IC 4-13.6-7-2 Contract provisions for retainage of payments; escrow accounts
and agreements
Sec. 2. (a) If the estimated cost of a public works project is one
hundred fifty thousand dollars ($150,000) or more, the division shall
include as part of the public works contract provisions for the
retainage of portions of payments by the division to the contractor,
by the contractor to subcontractors, and for the payment of
subcontractors and suppliers by the contractor. The contract must
provide that the division may withhold from the contractor sufficient
funds from the contract price to pay subcontractors and suppliers as
provided in section 4 of this chapter.
(b) A public works contract and contracts between contractors and
subcontractors, if portions of the public works contract are
subcontracted, may include a provision that at the time any retainage
is withheld, the division or the contractor, as the case may be, may
place the retainage in an escrow account, as mutually agreed, with:
(1) a bank;
(2) a savings and loan institution;
(3) the state of Indiana; or
(4) an instrumentality of the state of Indiana;
as escrow agent. The parties to the contract shall select the escrow
agent by mutual agreement. The parties to the agreement shall enter
into a written agreement with the escrow agent.
(c) The escrow agreement must provide the following:
(1) The escrow agent shall promptly invest all escrowed
principal in the obligations that the escrow agent selects, in its
discretion.
(2) The escrow agent shall hold the escrowed principal and
income until it receives notice from both of the other parties to
the escrow agreement specifying the percentage of the escrowed
principal to be released from the escrow and the persons to
whom this percentage is to be released. When it receives this
notice, the escrow agent shall promptly pay the designated
percentage of escrowed principal and the same percentage of
the accumulated escrowed income to the persons designated in
the notice.
(3) The escrow agent shall be compensated for its services as
the parties may agree. The compensation shall be a
commercially reasonable fee commensurate with fees being
charged at the time the escrow fund is established for the
handling of escrow accounts of like size and duration. The fee
must be paid from the escrowed income of the escrow account.
(d) The escrow agreement may include other terms and conditions
that are not inconsistent with subsection (c). Additional provisions
may include provisions authorizing the escrow agent to commingle
the escrowed funds held under other escrow agreements and
provisions limiting the liability of the escrow agent. As added by P.L.24-1985, SEC.7. Amended by P.L.22-1997, SEC.3;
P.L.160-2006, SEC.4.
IC 4-13.6-7-3 Amount of retainage withheld
Sec. 3. (a) To determine the amount of retainage to be withheld,
the division shall elect one (1) of the following options:
(1) To withhold no more than six percent (6%) of the dollar
value of all work satisfactorily completed until the public work
is fifty percent (50%) complete, and nothing further after that.
(2) To withhold no more than three percent (3%) of the dollar
value of all work satisfactorily completed until the public work
is substantially complete.
(b) If upon substantial completion of the work there are any
remaining uncompleted minor items, the division shall withhold,
until those items are completed, an amount equal to four hundred
percent (400%) of the value of each item as determined by the
architect-engineer. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-4 Payment of subcontractors and suppliers; certification of previous
payments; incorrect certification
Sec. 4. (a) Within ten (10) days of receipt of any payment by the
state or the escrow agent, the contractor or escrow agent shall pay
each subcontractor and each supplier the appropriate share of the
payment the contractor received based upon the service performed
by the subcontractor or the materials received from the supplier.
(b) The contractor shall furnish to the division a sworn statement
or certification at the time of payment to it that all subcontractors and
suppliers have received their share of the previous payment to the
contractor.
(c) If a contractor makes an incorrect certification, the department
may do any of the following:
(1) Consider the incorrect certification a breach of contract and
do any of the following:
(A) Cancel the contract.
(B) Collect from the contractor all funds paid to the
contractor under the contract.
(C) Exercise all of the state's rights set out in the contract.
(2) Pursue remedies against the contractor for falsifying an
affidavit.
(3) Revoke the contractor's qualification under
IC 4-13.6-4-13(b).
(4) Use the incorrect certification as a basis for finding the
contractor not responsible when awarding other contracts. As added by P.L.24-1985, SEC.7. Amended by P.L.5-1993, SEC.12.
IC 4-13.6-7-5 Bid bonds
Sec. 5. (a) The director:
(1) may require each contractor of a public works project with
an estimated cost of not more than two hundred thousand
dollars ($200,000); and
(2) shall require each contractor of a public works project with
an estimated cost of more than two hundred thousand dollars
($200,000);
to submit a good and sufficient bid bond with the bid. The bid bond
may equal any percentage of the estimated cost of the public works
project that the director requires.
(b) The division may accept bonds provided on forms specified by
the department or on forms given by surety companies. As added by P.L.24-1985, SEC.7. Amended by P.L.133-2007, SEC.3.
IC 4-13.6-7-6 Payment bonds
Sec. 6. (a) If the estimated cost of the public works project is more
than two hundred thousand dollars ($200,000), the division shall
require the contractor to execute a good and sufficient payment bond
to the department for the state in an amount equal to one hundred
percent (100%) of the total contract price. The bond shall include at
least the following provisions:
(1) The contractor, its successors and assigns, whether by
operation of law or otherwise, and all subcontractors, their
successors and assigns, whether by operation of law or
otherwise, shall pay all indebtedness that may accrue to any
person on account of any labor or service performed or
materials furnished in relation to the public work.
(2) The bond shall directly inure to the benefit of
subcontractors, laborers, suppliers, and those performing
service or who may have furnished or supplied labor, material,
or service in relation to the public work.
(3) No change, modification, omission, or addition in or to the
terms or conditions of the contract, plans, specifications,
drawings, or profile or any irregularity or defect in the contract
or in the procedures preliminary to the letting and awarding of
the contract shall affect or operate to release or discharge the
surety in any way.
(4) The provisions and conditions of this chapter shall be a part
of the terms of the contract and bond.
(b) The division may permit the bond given by the contractor to
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal the total contract
price.
(c) The division may accept bonds provided on forms specified by
the division or on forms given by surety companies.
(d) The division shall hold the bond of a contractor for the use and
benefit of any claimant having an interest in it and entitled to its
benefits.
(e) The division shall not release sureties of a contractor until the
expiration of one (1) year after the final settlement with the
contractor.
(f) If the estimated cost of the public works project is less than or
equal to two hundred thousand dollars ($200,000), the director may
require one (1) of the following:
(1) The contractor must execute a good and sufficient payment
bond. The director may determine the amount of the bond to be
any percentage, but no more than one hundred percent (100%),
of the cost of the project.
(2) The division will withhold retainage under this chapter in an
amount of ten percent (10%) of the dollar value of all payments
made to the contractor until the public work is substantially
completed. As added by P.L.24-1985, SEC.7. Amended by P.L.14-1986, SEC.9;
P.L.26-1989, SEC.13; P.L.22-1997, SEC.4; P.L.133-2007, SEC.4.
IC 4-13.6-7-7 Performance bonds
Sec. 7. (a) If the estimated cost of the public works project is:
(1) at least two hundred thousand dollars ($200,000), the
division shall; or
(2) less than two hundred thousand dollars ($200,000), the
division may;
require the contractor to execute a good and sufficient performance
bond to the department for the state in an amount equal to one
hundred percent (100%) of the total contract price.
(b) The bond required under subsection (a) shall include at least
the following provisions:
(1) The contractor shall well and faithfully perform the contract.
(2) No change, modification, omission, or addition in or to the
terms or conditions of the contract, plans, specifications,
drawings, or profile or any irregularity or defect in the contract
or in the procedures preliminary to the letting and awarding of
the contract shall affect or operate to release or discharge the
surety in any way.
(3) The provisions and conditions of this chapter shall be a part
of the terms of the contract and bond.
(c) The division may permit the bond given by the contractor to
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal the total contract
price.
(d) The division may accept bonds provided on forms specified by
the division or on forms given by surety companies.
(e) The division shall not release sureties of a contractor until the
expiration of one (1) year after the final settlement with the
contractor. As added by P.L.24-1985, SEC.7. Amended by P.L.26-1989, SEC.15;
P.L.22-1997, SEC.5; P.L.133-2007, SEC.5.
IC 4-13.6-7-8 Final settlement with contractor
Sec. 8. (a) Except for amounts withheld from the contractor under
section 3 of this chapter for uncompleted minor items, the division
may make a full, final, and complete settlement with a contractor,
including providing for full payment of all escrowed principal and
escrowed income, within sixty-one (61) days following the date of
substantial completion if:
(1) the contractor has materially fulfilled all of its obligations
under the public works contract;
(2) the division has received no claims from subcontractors or
suppliers under this chapter; and
(3) the contractor has furnished satisfactory evidence showing
full payment of all subcontractors and suppliers in the
performance of the contract.
(b) After the division makes a final settlement with a contractor,
all claims by subcontractors and suppliers to funds withheld from
that contractor under section 2 of this chapter are barred. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-9 Payment of subcontractors and suppliers by division; proration of
claims; disputed claims
Sec. 9. (a) If a subcontractor or a supplier files a claim with the
division under section 10 of this chapter, and the claim is undisputed,
the division shall:
(1) pay the claimant from the amounts retained from the
contractor under section 2 of this chapter;
(2) take a receipt for each payment; and
(3) deduct the total amount paid to subcontractors and suppliers
from the balance due the contractor.
(b) If there is not a sufficient amount owing to the contractor to
pay all subcontractors and suppliers making undisputed claims under
section 10 of this chapter, then the division shall prorate the amount
withheld from the contractor and shall pay the prorated amount to
each subcontractor and supplier entitled to a portion of the amount.
(c) If there is a dispute among the contractor, the subcontractors,
and the suppliers to the funds withheld by the division, the division
shall retain sufficient funds until the dispute is settled and the correct
amount to be paid to each person is determined. When the dispute is
resolved, the division shall make payments to persons making claims
as provided in this section. As added by P.L.24-1985, SEC.7. IC 4-13.6-7-10 Claims of subcontractors and suppliers; verification; notice to
contractors and sureties; actions upon bond
Sec. 10. (a) In order to receive payment under section 9 of this
chapter or to proceed against the bond of the contractor required
under section 6 of this chapter, any subcontractor or supplier making
a claim for payment on account of having performed any labor or
having furnished any material or service in relation to a public works
project must file a verified claim with the division within sixty (60)
days from the last labor performed, last material furnished, or last
service rendered. The claim shall state the amount due and owing to
the person and shall give as much detail explaining the claim as
possible. The division shall notify the contractor of any filed claims
before taking action under section 9 of this chapter.
(b) In order to proceed against the bond of the contractor required
under section 6 of this chapter, the claimant must notify the surety of
the contractor by sending a copy of the claim required by subsection
(a) to the surety company. The claimant shall also inform the
division that the surety has been notified. The division shall supply
the claimant with any information the claimant requires to notify the
surety.
(c) The claimant may not file suit against the contractor's surety
on the contractor's bond until the expiration of thirty (30) days after
filing of the claim with the division. If the claim is not paid in full at
the expiration of the thirty (30) day period, the claimant may bring
an action in a court of competent jurisdiction in the claimant's own
name upon the bond. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-11 Limitation of actions against sureties
Sec. 11. Unless the bond provides a greater period of time, all
suits must be brought against a surety on a bond required by this
chapter within one (1) year after final settlement with the contractor
under section 8 of this chapter. All suits against the surety after this
time are barred. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-12 Construction of chapter with other laws
Sec. 12. This chapter is intended to supplement all other laws
protecting labor, subcontractors, or suppliers and shall not be
construed as conflicting with them. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7
Chapter 7. Bonding, Escrow, and Retainages
IC 4-13.6-7-1 Application of chapter
Sec. 1. The director may apply the retainage provisions of this
chapter to public works projects with an estimated cost less than the
amount specified in section 2 of this chapter. As added by P.L.24-1985, SEC.7. Amended by P.L.133-2007, SEC.2.
IC 4-13.6-7-2 Contract provisions for retainage of payments; escrow accounts
and agreements
Sec. 2. (a) If the estimated cost of a public works project is one
hundred fifty thousand dollars ($150,000) or more, the division shall
include as part of the public works contract provisions for the
retainage of portions of payments by the division to the contractor,
by the contractor to subcontractors, and for the payment of
subcontractors and suppliers by the contractor. The contract must
provide that the division may withhold from the contractor sufficient
funds from the contract price to pay subcontractors and suppliers as
provided in section 4 of this chapter.
(b) A public works contract and contracts between contractors and
subcontractors, if portions of the public works contract are
subcontracted, may include a provision that at the time any retainage
is withheld, the division or the contractor, as the case may be, may
place the retainage in an escrow account, as mutually agreed, with:
(1) a bank;
(2) a savings and loan institution;
(3) the state of Indiana; or
(4) an instrumentality of the state of Indiana;
as escrow agent. The parties to the contract shall select the escrow
agent by mutual agreement. The parties to the agreement shall enter
into a written agreement with the escrow agent.
(c) The escrow agreement must provide the following:
(1) The escrow agent shall promptly invest all escrowed
principal in the obligations that the escrow agent selects, in its
discretion.
(2) The escrow agent shall hold the escrowed principal and
income until it receives notice from both of the other parties to
the escrow agreement specifying the percentage of the escrowed
principal to be released from the escrow and the persons to
whom this percentage is to be released. When it receives this
notice, the escrow agent shall promptly pay the designated
percentage of escrowed principal and the same percentage of
the accumulated escrowed income to the persons designated in
the notice.
(3) The escrow agent shall be compensated for its services as
the parties may agree. The compensation shall be a
commercially reasonable fee commensurate with fees being
charged at the time the escrow fund is established for the
handling of escrow accounts of like size and duration. The fee
must be paid from the escrowed income of the escrow account.
(d) The escrow agreement may include other terms and conditions
that are not inconsistent with subsection (c). Additional provisions
may include provisions authorizing the escrow agent to commingle
the escrowed funds held under other escrow agreements and
provisions limiting the liability of the escrow agent. As added by P.L.24-1985, SEC.7. Amended by P.L.22-1997, SEC.3;
P.L.160-2006, SEC.4.
IC 4-13.6-7-3 Amount of retainage withheld
Sec. 3. (a) To determine the amount of retainage to be withheld,
the division shall elect one (1) of the following options:
(1) To withhold no more than six percent (6%) of the dollar
value of all work satisfactorily completed until the public work
is fifty percent (50%) complete, and nothing further after that.
(2) To withhold no more than three percent (3%) of the dollar
value of all work satisfactorily completed until the public work
is substantially complete.
(b) If upon substantial completion of the work there are any
remaining uncompleted minor items, the division shall withhold,
until those items are completed, an amount equal to four hundred
percent (400%) of the value of each item as determined by the
architect-engineer. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-4 Payment of subcontractors and suppliers; certification of previous
payments; incorrect certification
Sec. 4. (a) Within ten (10) days of receipt of any payment by the
state or the escrow agent, the contractor or escrow agent shall pay
each subcontractor and each supplier the appropriate share of the
payment the contractor received based upon the service performed
by the subcontractor or the materials received from the supplier.
(b) The contractor shall furnish to the division a sworn statement
or certification at the time of payment to it that all subcontractors and
suppliers have received their share of the previous payment to the
contractor.
(c) If a contractor makes an incorrect certification, the department
may do any of the following:
(1) Consider the incorrect certification a breach of contract and
do any of the following:
(A) Cancel the contract.
(B) Collect from the contractor all funds paid to the
contractor under the contract.
(C) Exercise all of the state's rights set out in the contract.
(2) Pursue remedies against the contractor for falsifying an
affidavit.
(3) Revoke the contractor's qualification under
IC 4-13.6-4-13(b).
(4) Use the incorrect certification as a basis for finding the
contractor not responsible when awarding other contracts. As added by P.L.24-1985, SEC.7. Amended by P.L.5-1993, SEC.12.
IC 4-13.6-7-5 Bid bonds
Sec. 5. (a) The director:
(1) may require each contractor of a public works project with
an estimated cost of not more than two hundred thousand
dollars ($200,000); and
(2) shall require each contractor of a public works project with
an estimated cost of more than two hundred thousand dollars
($200,000);
to submit a good and sufficient bid bond with the bid. The bid bond
may equal any percentage of the estimated cost of the public works
project that the director requires.
(b) The division may accept bonds provided on forms specified by
the department or on forms given by surety companies. As added by P.L.24-1985, SEC.7. Amended by P.L.133-2007, SEC.3.
IC 4-13.6-7-6 Payment bonds
Sec. 6. (a) If the estimated cost of the public works project is more
than two hundred thousand dollars ($200,000), the division shall
require the contractor to execute a good and sufficient payment bond
to the department for the state in an amount equal to one hundred
percent (100%) of the total contract price. The bond shall include at
least the following provisions:
(1) The contractor, its successors and assigns, whether by
operation of law or otherwise, and all subcontractors, their
successors and assigns, whether by operation of law or
otherwise, shall pay all indebtedness that may accrue to any
person on account of any labor or service performed or
materials furnished in relation to the public work.
(2) The bond shall directly inure to the benefit of
subcontractors, laborers, suppliers, and those performing
service or who may have furnished or supplied labor, material,
or service in relation to the public work.
(3) No change, modification, omission, or addition in or to the
terms or conditions of the contract, plans, specifications,
drawings, or profile or any irregularity or defect in the contract
or in the procedures preliminary to the letting and awarding of
the contract shall affect or operate to release or discharge the
surety in any way.
(4) The provisions and conditions of this chapter shall be a part
of the terms of the contract and bond.
(b) The division may permit the bond given by the contractor to
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal the total contract
price.
(c) The division may accept bonds provided on forms specified by
the division or on forms given by surety companies.
(d) The division shall hold the bond of a contractor for the use and
benefit of any claimant having an interest in it and entitled to its
benefits.
(e) The division shall not release sureties of a contractor until the
expiration of one (1) year after the final settlement with the
contractor.
(f) If the estimated cost of the public works project is less than or
equal to two hundred thousand dollars ($200,000), the director may
require one (1) of the following:
(1) The contractor must execute a good and sufficient payment
bond. The director may determine the amount of the bond to be
any percentage, but no more than one hundred percent (100%),
of the cost of the project.
(2) The division will withhold retainage under this chapter in an
amount of ten percent (10%) of the dollar value of all payments
made to the contractor until the public work is substantially
completed. As added by P.L.24-1985, SEC.7. Amended by P.L.14-1986, SEC.9;
P.L.26-1989, SEC.13; P.L.22-1997, SEC.4; P.L.133-2007, SEC.4.
IC 4-13.6-7-7 Performance bonds
Sec. 7. (a) If the estimated cost of the public works project is:
(1) at least two hundred thousand dollars ($200,000), the
division shall; or
(2) less than two hundred thousand dollars ($200,000), the
division may;
require the contractor to execute a good and sufficient performance
bond to the department for the state in an amount equal to one
hundred percent (100%) of the total contract price.
(b) The bond required under subsection (a) shall include at least
the following provisions:
(1) The contractor shall well and faithfully perform the contract.
(2) No change, modification, omission, or addition in or to the
terms or conditions of the contract, plans, specifications,
drawings, or profile or any irregularity or defect in the contract
or in the procedures preliminary to the letting and awarding of
the contract shall affect or operate to release or discharge the
surety in any way.
(3) The provisions and conditions of this chapter shall be a part
of the terms of the contract and bond.
(c) The division may permit the bond given by the contractor to
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal the total contract
price.
(d) The division may accept bonds provided on forms specified by
the division or on forms given by surety companies.
(e) The division shall not release sureties of a contractor until the
expiration of one (1) year after the final settlement with the
contractor. As added by P.L.24-1985, SEC.7. Amended by P.L.26-1989, SEC.15;
P.L.22-1997, SEC.5; P.L.133-2007, SEC.5.
IC 4-13.6-7-8 Final settlement with contractor
Sec. 8. (a) Except for amounts withheld from the contractor under
section 3 of this chapter for uncompleted minor items, the division
may make a full, final, and complete settlement with a contractor,
including providing for full payment of all escrowed principal and
escrowed income, within sixty-one (61) days following the date of
substantial completion if:
(1) the contractor has materially fulfilled all of its obligations
under the public works contract;
(2) the division has received no claims from subcontractors or
suppliers under this chapter; and
(3) the contractor has furnished satisfactory evidence showing
full payment of all subcontractors and suppliers in the
performance of the contract.
(b) After the division makes a final settlement with a contractor,
all claims by subcontractors and suppliers to funds withheld from
that contractor under section 2 of this chapter are barred. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-9 Payment of subcontractors and suppliers by division; proration of
claims; disputed claims
Sec. 9. (a) If a subcontractor or a supplier files a claim with the
division under section 10 of this chapter, and the claim is undisputed,
the division shall:
(1) pay the claimant from the amounts retained from the
contractor under section 2 of this chapter;
(2) take a receipt for each payment; and
(3) deduct the total amount paid to subcontractors and suppliers
from the balance due the contractor.
(b) If there is not a sufficient amount owing to the contractor to
pay all subcontractors and suppliers making undisputed claims under
section 10 of this chapter, then the division shall prorate the amount
withheld from the contractor and shall pay the prorated amount to
each subcontractor and supplier entitled to a portion of the amount.
(c) If there is a dispute among the contractor, the subcontractors,
and the suppliers to the funds withheld by the division, the division
shall retain sufficient funds until the dispute is settled and the correct
amount to be paid to each person is determined. When the dispute is
resolved, the division shall make payments to persons making claims
as provided in this section. As added by P.L.24-1985, SEC.7. IC 4-13.6-7-10 Claims of subcontractors and suppliers; verification; notice to
contractors and sureties; actions upon bond
Sec. 10. (a) In order to receive payment under section 9 of this
chapter or to proceed against the bond of the contractor required
under section 6 of this chapter, any subcontractor or supplier making
a claim for payment on account of having performed any labor or
having furnished any material or service in relation to a public works
project must file a verified claim with the division within sixty (60)
days from the last labor performed, last material furnished, or last
service rendered. The claim shall state the amount due and owing to
the person and shall give as much detail explaining the claim as
possible. The division shall notify the contractor of any filed claims
before taking action under section 9 of this chapter.
(b) In order to proceed against the bond of the contractor required
under section 6 of this chapter, the claimant must notify the surety of
the contractor by sending a copy of the claim required by subsection
(a) to the surety company. The claimant shall also inform the
division that the surety has been notified. The division shall supply
the claimant with any information the claimant requires to notify the
surety.
(c) The claimant may not file suit against the contractor's surety
on the contractor's bond until the expiration of thirty (30) days after
filing of the claim with the division. If the claim is not paid in full at
the expiration of the thirty (30) day period, the claimant may bring
an action in a court of competent jurisdiction in the claimant's own
name upon the bond. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-11 Limitation of actions against sureties
Sec. 11. Unless the bond provides a greater period of time, all
suits must be brought against a surety on a bond required by this
chapter within one (1) year after final settlement with the contractor
under section 8 of this chapter. All suits against the surety after this
time are barred. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-12 Construction of chapter with other laws
Sec. 12. This chapter is intended to supplement all other laws
protecting labor, subcontractors, or suppliers and shall not be
construed as conflicting with them. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7
Chapter 7. Bonding, Escrow, and Retainages
IC 4-13.6-7-1 Application of chapter
Sec. 1. The director may apply the retainage provisions of this
chapter to public works projects with an estimated cost less than the
amount specified in section 2 of this chapter. As added by P.L.24-1985, SEC.7. Amended by P.L.133-2007, SEC.2.
IC 4-13.6-7-2 Contract provisions for retainage of payments; escrow accounts
and agreements
Sec. 2. (a) If the estimated cost of a public works project is one
hundred fifty thousand dollars ($150,000) or more, the division shall
include as part of the public works contract provisions for the
retainage of portions of payments by the division to the contractor,
by the contractor to subcontractors, and for the payment of
subcontractors and suppliers by the contractor. The contract must
provide that the division may withhold from the contractor sufficient
funds from the contract price to pay subcontractors and suppliers as
provided in section 4 of this chapter.
(b) A public works contract and contracts between contractors and
subcontractors, if portions of the public works contract are
subcontracted, may include a provision that at the time any retainage
is withheld, the division or the contractor, as the case may be, may
place the retainage in an escrow account, as mutually agreed, with:
(1) a bank;
(2) a savings and loan institution;
(3) the state of Indiana; or
(4) an instrumentality of the state of Indiana;
as escrow agent. The parties to the contract shall select the escrow
agent by mutual agreement. The parties to the agreement shall enter
into a written agreement with the escrow agent.
(c) The escrow agreement must provide the following:
(1) The escrow agent shall promptly invest all escrowed
principal in the obligations that the escrow agent selects, in its
discretion.
(2) The escrow agent shall hold the escrowed principal and
income until it receives notice from both of the other parties to
the escrow agreement specifying the percentage of the escrowed
principal to be released from the escrow and the persons to
whom this percentage is to be released. When it receives this
notice, the escrow agent shall promptly pay the designated
percentage of escrowed principal and the same percentage of
the accumulated escrowed income to the persons designated in
the notice.
(3) The escrow agent shall be compensated for its services as
the parties may agree. The compensation shall be a
commercially reasonable fee commensurate with fees being
charged at the time the escrow fund is established for the
handling of escrow accounts of like size and duration. The fee
must be paid from the escrowed income of the escrow account.
(d) The escrow agreement may include other terms and conditions
that are not inconsistent with subsection (c). Additional provisions
may include provisions authorizing the escrow agent to commingle
the escrowed funds held under other escrow agreements and
provisions limiting the liability of the escrow agent. As added by P.L.24-1985, SEC.7. Amended by P.L.22-1997, SEC.3;
P.L.160-2006, SEC.4.
IC 4-13.6-7-3 Amount of retainage withheld
Sec. 3. (a) To determine the amount of retainage to be withheld,
the division shall elect one (1) of the following options:
(1) To withhold no more than six percent (6%) of the dollar
value of all work satisfactorily completed until the public work
is fifty percent (50%) complete, and nothing further after that.
(2) To withhold no more than three percent (3%) of the dollar
value of all work satisfactorily completed until the public work
is substantially complete.
(b) If upon substantial completion of the work there are any
remaining uncompleted minor items, the division shall withhold,
until those items are completed, an amount equal to four hundred
percent (400%) of the value of each item as determined by the
architect-engineer. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-4 Payment of subcontractors and suppliers; certification of previous
payments; incorrect certification
Sec. 4. (a) Within ten (10) days of receipt of any payment by the
state or the escrow agent, the contractor or escrow agent shall pay
each subcontractor and each supplier the appropriate share of the
payment the contractor received based upon the service performed
by the subcontractor or the materials received from the supplier.
(b) The contractor shall furnish to the division a sworn statement
or certification at the time of payment to it that all subcontractors and
suppliers have received their share of the previous payment to the
contractor.
(c) If a contractor makes an incorrect certification, the department
may do any of the following:
(1) Consider the incorrect certification a breach of contract and
do any of the following:
(A) Cancel the contract.
(B) Collect from the contractor all funds paid to the
contractor under the contract.
(C) Exercise all of the state's rights set out in the contract.
(2) Pursue remedies against the contractor for falsifying an
affidavit.
(3) Revoke the contractor's qualification under
IC 4-13.6-4-13(b).
(4) Use the incorrect certification as a basis for finding the
contractor not responsible when awarding other contracts. As added by P.L.24-1985, SEC.7. Amended by P.L.5-1993, SEC.12.
IC 4-13.6-7-5 Bid bonds
Sec. 5. (a) The director:
(1) may require each contractor of a public works project with
an estimated cost of not more than two hundred thousand
dollars ($200,000); and
(2) shall require each contractor of a public works project with
an estimated cost of more than two hundred thousand dollars
($200,000);
to submit a good and sufficient bid bond with the bid. The bid bond
may equal any percentage of the estimated cost of the public works
project that the director requires.
(b) The division may accept bonds provided on forms specified by
the department or on forms given by surety companies. As added by P.L.24-1985, SEC.7. Amended by P.L.133-2007, SEC.3.
IC 4-13.6-7-6 Payment bonds
Sec. 6. (a) If the estimated cost of the public works project is more
than two hundred thousand dollars ($200,000), the division shall
require the contractor to execute a good and sufficient payment bond
to the department for the state in an amount equal to one hundred
percent (100%) of the total contract price. The bond shall include at
least the following provisions:
(1) The contractor, its successors and assigns, whether by
operation of law or otherwise, and all subcontractors, their
successors and assigns, whether by operation of law or
otherwise, shall pay all indebtedness that may accrue to any
person on account of any labor or service performed or
materials furnished in relation to the public work.
(2) The bond shall directly inure to the benefit of
subcontractors, laborers, suppliers, and those performing
service or who may have furnished or supplied labor, material,
or service in relation to the public work.
(3) No change, modification, omission, or addition in or to the
terms or conditions of the contract, plans, specifications,
drawings, or profile or any irregularity or defect in the contract
or in the procedures preliminary to the letting and awarding of
the contract shall affect or operate to release or discharge the
surety in any way.
(4) The provisions and conditions of this chapter shall be a part
of the terms of the contract and bond.
(b) The division may permit the bond given by the contractor to
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal the total contract
price.
(c) The division may accept bonds provided on forms specified by
the division or on forms given by surety companies.
(d) The division shall hold the bond of a contractor for the use and
benefit of any claimant having an interest in it and entitled to its
benefits.
(e) The division shall not release sureties of a contractor until the
expiration of one (1) year after the final settlement with the
contractor.
(f) If the estimated cost of the public works project is less than or
equal to two hundred thousand dollars ($200,000), the director may
require one (1) of the following:
(1) The contractor must execute a good and sufficient payment
bond. The director may determine the amount of the bond to be
any percentage, but no more than one hundred percent (100%),
of the cost of the project.
(2) The division will withhold retainage under this chapter in an
amount of ten percent (10%) of the dollar value of all payments
made to the contractor until the public work is substantially
completed. As added by P.L.24-1985, SEC.7. Amended by P.L.14-1986, SEC.9;
P.L.26-1989, SEC.13; P.L.22-1997, SEC.4; P.L.133-2007, SEC.4.
IC 4-13.6-7-7 Performance bonds
Sec. 7. (a) If the estimated cost of the public works project is:
(1) at least two hundred thousand dollars ($200,000), the
division shall; or
(2) less than two hundred thousand dollars ($200,000), the
division may;
require the contractor to execute a good and sufficient performance
bond to the department for the state in an amount equal to one
hundred percent (100%) of the total contract price.
(b) The bond required under subsection (a) shall include at least
the following provisions:
(1) The contractor shall well and faithfully perform the contract.
(2) No change, modification, omission, or addition in or to the
terms or conditions of the contract, plans, specifications,
drawings, or profile or any irregularity or defect in the contract
or in the procedures preliminary to the letting and awarding of
the contract shall affect or operate to release or discharge the
surety in any way.
(3) The provisions and conditions of this chapter shall be a part
of the terms of the contract and bond.
(c) The division may permit the bond given by the contractor to
provide for incremental bonding in the form of multiple or
chronological bonds that, if taken as a whole, equal the total contract
price.
(d) The division may accept bonds provided on forms specified by
the division or on forms given by surety companies.
(e) The division shall not release sureties of a contractor until the
expiration of one (1) year after the final settlement with the
contractor. As added by P.L.24-1985, SEC.7. Amended by P.L.26-1989, SEC.15;
P.L.22-1997, SEC.5; P.L.133-2007, SEC.5.
IC 4-13.6-7-8 Final settlement with contractor
Sec. 8. (a) Except for amounts withheld from the contractor under
section 3 of this chapter for uncompleted minor items, the division
may make a full, final, and complete settlement with a contractor,
including providing for full payment of all escrowed principal and
escrowed income, within sixty-one (61) days following the date of
substantial completion if:
(1) the contractor has materially fulfilled all of its obligations
under the public works contract;
(2) the division has received no claims from subcontractors or
suppliers under this chapter; and
(3) the contractor has furnished satisfactory evidence showing
full payment of all subcontractors and suppliers in the
performance of the contract.
(b) After the division makes a final settlement with a contractor,
all claims by subcontractors and suppliers to funds withheld from
that contractor under section 2 of this chapter are barred. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-9 Payment of subcontractors and suppliers by division; proration of
claims; disputed claims
Sec. 9. (a) If a subcontractor or a supplier files a claim with the
division under section 10 of this chapter, and the claim is undisputed,
the division shall:
(1) pay the claimant from the amounts retained from the
contractor under section 2 of this chapter;
(2) take a receipt for each payment; and
(3) deduct the total amount paid to subcontractors and suppliers
from the balance due the contractor.
(b) If there is not a sufficient amount owing to the contractor to
pay all subcontractors and suppliers making undisputed claims under
section 10 of this chapter, then the division shall prorate the amount
withheld from the contractor and shall pay the prorated amount to
each subcontractor and supplier entitled to a portion of the amount.
(c) If there is a dispute among the contractor, the subcontractors,
and the suppliers to the funds withheld by the division, the division
shall retain sufficient funds until the dispute is settled and the correct
amount to be paid to each person is determined. When the dispute is
resolved, the division shall make payments to persons making claims
as provided in this section. As added by P.L.24-1985, SEC.7. IC 4-13.6-7-10 Claims of subcontractors and suppliers; verification; notice to
contractors and sureties; actions upon bond
Sec. 10. (a) In order to receive payment under section 9 of this
chapter or to proceed against the bond of the contractor required
under section 6 of this chapter, any subcontractor or supplier making
a claim for payment on account of having performed any labor or
having furnished any material or service in relation to a public works
project must file a verified claim with the division within sixty (60)
days from the last labor performed, last material furnished, or last
service rendered. The claim shall state the amount due and owing to
the person and shall give as much detail explaining the claim as
possible. The division shall notify the contractor of any filed claims
before taking action under section 9 of this chapter.
(b) In order to proceed against the bond of the contractor required
under section 6 of this chapter, the claimant must notify the surety of
the contractor by sending a copy of the claim required by subsection
(a) to the surety company. The claimant shall also inform the
division that the surety has been notified. The division shall supply
the claimant with any information the claimant requires to notify the
surety.
(c) The claimant may not file suit against the contractor's surety
on the contractor's bond until the expiration of thirty (30) days after
filing of the claim with the division. If the claim is not paid in full at
the expiration of the thirty (30) day period, the claimant may bring
an action in a court of competent jurisdiction in the claimant's own
name upon the bond. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-11 Limitation of actions against sureties
Sec. 11. Unless the bond provides a greater period of time, all
suits must be brought against a surety on a bond required by this
chapter within one (1) year after final settlement with the contractor
under section 8 of this chapter. All suits against the surety after this
time are barred. As added by P.L.24-1985, SEC.7.
IC 4-13.6-7-12 Construction of chapter with other laws
Sec. 12. This chapter is intended to supplement all other laws
protecting labor, subcontractors, or suppliers and shall not be
construed as conflicting with them. As added by P.L.24-1985, SEC.7.
