What is the Purpose of Retainage and Payment Bonds?

What exactly is the purpose of Retainage and how is it different from the purpose of a Payment Bond? 

And when you throw into the mix the new Washington State law (SHB 1384) that prohibits withholding of retainage on USDOT funded projects for highways, roads, and streets, how does that affect what parties are protected by Retainage versus a Payment Bond?

Know SHB 1384:  If you are not already familiar with SHB 1384 that was approved by the Washington State Legislature this spring, and became effective on July 22, 2011, I encourage you to read the following two blog entries I've written on the subject:

• New Law Prohibits Withholding of Retainage on Federally Funded Transportation Projects in Washington State

• Clarifications on New Retainage Law (SHB 1384)

Protected Parties:  The following chart notes what parties are protected by Retainage and Payment Bonds under both non-USDOT funded projects and some USDOT funded projects.  SHB 1384 addresses USDOT funded projects for highways, roads, and streets.

References:  The following references are helpful in sorting through issues of Retainage and Payment Bonds.  Be sure to check with your attorney when interpreting these laws and especially the impact of SHB 1384.

• Chapter 60.28 RCW (Retainage)
• Chapter 39.08 RCW (Payment Bonds)
• SHB 1384 (Retainage on some USDOT funded projects)
• 49 CRF 26.29 (USDOT regulations on prompt payment)
  

Mike Purdy's Public Contracting Blog 

© 2011 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com