Tuesday, August 16, 2011

Who Gets the Money if There Are Too Many Claims Against the Retainage?

Most public works projects require that retainage be withheld from each progress payment.  But what happens if there are more claims against the retainage than there are dollars in the retainage account?

Under Washington state law (chapter 60.28 RCW), there is a priority order on conflicting claims as outlined in the chart below:

Who Decides What is a Valid Claim?  It's important to remember that a public agency should never pay a claim against the retainage from a worker, subcontractor, or supplier based simply on their claim.  It's not the role of the public agency to decide whether it is a valid claim or not.  That's up to the courts to decide, and a claim filed by a worker, subcontractor, or supplier should only be paid from the retainage to the claimant if the court orders it.  On the other hand, the state agencies noted above do not have to have a court order before they may require a public agency to make payment from the retainage.

Other States:  The purpose of retainage differs often by states.  If you're from another state, your state laws will have a different priority order.  I'm interested in hearing how your retainage requirements work.  Please feel free to either leave a comment on this blog entry or contact me.
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

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