OAR 734-010-0430: Retainage

(1) Withholding of Retainage. ODOT may retain payment but shall not retain an amount in excess of 5 percent of the Contract Price for Work completed. If the Contractor has performed at least 50 percent of the Contract Work and is progressing satisfactorily or if all Work on a subcontract is complete, upon the Contractor’s submission of Written application containing the surety’s Written approval, ODOT may, in its discretion, reduce or eliminate retainage on any remaining progress payments. ODOT shall respond in Writing to all such applications within a reasonable time. When the Contract Work is 97-1/2 percent completed, ODOT may, at its discretion and without application by the Contractor, reduce the retained amount to 100 percent of the value of the remaining unperformed Contract Work. ODOT may at any time reinstate retainage. Retainage shall be included in the final payment of the Contract Price. (2) Form of Retainage. Unless a Contracting Agency that reserves an amount as retainage finds in writing that accepting a bond or instrument described in part (a) or (b) of this section poses an extraordinary risk that is not typically associated with the bond or instrument, the Contracting Agency, in lieu of withholding moneys from payment, shall accept from the Contractor: (a) Bonds, securities or other instruments that are deposited and accepted as provided in subsection (4)(a) of this rule; or (b) A surety bond deposited as provided in subsection (4)(b) of this rule. (3) Deposit in interest-bearing accounts. ODOT shall deposit cash retainage in an interest-bearing account through the State Treasurer, for the benefit of ODOT. Earnings on such account shall accrue to the Contractor. (4) Alternatives to cash retainage. In lieu of cash retainage to be held by ODOT, the Contractor may substitute one of the following: (a) Deposit of bonds, securities and other instruments of the character described in ORS 279C.560(6): (A) The Contractor may deposit bonds, securities and other instruments with ODOT or in any bank or trust company to be held for the benefit of ODOT. If ODOT accepts the deposit, ODOT shall reduce the cash retainage by an amount equal to the value of the bonds, securities and other instruments, and reimburse the excess to the Contractor. Interest or earnings on the bonds, securities or other instruments shall accrue to the Contractor. (B) Bonds, securities and other instruments deposited or acquired in lieu of cash retainage must be of a character approved by the Director of the Oregon Department of Administrative Services, including but not limited to: (i) Bills, certificates, notes or bonds of the United States. (ii) Other obligations of the United States or agencies of the United States. (iii) Obligations of a corporation wholly owned by the Federal Government. (iv) Indebtedness of the Federal National Mortgage Association. (v) General obligation bonds of the State of Oregon or a political subdivision of the State of Oregon. (vi) Irrevocable letters of credit issued by an insured institution, as defined in ORS 706.008. (C) Upon ODOT’s determination that all requirements for the protection of ODOT’s interests have been fulfilled, it shall release to the Contractor all bonds, securities and other instruments deposited in lieu of retainage. (b) Deposit of surety bond: ODOT, at its discretion, may allow the Contractor to deposit a surety bond in a form acceptable to ODOT in lieu of all or a portion of funds retained or to be retained. ODOT requires that the first $10,000 of retainage be held as cash, before the retainage bond takes effect. A Contractor depositing such a bond shall accept surety bonds from its subcontractors and suppliers in lieu of retainage. In such cases, retainage shall be reduced by an amount equal to the value of the bond, and the excess shall be reimbursed. (5) Recovery of costs. ODOT may recover from the Contractor all costs incurred in the proper handling of retainage, bonds, securities and other instruments, and surety bonds, by reduction of the final payment.