Authorization and Procedure for Retention of Contractual Payments by State or Political Subdivisions; Procedure for Final Payment

  1. Law
  2. Georgia Code
  3. Contracts
  4. Contracts for Public Works
  5. Retention of Contractual Payments and Creation of Escrow Accounts on Contracts for Installation, Improvement, Maintenance, or Repair of Water or Sewer Facilities
  6. Authorization and Procedure for Retention of Contractual Payments by State or Political Subdivisions; Procedure for Final Payment

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  1. Any department, agency, or instrumentality of the state or any political subdivision of the state is authorized to insert in the specifications of all contracts relating to the installation, extension, improvement, maintenance, or repair of any water or sewer facility a clause providing for the retention of amounts not exceeding 10 percent of the gross value of the completed work as may be provided for in the contract; provided, however, that no amounts shall be retained on estimates or progress payments submitted after 50 percent of the work on the project has been completed if in the opinion of the department, agency, or instrumentality of the state or any political subdivision thereof such work is satisfactory and has been completed on schedule. This will not affect the retained amounts on the first 50 percent of the work on the project which may continue to be held to ensure satisfactory completion of the project. If, after discontinuing the retention, the department, agency, or instrumentality of the state or any political subdivision thereof determines that the work is unsatisfactory or has fallen behind schedule, retention may be resumed at the previous level. Retainage shall be invested at the current market rate and any interest earned on the retained amount by such department, agency, or instrumentality of the state or any political subdivision of the state shall be paid to the contractor when the project has been completed within the time limits specified and for the price specified in the contract, or in any amendments or change orders approved in accord with the terms of the contract, as certified pursuant to subsection (b) of this Code section.
  2. Final payment of the retained amounts to the contractor under the contract to which the retained amounts relate shall be made after certification by the engineer in charge of the project covered by the contract that the work has been satisfactorily completed and is accepted in accordance with the contract, plans, and specifications. Payment to the contractor of interest earned on the retained amounts shall be made after certification by the engineer in charge of the project covered by the contract that the work has been completed within the time specified and within the price specified in the contract.
  3. At substantial completion of the work and as the governmental entity's authorized contract representative determines the work to be reasonably satisfactory, the governmental entity shall within 30 days after invoice and other appropriate documentation as may be required by the contract documents are provided pay the retainage to the contractor. If at that time there are any remaining incomplete minor items, an amount equal to 200 percent of the value of each item as determined by the governmental entity's authorized contract representative shall be withheld until such item or items are completed.

(Ga. L. 1975, p. 1045, § 1; Code 1981, §13-10-20; Ga. L. 1983, p. 475, § 1; Ga. L. 1992, p. 2091, § 1; Code 1981, §13-10-81, as redesignated by Ga. L. 2001, p. 820, § 1.)

Cross references.

- Authority of municipal corporations to construct and improve water and sewage systems, § 36-34-5.

OPINIONS OF THE ATTORNEY GENERAL

Federal supremacy does not prevent application.

- The provisions of O.C.G.A. § 13-10-20 (see now O.C.G.A. § 13-10-81) are fully applicable to retainage for public contracts for installation, improvement, maintenance, or repair of water or sewer facilities in the State of Georgia, any time such retainage is withheld, whether or not the project is funded with federal funds. 1993 Op. Att'y Gen. No. U93-1.

Discretion in determining amount retained.

- O.C.G.A. § 13-10-20 (see now O.C.G.A. § 13-10-81) provides the appropriate public administrator with the discretion to determine what percentage of retainage is best suited to protect the public investment. 1981 Op. Att'y Gen. No. 81-24.

Construction with regulations of Environmental Protection Agency.

- Environmental Protection Agency regulations pertaining to retainage during construction of EPA projects, 40 C.F.R. 35.938-7, are not necessarily inconsistent with provisions of O.C.G.A. § 13-10-20 (see now O.C.G.A. § 13-10-81), and may therefore be applied to EPA construction grants projects in Georgia, should the appropriate public official, in the official's discretion, choose to do so. 1981 Op. Att'y Gen. No. 81-24.

Discretion conferred by statute.

- O.C.G.A. §§ 13-10-20 and13-10-21 (see now O.C.G.A. §§ 13-10-81 and13-10-82) confer upon appropriate administrator of contracting agency discretion to determine if retainage is to be used and amount of such retainage. The administrator has further discretion to specify method of retainage to be utilized. 1981 Op. Att'y Gen. No. 81-58.

Agency must be party to contract in order to require use of retainage method.

- When director of Environmental Protection Division (EPD) is involved in administration of construction grants for certain projects, but EPD is not a party to the contracts, the director would be unable to require use of escrow account or any other method of retainage. 1981 Op. Att'y Gen. No. 81-58.

RESEARCH REFERENCES

Am. Jur. 2d.

- 64 Am. Jur. 2d, Public Works and Contracts, §§ 90, 91.

C.J.S.

- 72 C.J.S. Supp., Public Contracts, §§ 25 et seq.


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