HB 389: "An Act relating to retainage on public and private construction contracts."
00 HOUSE BILL NO. 389 01 "An Act relating to retainage on public and private construction contracts." 02 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 03 * Section 1. AS 36.90.210 is amended to read: 04 Sec. 36.90.210. Required contractual terms. (a) The prime contractor and a 05 subcontractor on a public construction or public works contract must include in a 06 subcontract between the prime contractor and subcontractor for the public construction 07 or public works a clause that requires the prime contractor to pay 08 (1) the subcontractor for satisfactory performance under the 09 subcontract within eight working days after receiving payment from which the 10 subcontractor is to be paid; 11 (2) the subcontractor all retainage due under the subcontract within the 12 period provided in AS 45.45.940(c) [EIGHT WORKING DAYS AFTER FINAL 13 PAYMENT IS RECEIVED FROM THE STATE OR POLITICAL SUBDIVISION] 14 or after the notice period under AS 36.25.020(b) expires, whichever is later; 15 (3) the subcontractor interest on an amount that is not paid in
01 accordance with (1) of this subsection for the period beginning on the day after the 02 required payment date and ending on the day on which payment of the amount due is 03 made; the interest shall be computed at an interest rate that is equal to the amount set 04 out in AS 45.45.010(a); 05 (4) a penalty and interest on retainage withheld from the 06 subcontractor as provided in AS 45.45.940(e) [AT AN INTEREST RATE THAT IS 07 EQUAL TO THE AMOUNT SET OUT IN AS 45.45.010(a)]. 08 (b) A subcontractor on a public construction or public works contract must 09 include in each subcontract under which a person agrees to provide the subcontractor 10 with services, other than as an employee, or supplies to be used in the public 11 construction or public works project a clause that requires the subcontractor to pay 12 (1) the person for satisfactory performance under the subcontract 13 within eight working days after receiving payment from which the person is to be 14 paid; 15 (2) the person all retainage due under the subcontract within the 16 period provided in AS 45.45.940(c) [WITH THE PERSON WITHIN EIGHT 17 WORKING DAYS AFTER THE SUBCONTRACTOR RECEIVES ITS SHARE OF 18 THE STATE-HELD RETAINAGE FROM THE PRIME CONTRACTOR OR 19 ANOTHER SUBCONTRACTOR]; 20 (3) the person interest on an amount that is not paid in accordance with 21 (1) of this subsection for the period beginning on the day after the required payment 22 date and ending on the day on which payment of the amount due is made; the interest 23 shall be computed at an interest rate that is equal to the amount set out in 24 AS 45.45.010(a); 25 (4) a penalty and interest on retainage withheld from the person as 26 provided in AS 45.45.940(e) [AT AN INTEREST RATE THAT IS EQUAL TO THE 27 AMOUNT SET OUT IN AS 45.45.010(a)]. 28 * Sec. 2. AS 36.90.240 is amended to read: 29 Sec. 36.90.240. Form of certain notices. A notice under AS 36.90.230(a)(1) 30 [AS 36.90.220(2) OR 36.90.230(a)(1)] must be in writing and must state the amount 31 being withheld, the specific causes for the withholding under the terms of the
01 subcontract, and the remedial actions to be taken by the subcontractor to receive 02 payment of the amount withheld. 03 * Sec. 3. AS 36.90.250(a) is amended to read: 04 (a) The state or a political subdivision of the state shall pay to the prime 05 contractor a penalty and interest on retainage, including warranty retainage, on a 06 contract for public construction or public works as provided in AS 45.45.940(e) [AT 07 AN INTEREST RATE THAT IS EQUAL TO THE AMOUNT SET OUT IN 08 AS 45.45.010(a). INTEREST ON RETAINAGE ACCRUES FROM THE DATE OF 09 APPROVAL OF A PAY REQUEST UNTIL THE DATE OF PAYMENT TO THE 10 CONTRACTOR]. 11 * Sec. 4. AS 36.90.265 is amended by adding a new subsection to read: 12 (b) AS 45.45.940 applies to a public construction or public works contract of a 13 political subdivision of the state. 14 * Sec. 5. AS 36.90.270 is amended to read: 15 Sec. 36.90.270. Waiver of provisions prohibited. A contract provision that 16 waives a provision required by AS 36.90.200 - 36.90.290 or AS 45.45.940 is void. 17 * Sec. 6. AS 45.45 is amended by adding a new section to article 13 to read: 18 Sec. 45.45.940. Retainage on a contract for private construction. (a) In a 19 contract for private construction, a project owner, contractor, or subcontractor may not 20 withhold from a progress payment as retainage an amount that exceeds five percent of 21 the total amount of the progress payment. The total amount of the retainage withheld 22 from the progress payments may not exceed five percent of the total amount of the 23 contract price. 24 (b) A contractor or subcontractor may not withhold a percentage of an amount 25 as retainage that exceeds the percentage specified in the contract between the project 26 owner and the contractor. 27 (c) A contractor shall pay a subcontractor all retainage due under the 28 subcontract within 10 days after the contractor receives the retainage payment from 29 the project owner or within 30 days after the subcontractor's satisfactory completion of 30 the work required under the subcontract, whichever is sooner. A project owner shall 31 pay a contractor all retainage due under the contract within 30 days after the
01 contractor's satisfactory completion of the work required under the contract, unless the 02 contract provides for a different period. 03 (d) Money withheld as retainage shall be placed in an interest-bearing escrow 04 account. Interest earned on retainage shall be proportionately distributed with 05 retainage payments to the contractor and subcontractors from whom the retainage was 06 withheld. 07 (e) If the project owner fails to make a retainage payment to a contractor in 08 accordance with the construction contract, or if the contractor fails to make a retainage 09 payment to a subcontractor within the time specified in (c) of this section, the project 10 owner or contractor shall pay a penalty equivalent to two percent of the unpaid 11 amount, and interest shall accrue on the unpaid amount beginning the first calendar 12 day after the date on which the payment was due. Interest is calculated under this 13 subsection by using the prime rate, as defined in AS 44.88.599. A contractor or 14 subcontractor owed a penalty under this subsection may waive the penalty. 15 (f) Notwithstanding AS 09.30.065, in a civil action to recover damages under 16 this section, a court shall award attorney fees to a party recovering a money judgment 17 as follows: 18 (1) 40 percent of the amount of a judgment, including prejudgment 19 interest, that totals $25,000 or less; and 20 (2) 20 percent on the portion of a judgment, including prejudgment 21 interest, that exceeds $25,000. 22 (g) In this section, 23 (1) "contractor" means an entity that enters into a construction contract 24 with a project owner; 25 (2) "entity" means a person, the state, or a political subdivision of the 26 state; 27 (3) "project owner" means an entity that engages the services of a 28 contractor for the purpose of working on a construction project; 29 (4) "retainage" means money withheld from a contractor or 30 subcontractor until completion of a contract or satisfaction of another contingency; 31 (5) "subcontractor" means a person to which a contractor sublets all or
01 part of a contractor's initial undertaking. 02 * Sec. 7. AS 36.90.220(2) and 36.90.250(b) are repealed. 03 * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to 04 read: 05 APPLICABILITY. This Act applies to construction contracts, public construction 06 contracts, and public works contracts entered into on or after the effective date of this Act.