On public projects, an owner typically withholds retainage of 10%. Can the owner hold this 10% retainage until final completion? The short answer is, No!
Section 3921 of the PA Procurement Code mandates that, when the contract is 50% completed, retainage “shall not exceed 5% of the value of completed work” and can then be withheld only until substantial completion. The only condition is that the contractor must be making “satisfactory progress,” and there must be no cause for a “greater withholding.”
After substantial completion, Section 3941 of the PA Procurement Code mandates that full payment must be made upon issuance of a certificate of completion and a certificate for payment, less only one and one-half times the value of the punch list.
So, if your work is substantially complete, you should demand final inspection and then final payment. If you are still owed retainage, except for the punch list, demand release of the retainage. If the public owner withholds the retainage after it should be released, you are entitled to collect 10% interest on the withheld amount. If you don’t enforce your rights to release of retainage, you can be certain that the architect or engineer overseeing the public project will not either.
If you need assistance with improper withholding of retainage, feel free to call or email me. I’ll be happy to assist in anyway possible.
Christopher I. McCabe, Esq.
