Who this applies to
Hawaii's retainage rule lives in HRS chapter 103, the chapter on expenditure of public money and public contracts, and it operates through the procurement officer on a public contract [3]. The procurement officer holds whatever retainage is kept [3]. The section also governs what a contractor may keep from its subcontractors on that public job [3].
Private construction has no counterpart: no statewide statute sets a retainage cap or a release date for private work, so the contract governs.
What the rule says
Section 103-32.1(c)(1) caps what the procurement officer withholds from the contractor at 5% [3] of the total amount due. The cap does not stay open for the whole job. Once 50% [3] of the contract is completed and progress is satisfactory, no additional sum is withheld. If progress is not satisfactory, the procurement officer may keep withholding, still within 5% [3] of the amount due. Sums deducted as liquidated damages are not retainage [3].
A tier down, the rule depends on security. Where a subcontractor gives the contractor an acceptable performance and payment bond, another acceptable bond, or other acceptable collateral, the contractor may withhold no more than its own retainage percentage [3]. Without that security, the contractor or subcontractor may negotiate to retain, without cause, up to 10% [3] of each progress payment to a subcontractor, subject to the bonded-subcontractor limit [3].
How to comply
- Prime contract. Compare the retainage clause with the 5% [3] ceiling, and note whether the contract ties any withholding after the halfway point to a finding that progress is not satisfactory.
- Liquidated damages. Keep them apart from retainage when reconciling a pay application; the statute does not count them as retainage [3].
- Subcontracts. A subcontractor that has furnished an acceptable bond or collateral can compare its retainage with the percentage the prime is subject to [3]. For an unbonded subcontractor, the negotiated figure may not exceed 10% [3] of each progress payment.
- Substitution. Under HRS § 103-32.2, a public contract may let the contractor withdraw retained sums by depositing general obligation bonds of the State or its political subdivisions with the procurement officer [2].
- Release timing. Section 103-32.1 sets no number of days for releasing retainage to the contractor [3], so the contract's payment terms govern that step. Once the contractor receives final payment, HRS § 103-10.5(b) requires full payment to each subcontractor, retainage included, within ten days, unless there is a bona fide dispute over the subcontractor's performance [4].
This page reports what the section provides. It does not decide how a particular contract or project is treated; the statute text in the Sources below and a lawyer do that.
What changed recently
Section 103-32.1 was enacted in 1976, L 1976, c 167, and was last amended in 2010, L 2010, c 107, § 1 [3].
Related
- Retainage calculator: work out the dollar holdback on each progress payment.
- Retainage laws by state: how Hawaii's public-contract rule compares with other states.