Who this applies to
A single statute, the Nebraska Construction Prompt Pay Act, governs retainage on private jobs and on local public work, and its figures are the same for both [4].
Its limits protect the tiers below the owner as well. The percentage rules are written about retainage withheld from a contractor or a subcontractor [4], and once a contractor receives retainage, its subcontractors are due their share within 10 days of that receipt [5].
On the public side, the Act reaches counties, cities and other political subdivisions [3]. Two kinds of public work are outside it [3]:
- contracts of the State of Nebraska itself;
- federal-aid or state-aid projects of a political subdivision on which the state pays the contractor.
Those contracts fall outside this page; their retainage terms are a question for the contract itself, read with a lawyer.
What the rule says
The cap works in two stages, and release is tied to one event. Retainage may not exceed the amount the contract specifies, and in no case a rate of 10% [4]. When the withheld party's scope of work is 50% complete and it has performed in accordance with the contract, no more than 5% of each further progress payment may be held, provided that party gives satisfactory and reasonable assurances of continued performance and financial responsibility [4]. All retainage for work completed in accordance with the contract must then be released and paid within 45 days after the project, or a designated portion of it, is substantially complete [5].
How to comply
- Read the subcontract as closely as the prime contract. The cap and the step-down apply to retainage withheld from a subcontractor, not only from a contractor [4], so a subcontract's retainage clause is measured against the same limits.
- Start from the contract's own number. Retainage may not exceed what the contract specifies, up to a rate of 10% [4], so a contract written at a lower rate holds the withholding party to that rate.
- At the halfway mark of a scope, performance and assurances trigger the lower limit. The 50% test looks at the scope of the party being withheld from; with performance in line with the contract and satisfactory and reasonable assurances, later progress payments carry no more than 5% [4].
- Count 45 days from substantial completion. The clock can start at substantial completion of the whole project or of a designated portion of it, and the release and payment are owed by the owner or the owner's representative [5].
- Pass retainage down within 10 days. That is the contractor's deadline, separate from the owner's 45 days: subcontractors are due their share within 10 days of the contractor's receipt [5].
Both sections are linked under Sources; compare their wording with your contract and any subcontract before relying on these figures.
What changed recently
The session laws listed for these provisions are Laws 2010, LB552, § 4, and Laws 2014, LB961, § 7 [4].
Related
- Retainage calculator: its step-down option applies a reduced rate once the work passes a threshold you set.
- Retainage laws by state: the national list of state pages.