Who this applies to
These rules sit in Title 62 of the Pennsylvania Consolidated Statutes, the procurement title [1]. They govern what a government agency withholds from its contractor on a construction contract exceeding $50,000 [1], and the Department of General Services has a scale of its own [1]. Department of Transportation contracts under 62 Pa.C.S. § 301(c)(1) are outside the chapter's definition of a contract [1]. A related section, § 3922, carries payment down the chain: absent sufficient reason, the contractor pays subcontractors their earned share within 20 days [1] of receiving it.
The statute speaks to public contracts. Private work is not addressed by it, and this page does not cover private jobs; their retainage terms are a matter for the contract and a lawyer.
What the rule says
A contract may provide for retainage to ensure proper performance, within these limits [1]:
- Before the halfway point. The agency may withhold no more than 10% [1] of the amount due the contractor until 50% [1] of the contract is completed.
- At the halfway point. One-half of the amount retained is returned to the contractor. The return depends on the architect's or engineer's approval, satisfactory progress, and the absence of a specific cause for greater withholding [1].
- After the halfway point. The agency may withhold no more than 5% [1] of the value of completed work.
Where the Department of General Services is the agency, the figures are 6% [1] until 50% satisfactory completion and 3% [1] of the original contract amount after that.
A separate allowance covers multi-prime disputes. When a prime contractor's claim against the agency rests on increased costs caused by delays or other actions of another prime contractor, additional retainage of one and one-half times the possible liability may be withheld until the dispute is resolved, unless the contractor causing the claim furnishes a bond satisfactory to the agency [1].
How to comply
- Check the percentage against the agency. A Department of General Services contract uses 6% [1] and 3% [1]; other agencies use 10% [1] and 5% [1].
- Ask for the halfway return. At 50% [1] completion, the return of half the retainage turns on the conditions listed above, the architect's or engineer's approval among them.
- Closeout. After final inspection and the certificate of completion and final certificate for payment, the agency pays in full within 45 days [1], less one and one-half times the amount required to complete any remaining minor items [1].
- Late final payment. On a contract with retainage provisions, final payment due after substantial completion bears interest at 10% [1] per annum under § 3941(b), or the bond rate where the agency financed the project with bonds, whichever is less, but not below the legal rate [1].
- Disputes. Section 3942 provides for arbitration of retainage disputes [1].
The page describes the statute; it does not decide any project. The sections in the Sources below, read with the contract, and a lawyer settle how they apply.
Related
- Retainage calculator: model the holdback before and after the halfway return.
- Retainage laws by state: Pennsylvania's public-contract scale against other states.