Who this applies to
South Dakota's retainage provisions are in chapter 5-18B of its codified laws, which governs public improvements contracted by a purchasing agency [1]. The four sections that matter here, §§ 5-18B-11 to 5-18B-14, deal with progress payments, substitutes for retention, early occupancy and final payment [1] [2] [3] [4].
This page covers public work only. The chapter does not address private construction, so on a private job the contract and a lawyer answer the retainage question.
What the rule says
The statute does not use a percentage. A public improvement contract may permit progress payments, but an amount necessary to complete the improvement is retained from the final payment until the contract is executed in full and the improvement is completed to the purchasing agency's satisfaction and acceptance [1].
The deadline comes from § 5-18B-14 [4]. Final payment of any sums due to the contractor, the retained amount included, is made within 30 days [4] after completion and acceptance of the public improvement by the purchasing agency.
Holding money costs the agency interest. Once the contractor has furnished all required records and reports and a final inspection has been made, interest at not less than the Category E rate under SDCL 54-3-16 runs on retained amounts and on final payment from 30 days [1] after the work is completed, as shown by the architect's or engineer's letter of acceptance or by use and occupancy, until payment is tendered. For retainage on progress payments, the 30 days [1] count from the point the contractor has furnished the required records and reports and a progress inspection has occurred. Where federal participation is involved, interest can be delayed [1].
How to comply
- Read the retention clause. There is no statutory percentage to compare it with. The statute's measure is the amount necessary to complete the improvement, held from the final payment [1].
- Paper the job. Interest on retained amounts depends on the required records and reports being furnished and an inspection having occurred: a final inspection for the final payment, a progress inspection for retainage on progress payments [1].
- Substitute security. Section 5-18B-12 allows a bond or a deposit of securities in lieu of retention, where the contract permits it [2].
- Early occupancy. If the agency occupies the improvement before completion, § 5-18B-13 calls for payment of all but double the estimated cost to complete, or 1% [3] of the contract price, with a minimum of $300 [3].
- Final payment. Date completion and acceptance; the 30 days [4] start there.
What this page does is describe the four sections. Whether and how they apply to a given contract is for the statutes in the Sources below, the contract and a lawyer.
What changed recently
The source notes for §§ 5-18B-11 and 5-18B-12 cite SL 2010, ch 31, Secs. 50 and 51 [1] [2].
Related
- Retainage calculator: estimate a holdback where the contract states it as a percentage.
- Retainage laws by state: South Dakota's completion-based rule next to other states' caps.