Bill Text: OR SB657 | 2011 | Regular Session | Introduced
Bill Title: Relating to retainage on contract payments.
Spectrum: Committee Bill
Status: (Failed) 2011-06-30 - In committee upon adjournment. [SB657 Detail]
Download: Oregon-2011-SB657-Introduced.html
76th OREGON LEGISLATIVE ASSEMBLY--2011 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 1436
Senate Bill 657
Sponsored by COMMITTEE ON GENERAL GOVERNMENT, CONSUMER AND SMALL
BUSINESS PROTECTION
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Reduces percentage of construction contract, home improvement
contract or public improvement contract payment that may be held
as retainage.
A BILL FOR AN ACT
Relating to retainage on contract payments; creating new
provisions; and amending ORS 279C.555, 279C.570 and 701.420.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 279C.555 is amended to read:
279C.555. The withholding of retainage by a contractor or
subcontractor on public improvement contracts shall be in
accordance with ORS 701.420 and 701.430 except when the charter
of the contracting agency contains provisions requiring retainage
by the contracting agency of more than { - five - } { +
one + } percent of the contract price of the work completed.
SECTION 2. ORS 279C.570 is amended to read:
279C.570. (1) It is the policy of the State of Oregon that all
payments due on a public improvement contract and owed by a
contracting agency shall be paid promptly. No contracting agency
is exempt from the provisions of this section.
(2) Contracting agencies shall make progress payments on the
contract monthly as work progresses on a public improvement
contract. Payments shall be based upon estimates of work
completed that are approved by the contracting agency. A progress
payment is not considered acceptance or approval of any work or
waiver of any defects therein. The contracting agency shall pay
to the contractor interest on the progress payment, not including
retainage, due the contractor. The interest shall commence 30
days after receipt of the invoice from the contractor or 15 days
after the payment is approved by the contracting agency,
whichever is the earlier date. The rate of interest charged to
the contracting agency on the amount due shall equal three times
the discount rate on 90-day commercial paper in effect at the
Federal Reserve Bank in the Federal Reserve district that
includes Oregon on the date that is 30 days after receipt of the
invoice from the contractor or 15 days after the payment is
approved by the contracting agency, whichever is the earlier
date, but the rate of interest may not exceed 30 percent.
(3) Interest shall be paid automatically when payments become
overdue. The contracting agency shall document, calculate and pay
any interest due when payment is made on the principal. Interest
payments shall accompany payment of net due on public improvement
contracts. The contracting agency may not require the contractor
to petition, invoice, bill or wait additional days to receive
interest due.
(4) When an invoice is filled out incorrectly, when there is
any defect or impropriety in any submitted invoice or when there
is a good faith dispute, the contracting agency shall so notify
the contractor within 15 days stating the reason or reasons the
invoice is defective or improper or the reasons for the dispute.
A defective or improper invoice, if corrected by the contractor
within seven days of being notified by the contracting agency,
may not cause a payment to be made later than specified in this
section unless interest is also paid.
(5) If requested in writing by a first-tier subcontractor, the
contractor, within 10 days after receiving the request, shall
send to the first-tier subcontractor a copy of that portion of
any invoice, request for payment submitted to the contracting
agency or pay document provided by the contracting agency to the
contractor specifically related to any labor or materials
supplied by the first-tier subcontractor.
(6) Payment of interest may be postponed when payment on the
principal is delayed because of disagreement between the
contracting agency and the contractor. Whenever a contractor
brings formal administrative or judicial action to collect
interest due under this section, the prevailing party is entitled
to costs and reasonable attorney fees.
(7) A contracting agency may reserve as retainage from any
progress payment on a public improvement contract an amount not
to exceed { - five - } { + one + } percent of the payment. As
work progresses, a contracting agency may reduce the amount of
the retainage and the contracting agency may eliminate retainage
on any remaining monthly contract payments after 50 percent of
the work under the contract is completed if, in the contracting
agency's opinion, such work is progressing satisfactorily.
Elimination or reduction of retainage shall be allowed only upon
written application by the contractor, and the application shall
include written approval of the contractor's surety. However,
when the contract work is 97.5 percent completed the contracting
agency may, at the contracting agency's discretion and without
application by the contractor, reduce the retained amount to 100
percent of the value of the contract work remaining to be done.
Upon receipt of a written application by the contractor, the
contracting agency shall respond in writing within a reasonable
time.
(8) The retainage held by a contracting agency shall be
included in and paid to the contractor as part of the final
payment of the contract price. The contracting agency shall pay
to the contractor interest at the rate of 1.5 percent per month
on the final payment due the contractor, interest to commence 30
days after the work under the contract has been completed and
accepted and to run until the date when the final payment is
tendered to the contractor. The contractor shall notify the
contracting agency in writing when the contractor considers the
work complete and the contracting agency shall, within 15 days
after receiving the written notice, either accept the work or
notify the contractor of work yet to be performed on the
contract. If the contracting agency does not, within the time
allowed, notify the contractor of work yet to be performed to
fulfill contractual obligations, the interest provided by this
subsection shall commence to run 30 days after the end of the
15-day period.
(9)(a) The contracting agency shall pay, upon settlement or
judgment in favor of the contractor regarding any dispute as to
the compensation due a contractor for work performed under the
terms of a public improvement contract, the amount due plus
interest at the rate of two times the discount rate, but not to
exceed 30 percent, on 90-day commercial paper in effect at the
Federal Reserve Bank in the Federal Reserve district that
includes Oregon on the date of the settlement or judgment, and
accruing from the later of:
(A) The due date of any progress payment received under the
contract for the period in which such work was performed; or
(B) Thirty days after the date on which the claim for the
payment under dispute was presented to the contracting agency by
the contractor in writing or in accordance with applicable
provisions of the contract.
(b) Interest shall be added to and not made a part of the
settlement or judgment.
SECTION 3. ORS 701.420, as amended by section 8, chapter 77,
Oregon Laws 2010, is amended to read:
701.420. (1) Partial payment is allowed and may be made on
contracts for construction and home improvement. Except as
provided in ORS 701.430 (2), an owner, contractor or
subcontractor may withhold as retainage an amount equal to not
more than { - five - } { + one + } percent of the contract
price of the work completed. Partial payment allowed under this
subsection is not acceptance or approval of some of the work or a
waiver of defects in the work.
(2) The owner, contractor or subcontractor shall pay interest
at the rate of one percent per month on the final payment due the
contractor or subcontractor. Except as provided in ORS 701.430
(2), the interest shall commence 30 days after the contractor or
subcontractor has completed and the owner has accepted the work
under the contract for construction for which the final payment
is due. The interest shall run until the date when final payment
is tendered to the contractor or subcontractor. When the
contractor or subcontractor considers the work that the
contractor or subcontractor is contracted to perform to be
complete, the contractor or subcontractor shall notify the party
to whom the contractor or subcontractor is responsible for
performing the construction work under the contract. The party
shall, within 15 days after receiving the notice, either accept
the work or notify the contractor or subcontractor of work yet to
be performed under the contract. If the party does not accept the
work or does not notify the contractor or subcontractor of work
yet to be performed within the time allowed, the interest
required under this subsection shall commence 30 days after the
end of the 15-day period.
(3) When a contractor pays a subcontractor in full, including
the amount the contractor withheld as retainage, the owner with
whom the contractor has the contract shall pay the contractor,
out of the amount that the owner withheld from the contractor as
retainage, a sum equal to the amount of retainage that the
contractor paid the subcontractor. The contractor shall notify
the owner when the contractor pays a subcontractor in full under
this section and the owner shall, within 15 days after receiving
the notice, pay the contractor the amount due the contractor
under this subsection. Interest on the amount due the contractor
at the rate of one percent per month shall commence 30 days after
the owner receives notice of full payment to the subcontractor.
SECTION 4. { + The amendments to ORS 279C.555, 279C.570 and
701.420 by sections 1 to 3 of this 2011 Act apply to contracts
entered into on or after the effective date of this 2011 Act. + }
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