Chapter 4 - § 4.13 • PAYMENTS AND RETAINAGE

• Jurisdiction: Colorado

§ 4.13 • PAYMENTS AND RETAINAGE

Public entities must have sufficient funds appropriated before entering into construction con-tracts¹⁸⁵ and before they issue modifications or change orders requiring additional funds.¹⁸⁶ If the state violates appropriation provisions, a civil action may be pursued for the recovery of sums due under the contract, and a final judgment in favor of the contractor must be paid promptly.¹⁸⁷

When a public entity awards a construction contract exceeding $150,000, it must make partial payments to the contractor at the end of each month, so long as the contractor is performing satisfactorily.¹⁸⁸ The public entity must pay at least 95 percent of the calculated value of any completed work.¹⁸⁹ The withheld percentage is retained until the contract is completed and accepted by the public entity.¹⁹⁰ Within 60 days of the satisfactory completion of the project, the public entity must make a final settlement.¹⁹¹

A construction contractor on a public project exceeding $150,000 may withdraw any portion of the retainage if the contractor deposits acceptable securities with the public entity.¹⁹² Acceptable securities must have a market value at least equal to the amount withdrawn.¹⁹³ The contractor and the public entity may enter into an escrow agreement with a bank, trust company, or savings and loan association to provide an escrow agent for the custodial care of the deposited securities.¹⁹⁴ The custodian of the securities is to collect all interest and income on those securities and pay them to the contractor.¹⁹⁵ The effect of this arrangement is that the general contractor receives the interest on the retained funds, which may be substantial.

If a public entity directs or orders additional compensable work, the public entity must insert a clause into the contract that requires the public entity to reimburse the contractor for its costs on a periodic basis, as defined in the contract, until a change order is finalized.¹⁹⁶ The periodic reimbursement shall not be required until after the contractor submits an estimate of the cost for the additional compensable work.¹⁹⁷

When a public entity pays retained payments and interest to a contractor, the contractor then must make payments to each subcontractor.¹⁹⁸ The amount paid to each subcontractor must be in proportion to the respective amounts of retained payments that the contractor withheld from each subcontractor.¹⁹⁹

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Notes:

^[185] C.R.S. § 24-91-103.6(1). This provision legislatively...