Arkansas Retainage Guide and FAQs

Arkansas does not provide a retainage statue for private projects.

(a) Under any contract made or awarded by the state or by any public department or official thereof, including the construction, improvement, or repair of any and all ways, roads, or bridges with appurtenances which, by law, are under the supervision of the State of Arkansas or any political subdivision, the contractor may withdraw the whole, or any portion thereof, of the amount retained for payments to the contractor pursuant to the terms of the contract upon depositing with the Treasurer of State, except as provided in § 22-9-502, direct obligations of or obligations fully guaranteed by the federal government or any agency or department thereof, obligations of the State of Arkansas, obligations of any public housing authority, or certificates of deposit from federal or state banks or savings and loan associations.

(b) No amount shall be withdrawn in excess of the market value of the securities at the time of deposit or at the time of withdrawal.

As used in this subchapter:

(1) “Construction contract” means a contract between a public agency and a prime contractor which obligates the prime contractor to construct, repair, replace, or maintain improvements for the public agency;

(2) “Cost of the project” means the sum the public agency originally agrees to pay the prime contractor for performance of the contract plus any other sums the public agency agrees to pay the prime contractor for extra-cost items included in the construction project which were not included in the original contract;

(3) “Prime contractor” means the party which, individually or in concert with other prime contractors, establishes a direct contractual relationship with the public agency obligating the prime contractor to construct improvements for the public agency. Where applicable under the law, the prime contractor shall be a contractor licensed and in compliance with Arkansas law;

(4) “Progress payments” means the monthly estimates submitted by the prime contractor to the public agency for payment of that portion of the work completed, including stored materials and equipment purchased; and

(5) “Public agency” means the State of Arkansas or any of its agencies, departments, or institutions or any political subdivision of the state, or taxing unit, and includes any nonprofit corporation or association receiving public funds in whatever form, including grants, loans, and subsidies.

The provisions of this subchapter shall not be applicable to contracts entered into by the State Highway Commission for the construction or maintenance of public highways, roads, or streets.

The provisions of this subchapter shall not be applicable to contracts entered into by the State Highway Commission for the construction or maintenance of public highways, roads, or streets.

(a)

(1)

(A) In the case of a construction contract entered into between a public agency and a contractor who is required to furnish a performance and payment bond, the contractor shall be entitled to payment of ninety-five percent (95%) of the earned progress payments when due, with the public agency retaining five percent (5%) to assure faithful performance of the construction contract.

(B)

(i) A public agency may forego withholding retainage of the progress payments if:

(a) The construction contract is fifty-percent (50%) complete;

(b) The contractor has provided the work in a satisfactory manner; and

(c) The design professional and public agency agree with and approve of subdivisions (a)(1)(B)(i)(a) and (b) of this section.

(ii) This subdivision (a)(1)(B) does not prohibit a public agency from withholding retainage throughout the project.

(2) If the construction contract allows for phased work in which completion may occur on a partial occupancy, any retention proceeds withheld and retained under this section shall be partially released within thirty (30) days under the same conditions under this section in direct proportion to the value of the part of the capital improvement completed.

(b)

(1) In the case of a construction subcontract entered into between a contractor for a public agency and a subcontractor who is required by the contractor to furnish a performance and payment bond, the subcontractor shall be entitled to payment of ninety-five percent (95%) of the earned progress payments when due, with the contractor retaining five percent (5%) to assure faithful performance of the construction subcontract.

(2) Upon the approval of the contractor, if the subcontractor completes fifty percent (50%) of the construction subcontract the contractor shall not retain any further moneys.

(c) All sums withheld by the public agency shall be paid to the contractor within thirty (30) days after the construction contract has been completed.

(d) In the event the construction contract requires the contractor to purchase and furnish materials or equipment that will be stored on the job site or in a bonded warehouse by the contractor and used in the job as required by the construction contract, no retainage shall be withheld on that amount of the submitted progress payment pertaining to the cost of these stored materials or equipment.