Retainage On Ohio Public Projects

Thomas R. Yocum, Esq.

Retainage on public projects in Ohio is governed by statute, administrative regulations, and officially promulgated forms adopted pursuant to the statutory and administrative authority. Ohio law now requires that on public projects, the amount of retainage held by a prime contractor on a subcontractor must be at the same rate (or less) as the owner holds on the prime contractor.

Ohio Revised Code §153.12 provides that retainage on labor shall be at the rate of 8% on the first half of the job. No retainage shall be held on labor after the work is over 50% complete. ORC § 153.14 provides that retainage for material shall be at the  rate of 8% for material delivered to the site, and no retainage for material incorporated into the project.

        The Ohio Administrative Code contains a Retainage Rule at 153:1-3-02 (B)(8) which reads:

Retainage: The subcontract form shall contain a provision requiring that retainage shall be at a rate equal to or less than the percentage retained from the contractor's payment by the public authority for the subcontract work.”  The Administrative Code further provides at 153:1-3-02 (A) (5) provides, “A contract between a contractor and subcontractor failing to include the subcontract form shall not relieve the contractor or subcontractor of their obligation to fully comply with all required provisions set forth in this chapter.”

Pursuant to the foregoing authority, the Ohio Facilities Construction Commission (OFCC) has promulgated two relevant contract forms related to State of Ohio Standard Requirements for Public Facility Construction.  The first is Document 00 72 13 – General Conditions (General Contracting Project), M160-00 72 13 2014 Edition (2014-OCT) which sets forth general conditions that apply to all public projects in Ohio.  The second is the State of Ohio Subcontract Form, C 190-01v0912. 

The retainage provision in the Subcontract Form provides, in paragraph 6.7, as follows:

Subcontractor retainage shall be at a rate equal to the percentage retained from the Contractor’s payment by the Public Authority for Subcontract Work, unless a lesser percentage is otherwise specified.

As noted above, a public owner can retain no more than 8% on labor costs or stored materials and must pay for installed materials in full.  Further, once 50% of the work is completed, no portion of labor costs can be retained.

The statutory retainage rates are incorporated into the General Conditions as follows:

9.5.1 Partial payments to the Contractor for labor performed under either a Unit Price or lump sum Contract shall be made at the rate of 92 percent of the amount invoiced through the Contractor Payment Request that shows the Work is 50 percent complete.

9.5.2 After the Work is 50 percent complete, as evidenced by payments of at least 50 percent of the Contract Sum including approved Change Orders to date, no additional funds shall be retained from payments for labor.

9.6.1 The Owner shall pay the Contractor at the rate of 100 percent of the scheduled value for materials incorporated into the Project.

9.6.2 The Owner shall pay the Contractor at the rate of 92 percent of the invoice cost, not to exceed the scheduled value in a Unit Price or lump sum Contract, for materials delivered to the Site, or other off-site storage location approved …

9.7.2 When the Contractor has achieved Substantial Completion of all Work, and there is no other reason to retain funds; upon request of the Contractor, the funds retained in connection with that Work shall be released from escrow and paid to the Contractor, withholding only that amount necessary to assure faithful completion in the sole discretion of the Contracting Authority, including but not limited to compliance with Section 6.25.2.

Both the prime contractor and the subcontractor are bound by the terms of the General Conditions relating to retainage.  Any subcontract provision purporting to call for retainage in excess of 8% conflicts with the Subcontract Form and the General Condititons and is thus unenforceable. 

The above requirements apply regardless of the project delivery method.  The prime contractor cannot impose a higher percentage retainage requirement on the subcontractor than the owner imposes on the prime contractor.  The routine imposition of 10% retainage by prime contractors on subcontractors violates the above requirements on Ohio public projects and is unenforceable.   

Thomas R. Yocum, CSI, Benjamin, Yocum & Heather, www.byhlaw.com