While there is no federal statute addressing retainage, FHWA policy allows recipients of federal funds to set retention rates from progress payments to protect the federal interest.

– Establishes a contract clause, as part of the DBE program, to require prime contractors to pay all subcontractors for satisfactory performance of their contracts no later than 30 days (changed to 10 days by ) from receipt of each payment made by the LG to the prime contractor. Retainage may only be withheld if the contract provides for incremental acceptance of work with retainage paid to the prime contractor based on this partial acceptance. The prime must then pay all retainage to the subcontractor within 30 days (changed to 10 days by Texas Government Code §2251.022) after the prime contractor receives payment for satisfactory completion of the accepted work.

– Requires a RMA to use specifications that conform to the latest TxDOT standard specifications on projects connecting with the state highway system.

– Requires a RTA to use specifications that conform to the latest TxDOT standard specifications on projects with state fund participation.

– Requires a vendor receiving payment from a governmental entity to pay a subcontractor the appropriate share of the payment not later than 10 days from payment to the vendor.

– Provides that a governmental entity may deposit retainage in an interest-bearing account for contracts with a value exceeding $400,000 but less than $5 million and have a retainage clause of more than 5 percent. The interest must be paid to the contractor. Contracts over $5 million in contract value cannot provide for retainage in excess of 5 percent. Allows partial payments to a contractor if the contract includes such provisions.