Arizona § 41-2576 - Contract payment retention; partial payment

§ 41-2576. Contract payment retention; partial payment

A. Ten per cent of all construction contract payments shall be retained by this state as insurance of proper performance of the contract or, at the option of the contractor, a substitute security may be provided by the contractor in an authorized form pursuant to rules adopted by the director.  The contractor is entitled to all interest from any such substitute security.

B. When the contract is fifty per cent completed, one-half of the amount retained or securities substituted pursuant to this section shall be paid to the contractor upon the contractor's request provided the contractor is making satisfactory progress on the contract and there is no specific cause or claim requiring a greater amount to be retained. After the contract is fifty per cent completed, no more than five per cent of the amount of any subsequent progress payments made under the contract shall be retained providing the contractor is making satisfactory progress on the project, except that if at any time the state determines satisfactory progress is not being made ten per cent retention shall be reinstated for all progress payments made under the contract subsequent to the determination.

C. Any retention shall be paid or substitute security shall be returned to the contractor within sixty days after final completion and acceptance of work under the contract.  Retention of payments by a purchasing agency longer than sixty days after final completion and acceptance requires a specific written finding by the purchasing agency of the reasons justifying the delay in payment.  No purchasing agency may retain any monies after sixty days which are in excess of the amount necessary to pay the expenses the purchasing agency reasonably expects to incur in order to pay or discharge the expenses determined by the finding justifying the retention of monies.

D. This state shall not accept any substitute security unless accompanied by a signed and acknowledged waiver of any right or power of the obligor to set off any claim against either the state governmental unit or the contractor in relationship to the security assigned.  In any instance in which this state accepts substitute security as provided in this section, any subcontractor undertaking to perform any part of the contract is entitled to provide such security to the contractor.

E. Notwithstanding anything to the contrary in this section or in any other law:

1. There shall be no retention for job-order-contracting construction services contracts and the purchasing agency may elect to have no retention for construction-manager-at-risk and design-build construction services contracts.

2. This section applies only to amounts payable in a construction services contract for construction and does not apply to amounts payable in a construction services contract for design services, preconstruction services, finance services, maintenance services, operations services or any other related services included in the contract.