§ 279C.560 — Form of retainage; requirements for surety bonds; conditions for rejecting bonds, securities or other instruments; allocation of costs; procedures for holding and payment; requirement for contractor to accept bonds, securities or other instruments from subcontractors

Oregon § 279C.560

• Jurisdiction: Oregon
• Vol.: 7
• Title 26: Public Facilities, Contracting and Insurance
• Ch. 279C: Public Contracting - Public Improvements and Related Contracts

Text

(1)(a) A contractor may submit and a contracting agency shall accept from a contractor in lieu of withholding moneys for all or a portion of the retainage required under a public contract:
(A) Bonds, securities or other instruments of a character described in subsection (6) of this section that are deposited as provided in subsection (4) of this section; or
(B) A surety bond deposited as provided in subsection (7) of this section.
(b) A surety bond that a contractor submits under this section must be executed by a surety bonding company that is authorized to transact surety business in this state and may not be a surety obligation of an individual.
(c) A contracting agency may reject bonds, securities or other instruments that a contractor submits under paragraph (a)(A) of this subsection or a surety bond that the contractor submits under paragraph (a)(B) of this subsection only if the contracting agency first finds in writing good cause for the rejection that is based on unique project circumstances.
(2) A contracting agency that holds moneys as retainage under ORS 279C.570 (7) shall:
(a) Hold the moneys in a fund and pay the moneys to the contractor in accordance with ORS 279C.570; or
(b) At the election of the contractor, pay the moneys to the contractor in accordance with subsection (4) or (5) of this section and in a manner authorized by the Director of the Oregon Department of Administrative Services.
(3)(a) If a contracting agency incurs additional costs as a result of the contractor’s exercise of an option described in subsection (1), (4) or (5) of this section, the contracting agency may recover the additional costs from the contractor by reducing the final payment. As work on the contract progresses, the contracting agency shall, upon demand, inform the contractor of all accrued costs.
(b) Except as provided in subsection (8) of this section, a contractor shall bear additional costs that arise from the contractor’s exercise of an option described in subsection (1), (4) or (5) of this section that the contractor incurs after the date on which the contractor submits a bid or proposal to the contracting agency. These costs are not reimbursable project costs and the contracting agency is not responsible for paying these costs.
(4) A contractor may deposit bonds, securities or other instruments with a contracting agency or in a bank or other financial institution for the contracting agency to hold for the contracting agency’s benefit in lieu of moneys held as retainage. If a contractor submits bonds, securities or other instruments as provided in this subsection, the contracting agency shall reduce the moneys held as retainage in an amount equal to the value of the bonds, securities and other instruments and pay the amount of the reduction to the contractor in accordance with ORS 279C.570. Interest or earnings on the bonds, securities or other instruments accrue to the contractor.
(5) If the contractor elects, the contracting agency shall deposit the retainage, as the retainage accumulates, in an interest-bearing account in a bank or other financial institution for the benefit of the contracting agency. If the contracting agency is a state contracting agency, the account must be established through the State Treasurer. Earnings on the account accrue to the contractor.
(6) Bonds, securities and other instruments deposited or acquired in lieu of retainage, as permitted by this section, must be of a character approved by the Director of the Oregon Department of Administrative Services, including but not limited to:
(a) Bills, certificates, notes or bonds of the United States.
(b) Other obligations of the United States or agencies of the United States.
(c) Obligations of a corporation wholly owned by the federal government.
(d) Indebtedness of the Federal National Mortgage Association.
(e) General obligation bonds of the State of Oregon or a political subdivision of the State of Oregon.
(f) Irrevocable letters of credit issued by an insured institution, as defined in ORS 706.008.
(7) A contractor may deposit a surety bond for all or any portion of the amount of funds retained, or to be retained, by the contracting agency in substantially the form specified in ORS 701.435 (4). The surety bond and any proceeds of the surety bond must be made subject to all claims and liens and in the same manner and priority specified for retainage under ORS 279C.550 to 279C.570 and 279C.600 to 279C.625. The contracting agency shall reduce the moneys the contracting agency holds as retainage in an amount equal to the value of the surety bond and pay the amount of the reduction to the contractor in accordance with ORS 279C.570.
(8)(a) When a contracting agency accepts a surety bond in lieu of retainage from a contractor under this section, the contractor shall accept surety bonds from subcontractors or suppliers from which the contractor has withheld retainage. At any time before final payment on a public improvement contract, a subcontractor may submit a surety bond to a contractor and request that the contractor on the public improvement contract submit, in the manner provided in subsection (7) of this section, a surety bond to the contracting agency for the portion of the contractor’s retainage that pertains to the subcontractor. The surety bond the subcontractor provides to the contractor must meet the requirements set forth in subsection (1)(b) of this section. When a contractor at a subcontractor’s request obtains and submits to the contracting agency a surety bond under this subsection, the contractor may withhold from payments to the subcontractor an amount equivalent to the portion of the contractor’s surety bond premium for which the subcontractor is responsible.
(b) Within 30 days after a subcontractor’s request under paragraph (a) of this subsection, the contractor shall provide, and the contracting agency shall accept, a surety bond that meets the requirements set forth in subsection (1)(b) of this section unless:
(A) The contracting agency finds good cause in writing to reject the surety bond based on unique project circumstances;
(B) The surety bond is not commercially available; or
(C) The subcontractor refuses to pay to the contractor the subcontractor’s portion of the surety bond premium or refuses to provide the contractor with a surety bond that meets the requirements of subsection (1)(b) of this section.
(c) A surety bond the subcontractor submits under this subsection, and any proceeds from the surety bond, must be made subject to all claims and liens and in the same manner and priority specified for retainage under ORS 279C.550 to 279C.570 and 279C.600 to 279C.625.
(d) A contracting agency shall, within 30 days after receiving a surety bond under this subsection, release to the contractor an amount the contracting agency holds as retainage that is equivalent to the amount the contractor submitted as a surety bond.
(e) A contractor must, within 30 days after receiving a surety bond from a subcontractor or supplier, release to the subcontractor or supplier the amount the contractor holds as retainage that is equivalent to the amount the subcontractor or supplier submitted as the surety bond.
(9) A surety bond under this section must be in substantially the form specified in ORS 701.435 (4).

Legislative History

2003 c.794 §148; 2009 c.568 §1; 2024 c.2 §1