When must we be paid on an Iowa construction job, and how much can be retained?
For a public improvement, Iowa Code chapter 573 fixes both. Payments under contracts for the construction of public improvements, unless provided otherwise by law, are made on the basis of monthly estimates of labour performed and material delivered as determined by the project architect or engineer, and the public corporation shall retain from each monthly payment not more than three percent of the amount determined to be due (§ 573.12(1)(a)); the contractor may retain from each payment to a subcontractor not more than the lesser of three percent or the amount specified in the contract between them (§ 573.12(1)(b)). Interest is paid to the contractor on a progress payment that the project architect or engineer has approved as payable and that remains unpaid for fourteen days after receipt of the payment request at the place or by the person designated to first receive it, or for a longer period specified in the contract documents not exceeding thirty days (§ 573.12(2)(a)(1)); that interest "shall accrue during the period commencing the day after the expiration of the period defined in subparagraph (1) and ending on the date of payment", and the rate is not fixed by this section, "The rate of interest shall be determined as set forth in section 573.14" (§ 573.12(2)(a)(2)). Section 573.14 supplies both that rate and a second retention. The rate "shall be the same as the rate of interest that is in effect under section 12C.6, as of the day interest begins to accrue, for a deposit of public funds for a comparable period of time" (§ 573.14(2)), and the retained fund is held for thirty days after completion and final acceptance, after which "If at the end of the thirty-day period claims are on file, the public corporation shall continue to retain from the unpaid funds a sum equal to double the total amount of all claims on file." (§ 573.14(1)). A progress or final payment to a subcontractor for satisfactory performance shall be made no later than seven days after the contractor receives payment for that subcontractor's work, or a reasonable time after the contractor could have received payment for it where the reason for nonpayment is not the subcontractor's fault (§ 573.12(2)(b)(1)).
The trap
Every figure above comes from a chapter whose subject is the construction of PUBLIC improvements. Nothing read here imposes the three-percent retainage cap, the fourteen-day interest clock or the seven-day subcontractor deadline on a private Iowa construction contract, and this rule does not claim that it does. Three details inside the section matter to a subcontractor, and the first is the one a subcontractor is owed money by: if the contractor receives an interest payment under § 573.14, "the contractor shall pay the subcontractor a share of the interest payment proportional to the payment for that subcontractor's work" (§ 573.12(3)(a)), the late-payment interest is not the contractor's to keep. The seven-day clock is pay-when-paid with a fallback that defeats the usual objection, a reasonable time after the contractor COULD have received payment, where the nonpayment is not the subcontractor's fault. And a contractor's acceptance of payment for one subcontractor's work is not a waiver of claims and does not prejudice the contractor's rights as to any other claim related to the contract or project (§ 573.12(2)(b)(2)). One more interest rule sits in the same section and runs to the contractor rather than from it: where a public corporation other than a school corporation, county or city retains funds, "the interest earned on those funds shall be payable at the time of final payment on the contract in accordance with the schedule and exemptions specified by the public corporation in its administrative rules" (§ 573.12(3)(b)).
10 authorities
- statuteIowa Code § 573.12enactment date not established
The words that state the rule
Payments made under contracts for the construction of public improvements, unless provided otherwise by law, shall be made on the basis of monthly estimates of labor performed and material delivered, as determined by the project architect or engineer. The public corporation shall retain from each monthly payment not more than three percent of that amount that is determined to be due according to the estimate of the architect or engineer.
- statuteIowa Code § 573.12enactment date not established
The words that state the rule
The contractor may retain from each payment to a subcontractor not more than the lesser of three percent or the amount specified in the contract between the contractor and the subcontractor.
- statuteIowa Code § 573.12enactment date not established
The words that state the rule
Interest shall be paid to the contractor on any progress payment that is approved as payable by the public corporation’s project architect or engineer and remains unpaid for a period of fourteen days after receipt of the payment request at the place, or by the person, designated in the contract, or by the public corporation to first receive the request, or for a time period greater than fourteen days, unless a time period greater than fourteen days is specified in the contract documents, not to exceed thirty days, to afford the public corporation a reasonable opportunity to inspect the work and to determine the adequacy of the contractor’s performance under the contract.
- statuteIowa Code § 573.12enactment date not established
The words that state the rule
Interest shall accrue during the period commencing the day after the expiration of the period defined in subparagraph (1) and ending on the date of payment. The rate of interest shall be determined as set forth in section 573.14.
- statuteIowa Code § 573.12enactment date not established
The words that state the rule
A progress payment or final payment to a subcontractor for satisfactory performance of the subcontractor’s work shall be made no later than one of the following, as applicable: (a) Seven days after the contractor receives payment for that subcontractor’s work. (b) A reasonable time after the contractor could have received payment for the subcontractor’s work, if the reason for nonpayment is not the subcontractor’s fault.
- statuteIowa Code § 573.12enactment date not established
The words that state the rule
A contractor’s acceptance of payment for one subcontractor’s work is not a waiver of claims, and does not prejudice the rights of the contractor, as to any other claim related to the contract or project.
- statuteIowa Code § 573.12enactment date not established
The words that state the rule
If the contractor receives an interest payment under section 573.14, the contractor shall pay the subcontractor a share of the interest payment proportional to the payment for that subcontractor’s work.
- statuteIowa Code § 573.14enactment date not established
The words that state the rule
The fund provided for in section 573.13 shall be retained by the public corporation for a period of thirty days after the completion and final acceptance of the improvement. If at the end of the thirty-day period claims are on file, the public corporation shall continue to retain from the unpaid funds a sum equal to double the total amount of all claims on file. The remaining balance of the unpaid fund, or if no claims are on file, the entire unpaid fund, shall be released and paid to the contractor.
- statuteIowa Code § 573.14enactment date not established
The words that state the rule
Interest shall accrue during the period commencing the thirty-first day following the completion of work and satisfaction of the other requirements of this subsection and ending on the date of payment. The rate of interest shall be determined by the period of time during which interest accrues, and shall be the same as the rate of interest that is in effect under section 12C.6, as of the day interest begins to accrue, for a deposit of public funds for a comparable period of time.
- statuteIowa Code § 573.12enactment date not established
The words that state the rule
If a public corporation other than a school corporation, county, or city retains funds, the interest earned on those funds shall be payable at the time of final payment on the contract in accordance with the schedule and exemptions specified by the public corporation in its administrative rules. The rate of interest shall be determined by the period of time during which interest accrues, and shall be the same as the rate of interest that is in effect under section 12C.6 as of the day interest begins to accrue.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.