ROBERT L. EHRLICH, JR., Governor                             Ch. 173

Article - State Finance and Procurement

13-225.

(a) (1) In this section the following words have the meanings indicated.

(2) "Payment security" has the meaning stated in § 17-101 of this

article.

article.

(3) "Performance security" has the meaning stated in § 17-101 of this

(b)     (1) If a contractor has furnished 100% payment security and 100%
performance security in accordance with Title 17, Subtitle 1 of this article under a
State procurement contract for construction, the percentage specified in the contract
for retainage may not exceed 5% of the total amount.

(2)     In addition to retainage, a primary procurement unit and the
Maryland Transportation Authority may withhold from payments otherwise due a
contractor any amount that the unit reasonably believes necessary to protect the
State's interest.

(3)     Retainage withheld by a primary procurement unit and the
Maryland Transportation Authority may be deposited in an interest-bearing escrow
account in accordance with § 15-108 of this article.

(c)      (1) A contractor may not retain a percentage of payments due a
subcontractor that exceeds the percentage of payments retained by the primary
procurement unit or the Maryland Transportation Authority.

(2) Paragraph (1) of this subsection may not be construed to prohibit a
contractor from withholding any amount in addition to retainage if the contractor
determines that a subcontractor's performance under the subcontract provides
reasonable grounds for withholding the additional amount.

(d)     (1) A subcontractor may not retain a percentage of payments due a lower
tier subcontractor that exceeds the percentage of payments retained from the
subcontractor.

(2) Paragraph (1) of this subsection may not be construed to prohibit a
subcontractor from withholding any amount in addition to retainage if the
subcontractor determines that a lower tier subcontractor's performance under the
subcontract provides reasonable grounds for withholding the additional amount.

(e)     If retainage has been placed in escrow under § 15-108 of this article, each
payment of retainage shall include a pro rata portion of interest earned.

(f)      This section may not be construed to limit the application of the provisions
of Title 17, Subtitle 1 of this article.

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