Chapter Eight: Lien-Like Remedies on Public Projects

1. Introduction.

   Construction liens do not attach to public property.[1]  On projects where public property is improved, Washington law establishes two lien-like remedies to supplement a direct action for nonpayment.  The first, codified in the state’s “Little Miller Act,”[2] requires the contractor on most public projects to post a payment bond for the benefit of laborers, subcontractors, and suppliers.  The second requires public owners to retain a percentage of the monies otherwise due to the prime contractor as a fund against which laborers, subcontractors, and suppliers can assert lien-like claims.  There is also a prompt payment requirement on state public projects.  These and other matters are discussed below, as follows:

   • Section 2:  Bonds on Public Projects.
   • Section 3:  Retainage on Public Projects.
   • Section 4:  Prompt Payment Requirements on Public Projects.

   Washington courts have noted that the bond and retainage remedies are analogous to the private lien law in that they provide security for the payment of persons performing work to improve the property.  Washington courts have accordingly looked to lien law when interpreting these public works statutes.[3]

2. Bonds on Public Projects.

   The bond remedy is mandatory on most public projects.  In particular, anyone contracting to perform work for a public body (defined broadly to include the state and any county, municipality, and district) must deliver a “good and sufficient bond, with a surety company as surety,” to ensure faithful performance of the work (i.e., a performance bond) and payment to certain persons furnishing work and supplies and taxing authorities (i.e., a payment bond).[4]  The statute allows only limited exceptions to the bond requirement:

   • On contracts of $150,000 or less, the contractor may elect to have the public body retain 10 percent of the contract amount instead of posting a bond.
   • On contracts of $150,000 or less, the public body may accept a bond from one or more individual sureties (e., not from a surety company).

   The bond, if required, must be in the amount of the full contract price and payable to the State of Washington, again with limited statutory exceptions:

   • Cities, towns, and certain districts may, by general ordinance or resolution, reduce the bond amount to no less than 25 percent of the contract price and may require the bond to be payable to the city, town, or district.
   • Under the job order contracting procedure described in RCW 39.10.420, bonds must be in an amount not less than the dollar value of all open work orders.[5]
   • There are special rules relating to the construction, maintenance, and repair of marine vessels.[6]

   If a public body contracts for work without enforcing the bond requirement, then the public body will be directly liable to the persons who would have been protected by the bond.[7]  The liability is strict; good faith is no excuse.[8]

   The parties protected by a public payment bond are “all laborers, mechanics, and subcontractors and material suppliers, and all persons who supply such person or persons, or subcontractors, with provisions and supplies.”  This provision is a bit obscure.  The phrase “such person or persons” appears to refer to individual workers (laborers and mechanics).  Persons who provide materials to subcontractors are protected by the bond, but persons who provide materials to material suppliers are not.[9]

   Because the bond is a form of security given by the contractor, an unregistered subcontractor can pursue a claim against the bond just as it could pursue a claim against the contractor directly.[10]

   It has been held that, by allowing claims for “provisions and supplies” as well as for “materials,” the bond statute gives broader protection than the lien statute.[11]  “Supplies” are things furnished for the work that are necessarily consumed by use in the work, such as fuel for equipment, food for workers,[12] and expendable drill bits[13] but not insurance[14] or freight charges to bring equipment to the site.[15]  The rental cost of equipment is claimable[16] but the cost of repairing or replacing worn-out equipment is not.[17]  Unfortunately, it is not always obvious whether a particular cost should be classified as material, supplies, or equipment.[18]

   If a bond claim is made based on the supply of materials, the bond claimant must demonstrate that the material was either incorporated into the work or at least delivered to the site for such use.[19]

   The rights of claimants under a public payment bond, like rights under the construction lien statute, must be perfected by timely actions.  The first of these is a pre-claim notice.  The purpose of a pre-claim notice is to protect the general contractor against having to pay twice for the same work.[20]  Pre-claim notice must be given by anyone providing “materials, supplies, or provisions” to a subcontractor.[21]  In other words, persons in direct privity with the prime contractor need not give pre-claim notice.  Persons who provide only labor need not give pre-claim notice.[22]  But sub-subcontractors and suppliers generally should do so.

   Pre-claim notice must be given within 10 days of starting to deliver materials, supplies, or provisions, or the bond claim is lost.[23]  Note that this provision differs from the rule in lien cases.  Under the construction lien statute, pre-claim notice may be given at any time, but it has a limited retroactive effect.  In the case of public works bonds, the pre-claim notice must be given within the specific 10-day period.  The pre-claim notice requirement may be excused in the following situations:  first, if the prime contractor makes a subcontractor its common law agent (in which case a person working for the subcontractor is in effect working for the prime); and second, if the supplier reasonably (but incorrectly) believes it is dealing with the prime.[24]

   The pre-claim notice must be delivered or mailed to the contractor (i.e., the prime contractor that has arranged for the bond).  The statute does not mandate any particular form for pre-claim notice, but the notice should identify the claimant, the bond, and the person ordering the work (typically a subcontractor);  it should also state that the contractor and its bond will be held responsible for payment to the claimant.[25]  It has been held that substantial compliance with the notice requirement is sufficient.[26]  However, actual notice of the claimant’s work is not enough.[27]  The statute does not specify any particular kind of delivery or mailing, but it would be prudent to follow the same procedures for pre-claim notices in lien cases:  personal delivery with a signed receipt (to someone with authority to sign for the contractor) or certified or registered mail to the contractor’s address as listed on the Department of Labor and Industries website (and to any other address provided to the claimant for notice to the prime contractor).

   The second step toward perfecting a bond claim is to make a claim against the bond.  The claimant must “present to and file with” the board, council, or other governing body of the public owner a written notice of claim.[28]  The statute contains a form of notice that is easy to use.  Substantial compliance is acceptable:  the notice is sufficient if it identifies the bond, the surety, and the work involved, and if it gives notice of an intent to claim against the bond.[29]  Again, actual notice that the claimant remains unpaid is normally not sufficient.[30]

   The notice of bond claim must be given within 30 days after the “acceptance of the work by the affirmative action of the . . . public body.”[31]  This means that the 30-day period for filing bond claims begins to run when the public body gives “final and absolute” acceptance of the work.[32]  The fact that minor work remains to be done is immaterial if the public body’s acceptance is unconditional in form;  however, an acceptance expressly conditioned on additional work being done does not start the 30-day time period.[33]  But the claimant need not wait until the last minute:  a notice of claim may be filed even before the final acceptance of the work.[34]  A subcontractor whose work is terminated need not file a bond claim within 30 days of termination; the deadline is tied to the public body’s acceptance of the overall work (even if finished by others).[35]

   Once a bond claim has been perfected, it may be enforced by a lawsuit against the surety that issued the bond.  The statute does not provide for any particular venue, so presumably, the lawsuit may be brought in any county where the surety can be found.  The venue may be fixed by the claimant’s contract.[36]

   The statute does not give any time limit for commencing a bond lawsuit.  Thus, the usual statute of limitations for a bond claim (which is based on a written contract) is six years.[37]  This may be varied by the terms of the bond.[38]

   In a bond lawsuit, the claimant has the burden to show timely pre-claim and claim notices, the underlying merits of her claim, and that the claimed items are all properly charged against the bond.  If proper items cannot be distinguished from improper items, the entire bond claim may be rejected, as in the case of a private lien claim.[39]  Mistaken claims may be excused if in good faith.[40]

   Others may have competing claims against the bond, including other claimants who have supplied materials or equipment, and the State of Washington, which may seek payment of taxes and penalties incurred by the contractor.  Under RCW 39.12.050, unpaid amounts under the prevailing wage statute can also be pursued as claims against the bond.  The bond statute does not provide for priority among multiple claimants.  If faced with a priority question, a court would probably look to the provisions in RCW 62.28.040 (for claims against retainage).  See Section 3, Retainage on Public Projects, below, for a description of that provision.

   A bond claim action is one at law, so there is a right to a jury.  If the action is combined with foreclosure of a retainage lien, the matter is murkier, but juries have been allowed on such combined claims.[41]

   The claimant’s recovery in a bond claim is measured by quantum meruit, which may be more or less than the claimant’s contract amount.[42]  A successful claimant is also entitled to recover attorneys’ fees:  an award of fees is mandated, but the amount of any such award is discretionary with the court.[43]  There are two exceptions.  First, no attorneys’ fees may be recovered in a bond lawsuit filed within 30 days after the claim notice is filed.[44]  This allows the public body to investigate and resolve claims without litigation; the sanction is sufficiently serious that a claimant should wait 30 days before filing a lawsuit.  Second, attorneys’ fees are not recoverable unless the surety maintains a position adverse to the claimant.[45]

   A successful claimant on a bond claim may also recover interest on the judgment.  Interest is at the statutory 12 percent rate, without regard to any different rate of interest in the claimant’s contract.  This is because the right to recovery (and to interest) arises from the bond statute and not from the claimant’s contract.[46]

3. Retainage on Public Projects.

   The retainage remedy is mandatory on many public projects.[47] In particular, all “public improvement” contracts must provide, and public bodies must reserve, a contract retainage not to exceed 5 percent of the monies earned by the contractor as a trust fund for (a) persons with claims arising under the contract and (b) the state concerning taxes and penalties that may be due from the contractor.[48]  “Public improvement contract” is broadly defined to cover all contracts for public works, except for professional services contracts and work orders.[49]  “Public body” is broadly defined to include the state, counties, cities, towns, and districts.[50]  The phrase “claims arising under the contract” is not limited to claims by the prime contractor;  all persons working on the project have a potential lien against the retainage fund.[51]

   The public body may retain an amount “not to exceed five percent.”  The statute does not state any minimum retainage percentage or amount, but evidently, the lower limit is not zero because the statute says that the public body “must reserve” a retainage fund.  No published opinion has addressed what amount between 5 percent and 0 percent is required.

   The prime contractor may ask that the retainage fund be reduced to the value of the work remaining under the contract;  moreover, once all the work other than landscaping is completed, the contractor can ask for the return of all amounts retained (other than five percent of the landscaping cost).[52]  The statute does not require the prime contractor or the owner to give notice to potential claimants of a request to diminish or eliminate the retainage fund.  However, the prime contractor’s right to reduce the fund is said to be “subject to” the remainder of the statute.[53]  The evident intent (nowhere clearly stated) is that the public body should refuse to reduce the retainage fund if there are outstanding claims against the fund.  For this reason, a subcontractor or supplier claimant should consider asserting claims against the fund promptly, even if work is continuing at the site so that the fund is not paid out before the claimant has a chance to make a claim.

   The contractor has a right to choose how the public body will retain money, either in a separate fund with the public body or deposited in a financial institution (with interest accruing to the contractor) or invested in bonds or securities (with interest accruing to the contractor).[54]

   If the contractor is subject to retainage, the contractor may in turn retain monies from its subcontractors and suppliers, who may in turn retain monies from their lower-tier subcontractors and suppliers.  Any interest accruing on such retained funds is for the benefit of the parties from whom the monies are withheld.[55]

   As a substitute for some or all of the retainage, the prime contractor can offer a bond (different from the bond required by RCW 39.08) and the public body must generally accept it.[56]  The bond stands in for the retainage fund and is subject to all the claims and liens to which the fund would have been subject.  If the prime contractor posts a bond, it must in turn accept bonds instead of retainage from its subcontractors and suppliers.[57]  At the request of a subcontractor, the contractor must submit a bond to the owner for that portion of the retainage allocable to the subcontractor, minus the subcontractor’s portion of the bond premium.[58]

   The retainage rules are modified concerning contracts funded in whole or in part by federal transportation funds, contracts terminated for reasons other than the contractor’s breach, contracts for the construction of ferry vessels and projects funded by the Farmers Home Administration, and contracts using the general contractor/construction manager method.[59]

   The statute says that every person “performing labor or furnishing supplies toward the completion of a public improvement contract” is entitled to a lien on the retainage fund.[60]  As noted above, this includes subcontractors and suppliers who are not in privity with the prime contractor;  it does not include material suppliers to material suppliers.[61]  Persons with lien rights against the retainage fund should be the same persons who have rights against a public works bond.[62]

   The rights of claimants under the public retainage statute, like rights under the lien statute, must be perfected by timely actions.  The first of these is a pre-claim notice.  The statute says that “every person” furnishing materials, supplies, or equipment “shall” give a written pre-claim notice to the prime contractor, but it also says that the notice shall include the “name of the subcontractor” ordering the materials, supplies, or equipment.[63]  From this last phrase, and by analogy to the bond statute, it is arguable that subcontractors and material suppliers in direct privity with the prime contractor do not need to give pre-claim notice to preserve claims against the retainage.[64]

   The notice can be given at any time, but its effect is limited to work performed during the 60 days preceding the notice.[65]  Giving notice requires mailing (by registered or certified mail) or personal delivery with a written receipt; accordingly, the 60 days should be measured from when these steps are taken (and not from the date a mailed notice is received).

   The statute provides an outline of the information to be included in a pre-claim notice.  Including this information “in substance and effect” should be sufficient.[66]  Under the retainage statute, the failure to give a pre-claim notice (if required) bars any claim against the retainage.

   On public projects where bonds and retainage remedies are both available, it may make sense to provide a pre-claim notice covering both remedies.  Such a combined notice should comply with the bond statute’s stricter timing requirement.

   The pre-claim notice may be delivered by registered or certified mail to the contractor’s address (listed on the Department of Labor and Industries website) or by personal service on the prime contractor’s representative (some person at the site or the contractor’s home office with authority to sign).[67]  Both methods should produce written receipts.

   The second step toward perfecting a retainage claim is to make a claim against the retainage.  The statute provides that the claim must be submitted within 45 days of completion of the contract work, and “in the manner provided in RCW 39.08.030.”[68]  Note that the time for filing a retainage claim runs from the “completion” of the work, while the time for filing a bond claim runs from the public body’s “acceptance” of the work.[69]  What counts as “completion” is usually defined by the contract.  The “manner provided” in the bond statute means the form given in the bond statute and also the direction that the claim be filed with the public owner of the project.

   After the 45 days, the public body will determine whether claims (from contractors, suppliers, or taxing authorities) remain unresolved; if they do, the public body will continue to hold sufficient retainage to satisfy the claims and return the remainder (if any) to the contractor.[70]

   Once the retainage lien has been perfected, it has only a limited lifespan.  The claimant must commence a foreclosure action within four months from the time of filing the claim.[71]  Failure to commence an action within the four months discharges the claimant’s lien, but the discharge can be avoided by re-filing the retainage claim before it expires.[72]

   There is a trap for the unwary here.  A re-filed retainage claim must be filed within four months of the previous claim filing.  Otherwise, the previous claim expires and the new one is ineffective, even if the work is not yet complete.[73]  So a claimant filing an early claim (to guard against the retainage fund being decreased at the prime contractor’s request) must make sure to renew the claim or else commence a foreclosure action within four months.

   The statute says that a retainage lien foreclosure action shall be “governed by the laws regulating the proceedings in civil actions touching the mode and manner of trial and the proceedings and laws to secure the property to hold it for the satisfaction of any lien against it.”[74]  This provision has caused considerable controversy about how the “laws regulating the proceedings” in construction lien cases should be applied to retainage lien cases.  One case, relying on an early decision about private lien rights, held that retainage lien rights were lost unless a foreclosure action was filed and served within the four-month life of the lien.[75]  Then, the early case (relating to private liens) was held to have been superseded by changes to the Civil Rules, so that (private) lien rights survived as long as a foreclosure action was timely commenced (by filing or service) within the statutory period.[76]  Then, the private lien statute was amended to provide that the foreclosure lawsuit had to be both filed within the statutory period and served on “all necessary parties” within 90 days.[77]  It was held that these specific requirements superseded the Civil Rules and that failure to serve even one necessary party was fatal to the lien.[78]  Thereafter, the private lien statute was amended again;  the current provision requires the filing of the foreclosure action within the statutory period and service on the “owner” within 90 days of filing.[79]

   In light of this history, a claimant should assume that, to preserve retainage lien rights, she must file a foreclosure action within four months after filing the lien claim and also serve the “owner” (the public owner holding the retainage) within 90 days of filing the lawsuit.  If the retainage fund has been replaced with a retainage bond, the same time frames should apply.[80]  If a claimant is joined in a foreclosure action commenced by another party, the claimant’s action is commenced only when she files an answer and cross-complaint, which she must do before the four-month period expires.[81]

   One necessary party to the lien foreclosure action is the public body holding the funds, though the public body need not “make any detailed answer to any complaint.”[82]  If the public body itself has no claims (e.g., for taxes due) then the public body is likely to tender the retainage fund to the court and ask to be dismissed.

   The statute says that the foreclosure action is to be brought in the county where the retainage lien claim was filed (i.e., where the public body is located).[83]  This mandatory provision can be modified by a valid contractual forum selection clause.[84]

   Another necessary party is the prime contractor, who receives any part of the retainage not paid out to claimants.  Other claimants against the retainage are certainly parties to be joined if possible, particularly if there is doubt whether the retainage fund will cover all the claims.  By analogy with RCW 60.04.171, all claimants should seek to combine their claims in a single foreclosure action, and failure to include a particular claimant may result in the judgment having no effect on that claimant.  If the claimant wishes to pursue a contract claim for nonpayment, then the alleged debtor is a necessary party to that claim, but the contract claim does not make the alleged debtor a necessary party in the lien foreclosure.  This may be significant if the debtor is bankrupt or otherwise not available to participate.

   Because an action to foreclose a retainage lien is similar to an action to foreclose a construction lien, a jury trial is probably not available.[85]  Venue is generally in the jurisdiction of the public agency but may be changed by agreement.[86]  The measure of recovery, as in private lien cases, is measured by the contract price of the work.[87]

   When the work is completed, the public agency notifies the Department of Revenue, the Employment Security Division, and the Department of Labor and Industries and waits to find out whether any of those entities assert claims against the retainage.  RCW 60.28.051.  Once the responses have been received, the public owner is in a position to calculate the total claims (including its own, if any) against the retainage fund.  Any unclaimed amount should be returned to the contractor.  RCW 60.28.021.

   The statute does not say how to prioritize payments if there are multiple claimants, except that state tax liens take priority on contracts over $35,000 and claims for prevailing wages take priority over other claims.[88]  No published case provides guidance.  Two leading options are (a) to resolve priorities by analogy with the private lien statute, RCW 60.04.181, or (b) to pay all claims pro rata.[89]

   A prevailing claimant in a retainage lien foreclosure action is entitled to “attorney fees in such sum as the court finds reasonable.”[90]  Fees are not available unless the claimant prevails on the lien foreclosure issue in particular.[91]  Interest is also available from the date the lien claim was filed with the public body.[92]

4. Prompt Payment Requirements on Public Projects.

   On public projects, the contractors and subcontractors are required to make payment of uncontested amounts within specified time frames, generally 10 days after receiving funds; up to 150 percent of amounts disputed in good faith may be withheld.[93]  Failure to make timely payments subjects the responsible party to prejudgment interest at the legal rate and, in an action to recover wrongfully withheld payments, liability for costs and reasonable attorneys’ fees.

   The public body also should make prompt payment of uncontested amounts;  failure to make timely payments subjects the public body to interest at the rate of 1 percent per month.[94] Payment must be made within 30 days of receipt of a proper invoice or receipt of goods or services, whichever is later.[95]  An invoice is received when delivered (generally reflected on a date stamp) and payment is made when mailed or delivered to the payee.[96]  If a public body orders additional work beyond the scope of the original contract, the public body must issue a change order for the full dollar amount of additional work not in dispute, or else interest will accrue on that undisputed charge.[97]

   Amounts may be withheld if the public body explains within eight days of receiving an invoice specifically why part or all of the payment is being withheld and what remedial actions the contractor must take to receive the withheld amount.[98]  Once the contractor remedies the unsatisfactory work, the public body must pay the contractor within 30 days.[99]

   If the contractor, after submitting an invoice that includes money for its subcontractor, S, discovers that part of the requested money should be withheld from S because of defective work, the contractor may withhold the money from S but must give notice to S and the public owner and pay S within eight working days after the work is corrected.[100]

   In any action brought to collect interest due for late payments by a public body or by a contractor, “the prevailing party is entitled to an award of reasonable attorney fees.”[101]

   An illustration of the interplay between the prompt payment statute and other contractor remedies was presented in Thompson v. Peninsula School District No. 401.[102]  The contractor finished its work, but the school district withheld final payment (including retainage withheld under RCW 60.28.011) because an employee of the Department of Labor and Industries claimed that the contractor had failed to pay its workers according to law.  The four-month period for bringing retainage claims passed without the Department making any claim, but the District continued to withhold final payment.  The Court of Appeals found that the District had no legal excuse for nonpayment and that the contractor was entitled to both interest and attorneys’ fees.[103]

   There are several situations where prompt payment obligations do not apply.  The one most likely to be encountered is the case of money withheld subject to a good-faith dispute, but the public body must give notice of the dispute (via certified mail, personal delivery, or in compliance with the contract) before timely payment is due.[104]

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[1] See Estate of Haselwood v. Bremerton Ice Arena, Inc., 166 Wash. 2d 489, 500, 210 P.3d 308 (2009).

[2] The term comes from the resemblance to the federal Miller Act, 40 U.S.C. § 3131 et seq. Lien-like remedies on federal projects are outside the scope of this book.

[3] See, e.g., Md. Cas. Co. v. City of Seattle, 11 Wash. 2d 69, 73-74, 118 P.2d 416 (1941) (“all of our cases dealing with the subject of claims under public works bonds proceed upon the theory that the purpose of the statute requiring such bonds is to protect those persons who would be protected by the lien laws, if the work was private in character”); Farwest Steel Corp. v. Mainline Metal Works, Inc., 48 Wash. App. 719, 729, 741 P.2d 58 (1987) (“there is good reason to look to private materialman’s lien statutes as a guide for interpreting the scope of the [public] retainage statute”).

[4] RCW 39.08.010.  Chapter 39.08 is not expressly limited to construction work that improves real property, but the content of the chapter suggests that this limitation was intended. See supra, fn.3.

[5] RCW 39.08.030(2).

[6] RCW 39.08.100.

[7] RCW 39.08.015.

[8] See Old Nat’l. Bank of Spokane v. Lewis Cnty., 137 Wash. 436, 441, 242 P. 961 (1926).

[9] This limitation was recognized in Farwest Steel Corp., 48 Wash. App. at 722-26. See Chapter Two, Section 2.c, Materials, for a similar rule denying construction lien rights to persons providing materials to material suppliers.  The Farwest opinion discusses how to distinguish subcontractors from material suppliers. Note that the federal Miller Act provides protection only to persons who contract directly with the prime contractor or who contract with a subcontractor that contracts directly with the prime. See J.W. Bateson Co. v. United States ex rel. Bd. of Trs. of  Nat’l Automatic Sprinkler Indus. Pension Fund, 434 U.S. 586, 589 (1978). By contrast, the Washington public bond statute protects subcontractors at any tier.

[10] See Lobak Partitions, Inc. v. Atlas Constr. Co., 50 Wash. App. 493, 499-502, 749 P.2d 716 (1988).

[11] See Nat’l Grocery Co. v. Md. Cas. Co., 148 Wash. 387, 393-94, 269 P. 4 (1928). This holding is in tension with the idea that the bond statute is intended to protect the same claimants that would have lien rights on a private project. See supra, fn.3.

[12] See Nat’l Grocery Co., 148 Wash. at 393-94.

[13] See U.S. Fid. & Guar. Co. v. Feenaughty Machinery Co., 197 Wash. 569, 85 P.2d 1085 (1939).

[14] See Md. Cas. Co., 11 Wash. 2d 69.

[15] See Hamilton v. Whittaker, 29 Wash. 2d 173, 186 P.2d 609 (1947); cf. King County v. Guardian Cas. & Guar. Co., 103 Wash. 509, 515, 175 P. 166 (1918) (holding that the cost of delivering materials for a project was properly charged against the bond).

[16] See Willett v. Davis, 30 Wash. 2d 622, 635-36, 193 P.2d 321 (1948).

[17] See Standard Boiler Works v. Nat’l Sur. Co., 71 Wash. 28, 30, 127 P. 573 (1912) (no claim for repairs to equipment); U.S. Fid. & Guar. Co., 197 Wash. at 576 (no claim for replacement of worn-out equipment).

[18] The rental cost of equipment can be considered a “supply,” something necessarily consumed in the work, only through the fiction that the “use” of the equipment (as opposed to the equipment itself) is consumed. See U.S. Rubber Co. of Cal. v. Wash. Eng’g ’g Co., 86 Wash. 180, 184-85, 149 P. 706 (1915).

[19] See Holly-Mason Hardware Co. v. Nat’l Sur. Co., 107 Wash. 74, 78-79, 180 P. 901 (1919). See Chapter Two, Section 2.c, Materials, for a similar rule applicable in lien cases.

[20] See LRS Elec. Controls, Inc. v. Hamre Constr. Inc., 153 Wash. 2d 731, 739, 107 P.3d 721 (2005).

[21] RCW 39.08.065.

[22] RCW 39.08.065.

[23] See Campbell Crane & Rigging Servs., Inc. v. Dynamic Int’l AK, Inc., 145 Wash. App. 718, 726, 186 P.3d 1193 (2008) (sub-subcontractor providing “crane lifting services” on a public project was a supplier of labor and therefore not required to provide pre-claim notice to maintain a claim on the bond); cf. LRS Elec. Controls, Inc., 153 Wash. 2d at 740 (subcontractor providing both materials and labor on a public project was required to give pre-claim notice for the materials portion of its claim).

[24] See Austin v. C.V. Wilder & Co., 65 Wash. 2d 456, 459-60, 397 P.2d 1019 (1965).

[25] RCW 39.08.065.

[26] See Keller Supply Co. v. Lydig Constr. Co., 57 Wash. App. 594, 598-600, 789 P.2d 788 (1990).

[27] See LRS Elec. Controls, Inc., 153 Wash. 2d at 740.

[28] RCW 39.08.030(1)(a). The governing body is unlikely to be involved in the project day-to-day, so a bond claim will probably not resemble an ordinary claim for time or money under the construction contract.

[29] See Foremost-McKesson Sys. Div. of Foremost-McKesson, Inc. v. Nevis, 8 Wash. App. 300, 505 P.2d 1284 (1973).

[30] See Robinson Mfg. Co. v. Bradley, 71 Wash. 611, 615-16, 129 P. 382 (1913); cf. Van Doren Roofing & Cornice Co. v. Guardian Cas. & Guar. Co., 99 Wash. 68, 71-72, 168 P. 1124 (1917) (defective notice was excused because the public body treated it as sufficient).

[31] RCW 39.08.030(1)(a). Note that the period for claims against retainage on a public project is different. See infra, Section 3, Retainage on Public Projects.

[32] See Nat’l Blower & Sheet Metal Co. v. Am. Sur. Co. of N.Y., 41 Wash. 2d 260, 264, 248 P.2d 547 (1952).

[33] Id. at 267-68.

[34] See Cascade Lumber Co. v. Aetna Indem. Co., 56 Wash. 503, 508-09, 106 P. 158 (1910).

[35] See Puget Sound Bridge & Dredging Co. v. Jahn & Bressi, 148 Wash. 37, 50, 268 P. 169 (1928) (terminated contractor had until 30 days after final completion to file bond claim).

[36] See Keystone Masonry, Inc. v. Garco Constr., Inc., 135 Wash. App. 927, 935-36, 147 P.3d 610 (2006) (venue for combined bond and retainage claim was fixed by contract); see also 3A Indus., Inc. v. Turner Constr. Co., 71 Wash. App. 407, 418-19, 869 P.2d 65 (1993) (subcontractor’s bond claim was governed by arbitration clause in prime contract).

[37] See Indus. Coatings Co. v. Fid. & Deposit Co. of Md., 117 Wash. 2d 511, 513-18, 817 P.2d 393 (1991).

[38] Cf. Honeywell, Inc. v. Babcock, 68 Wash. 2d 239, 412 P.2d 511 (1966) (court enforced limitation of action clause in payment bond on private project).

[39] See Gilbert Hunt Co. v. Parry, 59 Wash. 646, 650, 110 P. 541 (1910).

[40] See Puget Sound State Bank v. Gallucci, 82 Wash. 445, 456, 144 P. 698 (1914); Strandell v. Moran, 49 Wash. 533, 535, 95 P. 1106 (1908).

[41] See Diamaco, Inc. v. Mettler, 135 Wash. App. 572, 145 P.3d 399 (2006) (jury trial held on combined bond and retainage claims).

[42] See Md. Cas. Co. v. City of Tacoma, 199 Wash. 72, 87-88, 90 P.2d 226 (1939). This is different from the recovery in a claim against retainage, which is measured by the claimant’s contract price. See infra, Section 3, Retainage on Public Projects.

[43] See Diamaco, Inc., 135 Wash. App. at 574.

[44] RCW 39.08.030(1).

[45] See Lakeside Pump & Equip., Inc. v. Austin Constr. Co., 89 Wash. 2d 839, 846-47, 576 P.2d 392 (1978); cf. Diamaco, Inc., 135 Wash. App. at 577 (surety admitted some parts of claimant’s claim and denied others; this was sufficiently adverse to justify a fee award); U.S. Filter Distrib.  Grp. Inc. v. Katspan, Inc., 117 Wash. App. 744, 754, 72 P.3d 1103 (2003) (surety refused to pay unless claimant signed a release form that claimant had no duty to sign; this was sufficiently adverse to justify a fee award).

[46] See U.S. Filter Distrib. Grp. Inc., 117 Wash. App. at 754.

[47] Recent Washington legislation limits the percentage of retainage withheld from contractors on private projects. Effective July 23, 2023, the new law, codified in RCW Chapter 60.30, largely mimics the retainage limits existing in the public works context. RCW 60.30.010 limits retainage on private construction projects to no more than five percent of the contract price of the work completed and imposes interest, at one percent per month, if payment is not made after notification that work for which payment is requested is complete. RCW 60.30.020 creates an opportunity for contractors and subcontractors to tender a retainage bond in lieu of retainage. The statute does not apply to public construction projects or to single-family residential construction of fewer than 12 units.

[48] See RCW 60.28.011(1)(a). A major exception is projects supported by federal transportation funds, which applies to many WSDOT projects.

[49] RCW 60.28.011(12)(d).

[50] RCW 60.28.011(12)(c).

[51] RCW 60.28.011(2) says that “[e]very person performing labor or furnishing supplies toward the completion of a public improvement contract has a lien” on the retainage fund. See Crabtree v. Lewis, 86 Wash. 2d 282, 288, 544 P.2d 10 (1975) (employee benefit plan was entitled to lien on retainage for benefit of subcontractor’s employee).

[52] RCW 60.28.011(3).

[53] It is also subject to the prevailing wage statute, RCW Chapter 39.12.  RCW 39.12.050 makes unpaid prevailing wages a lien against the retainage fund.

[54] RCW 60.28.011(4)

[55] RCW 60.28.011(5).

[56] RCW 60.28.011(6).

[57] See id. The prime bond and the sub bond may have been intended to be analogous, but they are importantly different. Under the statute, the retainage fund protects lower-tier subs and suppliers who have no lien against public property. If the prime offers a bond in lieu of retainage, the bond similarly protects the lower-tier subs and suppliers. If the prime retains monies from its subcontractors, no statute subjects this retainage fund to claims by lower-tier subs and suppliers; the purpose of the prime’s retainage is to protect the prime.  If the prime accepts a bond from its sub in lieu of retainage, that bond continues to protect the prime.

[58] See id.

[59] RCW 60.28.011(1)(b), (7), (8), (10), (11).

[60] RCW 60.28.011(2).

[61] See Farwest Steel Corp., 48 Wash. App. at 722.

[62] See supra, Section 2, Bonds on Public Projects; see also United States Fid. & Guar. Co. v. E.I. DuPont de Nemours & Co., 197 Wash. 569, 85 P.2d 1085 (1939) (treating the bond and retainage statutes together for purposes of identifying potential claimants).  Under RCW 39.12.050, unpaid amounts under the prevailing wage statute are also liens against the retainage fund.

[63] RCW 60.28.015.  Like the bond statute and the lien statute, the retainage statute does not require persons providing only labor to give a pre-claim notice.  See Campbell Crane & Rigging Servs., Inc., 145 Wash. App. at 724.

[64] Cf. LRS Elec. Controls, Inc., 153 Wash. 2d at 740 (claimant’s lack of privity with the prime contractor was “fundamental” to the conclusion that the claimant needed to submit a pre-claim notice).

[65] See id. This provision is similar to the private lien statute, RCW 60.04.031(1).

[66] RCW 60.28.015; see also Keller Supply Co., 57 Wash. App. at 598-600.

[67] RCW 60.28.015.

[68] RCW 60.28.011(2).

[69] Former RCW 60.28.010 (2007) required retainage claims to be filed “in the manner and within the time provided in RCW 39.08.030.”  The changed language in current RCW 60.28.011(2) presumably reflects an intent to measure the time for retainage claims differently from bond claims.

[70] RCW 60.28.021.

[71] RCW 60.28.030.

[72] See Shope Enters., Inc. v. Kent Sch. Dist., 41 Wash. App. 128, 132-33, 702 P.2d 499 (1985).

[73] See Airefco, Inc. v. Yelm Cmty. Schs. No. 2, 52 Wash. App. 230, 234, 758 P.2d 996 (1988). This decision was based on the premise that the lien statute must be “strictly construed,” and may be subject to revision in light of later clarification of that rule.  See Williams v. Athletic Field, Inc., 172 Wash. 2d 683, 696-97, 261 P.3d 109 (2011).

[74] RCW 60.28.030.

[75] See Galvanizer’s Co. v. State Highway Comm’n,’8 Wash. App. 804, 806, 509 P.2d 73 (1973) (citing City Sash & Door Co. v Bunn, 90 Wash. 669, 156 P. 854 (1916)).

[76] See Curtis Lumber Co. v. Sortor, 83 Wash. 2d 764, 767-68, 522 P.2d 822 (1974) (disapproving City Sash & Door, 90 Wash. 669).

[77] This was in former RCW 60.04.100 (repealed 1992).

[78] See Queen Anne Painting Co. v. Olney & Assocs., Inc., 57 Wash. App. 389, 394-95, 788 P.2d 580 (1990).

[79] RCW 60.04.141.

[80] The limitations on a retainage action do not affect the claimant’s right to sue the contractor or its surety if no foreclosure is sought against the retainage.  See RCW 60.28.030.

[81] See Nemah River Towboat Co. v. Brewster, 152 Wash. 672, 679-80, 278 P. 694 (1929).

[82] RCW 60.28.030.  If the retainage fund has been replaced with a retainage bond, the public owner may not be a necessary party, since the sole beneficiaries of the bond will be claimants.

[83] Id.

[84] See Keystone Masonry, Inc. v. Garco Constr., Inc., 135 Wash. App. 927, 935-36, 147 P.3d 610 (2006) (contract forum selection clause overrode the retainage venue statute).

[85] A jury may be available if a retainage claim is combined with a bond claim. See supra, fn. 41 and associated text.

[86] See Keystone Masonry, Inc., 135 Wash. App. 927.

[87] See Norris Indus. v. Halvorson-Mason Constructors, 12 Wash. App. 393, 398-99, 529 P.2d 1113 (1974). This contrasts with the measure of recovery in a bond action, which is quantum meruit. See supra, Section 2, Bonds on Public Projects.

[88] RCW 60.28.040, .051.

[89] Payment pro rata leads to further questions. If a prime contractor has two subs (S1 and S2) and S1 has two sub-subcontractors (S1a and S1b) and all four make equal claims, should all four get equal payments or should half the retainage go to the “S1 family” and half to the “S2 family”? In any case, it will be important to avoid double recovery (which is a risk if S1’s claim includes the amounts claimed by S1a and S1b).

[90] RCW 60.28.030.

[91] See Expert Drywall, Inc. v. Ellis-Don Constr., Inc., 86 Wash. App. 884, 939 P.2d 1258 (1997) (no fees allowed where claimant resolved underlying claim, but not retainage lien foreclosure, in arbitration proceeding).

[92] See U.S. Fid. & Guar. Co., 197 Wash. at 581.

[93] RCW 39.04.250.

[94] RCW 39.76.011 et seq.

[95] RCW 39.76.011(2)(a).

[96] RCW 39.76.011(3).

[97] RCW 39.04.360.

[98] RCW 39.76.011(2)(b).

[99] RCW 39.76.011(d).

[100] RCW 39.76.011(e).

[101] RCW 39.76.040; see Thompson v. Peninsula Sch. Dist. No. 401, 77 Wash. App. 500, 507, 892 P.2d 760 (1995) (where the court found that a school district had failed to pay the retained percentage to a contractor in a timely manner and, therefore, the contractor was entitled to interest at the statutory rate, plus reasonable attorneys’ fees incurred during both the underlying proceedings and on appeal).

[102] 77 Wash. App. 500.

[103] The court rejected the district’s argument that it had acted reasonably in the circumstances. “[T]he District fails to cite any authority, and we are aware of none, that adopts a reasonableness standard as opposed to a requirement that the District comply with applicable statutes.”  Id. at 504.

[104] RCW 39.76.020 (especially subpart (4)); see also Elcon Constr., Inc. v. E. Wash. Univ., 174 Wash. 2d 157, 170-71, 273 P.3d 965 (2012) (dispute and litigation in good faith did not make payment untimely and thus contractor was not entitled to interest).