Frequently Asked Questions (FAQ)
We have been told there is a state law requiring retainages on construction
contracts to be deposited in a separate bank account? At the close
of the contract the retainage, plus the interest earned, must be paid
to the contractor. Our auditor says there is no such law. Is there?
Act 524 of 1980 (MCL 125.1561) provides that cities and villages
may retain not more than 10% of the total dollar amount of a construction
contract to assure proper performance and sets the terms and conditions
for payment of the amount retained. The Act requires that the city/village
deposit the funds retained in an interest-bearing account. When the
contract is 94% completed, at the request of the contractor, the city
must release the retainage plus interest. We have a copy of the forms
used by the City of Southfield to monitor their retainage accounts.
Let us know if you would like a copy.
What is the maximum amount for which we can write a contract without
going out for public bids under state law.
There is NO state law requiring public bids on municipal contracts. However,
many cities and home rule villages have such a requirement written
into their charter and additional cities and villages have ordinances
establishing a threshold amount over which contracts must be bid. Even
if your municipality does not have such a requirement, it is often
prudent to solicit bids on large projects.
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