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UNC �Y scNOOL OF GOVERNMENT 1. Performance Bond — A performance bond protects the public entity by ensuring faithful performance of the contractor in accordance with the plans, specifications and terms of the contract. 2. Payment Bond — A payment bond protects subcontractors by ensuring prompt payment for all labor and materials for which the contractor or subcontractor is liable. Step 9: Contract Management., Retainage 1. Retainage — Retainage is the amount of payment the local government withholds ("retains') until the construction project has been satisfactorily completed. Retainage is not allowed on projects costing less than $100,000. For projects costing $100,000 or more, specific requirements apply to the amount of payment that may be withheld and when payments may be withheld at various points during the construction project: a. Until the project is 50% complete, the local government cannot retain more than 5% per periodic payment owed to the prime contractor. b. When the project is 50% complete, no further retainage is allowed as long as performance is satisfactory. c. When a certificate of substantial completion is issued or upon beneficial occupancy, all remaining retainage must be released, although the local government may retain up to 2 Y. times the value of remaining work to secure completion or correction of that work. d. "Line -item' release of retained funds is required for "early finishing trades' (subcontractors who complete 100% of their work before the project is 50% complete). In addition to these requirements, local governments may also withhold additional amounts in certain instances generally involving unsatisfactory performance and defective workmanship. [G.5.143-134.1] "Early finishing trades' include structural steel, piling, caisson, and demolition. [G.S. 143-134.1(b2)) 'um her 1 \n 8 1 Construction Contracting Basic Legal Requirements Updated September 2013 F-9 Page 84