Fifty-Fourth Legislature, Second Regular Session




public contracts; payment methods


Allows a contractor for certain public works construction contracts to opt for the county, city, town or special taxing district (government agent) to accept an assignment of money market accounts or demand deposit accounts in lieu of statutory retention methods.


A government agent is required to enter into a public works construction contract with the lowest responsible bidder whose proposal is satisfactory. The government agent, by mutual agreement, must make monthly progress payments on all contracts over 90 days, which are made on the basis of duly certified and approved estimates of work performed during the preceding calendar month. The government agent must retain 10 percent of the amount of each estimate until final completion as a guarantee for complete performance of the contract. The retained amounts must be paid to the contractor within 60 days of completion or upon filing notice of completion of the contract, unless the government agent issues a written finding of the reasons to justify a delay in payment. Any amount retained after 60 days cannot be greater than the amount necessary to pay the expenses the government agent expects to incur in order to pay or discharge the expenses.

A contractor can choose, in lieu of retention, for the government agent to accept an assignment of: 1) time certificates of deposits of licensed banks; 2) securities of the United States, Arizona or Arizona counties, municipalities or school districts; or 3) shares of savings and loan associations authorized to transact business in Arizona. If the government agent accepts a substitute security for 10 percent retention, the contractor is entitled to receive all interest or income earned by the security as it accrues. The government agent can only accept a time certificate of deposit of a bank or shares of a savings and loan association in lieu of retention if it is accompanied by a signed and acknowledged waiver of the bank or savings and loan association or any right or power to set-off against the government agent or contractor (A.R.S. 34-221).

There is no anticipated fiscal impact to the state General Fund associated with this legislation.


1.      Allows a contractor for a public works construction project with a government agent to opt for the government agent to accept an assignment of money market accounts or demand deposit accounts, rather than statutorily required retention of pay estimates.

2.      Makes technical and conforming changes.

3.      Becomes effective on the general effective date.

Prepared by Senate Research

February 6, 2020