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2011 Mississippi Attorney General Reports and Opinions 1 (2011)

handle is hein.sag/sagms0084 and id is 1 raw text is: Larry E. Clark, Esq. Office of the Attorney General February 9, 2011 Office of the Attorney General State of Mississippi *1 Opinion No. 2011-00001 *1 February 9, 2011 Re: Pearl River Valley Water Supply District; Retainage Provisions in Federally Funded Contract for Road Construction *1 Larry E. Clark, Esq. *1 Watkins Ludlam Wnter & Stennis, P.A. *1 Post Office Box427 *1 Jackson, Mississippi 39205 Dear Mr. Clark: *1 Attorney General Jim Hood has received your request for an opinion and has assigned it to me for research and response. Issues Presented *1 You inquire as to the authority of the Pearl River Valley Water Supply District to execute and perform a construction contract that excludes a provision for retainage as required by Mississippi Code Annotated Section 31-5-33. Specifically, in pertinent part, you provde the following: *1 The District is in the process of making certain improvements to the Bob Anthony Parkway (upper and lower Spillway Road across dam) and constructing associated facilities within the District (the Project'). Pursuant to a Memorandum of Understanding (the MOU) entered into between the District and the Mississippi Department of Transportation (MDOT), the primary source of funding for the Project will be a grant in the amount of approximately Two Million Three Hundred Twenty Nine Thousand One Hundred Fifty Dollars ($2,329,150) by MDOT of funds provded to it bythe Federal Highway Administration (FHWA). The contract for the performance of the work (the Contract ) will not be executed by MDOT or FHWA, but the procedures necessary for the Project, including preliminary matters, design and environmental work and contract acquisition must be performed according to the project Development Manual for Local Public Agencies produced by MDOT, and the role of FHWA in funding the Project must be acknowledged and posted bythe District. *1 The District has advertised for and received bids for the work and is now prepared to accept the bid of the lowest and best bidder and award the Contract. The Contract as written calls for progress payments to be made to the contractor as the work is performed. Mississippi law, specifically Section 31-5-33, provdes for retainage of a percentage of progress payments made under public contracts. It includes the following language pertinent to this inquiry: *1 (1) In any contract for the construction, repair, alteration or demolition of any building, structure or facility awarded by the State of Mississippi, or any agency, unit or department of the State of Mississippi, or by any political subdivision thereof, which contract provdes for progress payments in installments based upon an estimated percentage of completion with a percentage of the contract proceeds to be retained by the state agency, unit or department, or bythe political subdivision or contractor pending completion of the contract, such retainage shall be five percent (5%), and the amount retained bythe prime contractor from each payment due the subcontractor shall not exceed the percentage withheld by the state, or any agency, unit or department of the state, or by any political subdivision thereof, from the prime contractor. *2 (2) The provisions of this section shall not apply to contracts let bythe Mississippi Transportation Commission for the construction, improvement or maintenance of roads and bridges. *2 Under federal regulations there are restrictions on retainage provisions in construction contracts funded by FHWA. Applicable federal regulations, specifically49 C.F.R. Section 26.29, make certain requirements regarding retainage held from payments to Disadvantaged Business Enterprises (DBEs) which applyto grants of federal money to recipients such as MDOT in this instance. 1 Several alternative means of meeting these requirements are provided for in the regulation, including the option of not withholding retainage from prime contractors and prohibiting prime contractors from withholding retainage. *2 MDOT chose the first option, and no MDOT contracts utilizing federal funds now provide for retainage to be withheld from prime contractors or subcontractors. Subsequently, MDOT sought and obtained from the Legislature an act amending Section 31-5-33 specifically exempting MDOT

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