Public Contracting - Public Improvements and Related Contracts

ORS 279C.570
Prompt payment policy

  • progress payments
  • retainage
  • interest
  • exception
  • settlement of compensation disputes


It is the policy of the State of Oregon that all payments due on a public improvement contract and owed by a contracting agency shall be paid promptly. No contracting agency is exempt from the provisions of this section.


Contracting agencies shall make progress payments on the contract monthly as work progresses on a public improvement contract. Payments shall be based upon estimates of work completed that are approved by the contracting agency. A progress payment is not considered acceptance or approval of any work or waiver of any defects therein. The contracting agency shall pay to the contractor interest on the progress payment, not including retainage, due the contractor. The interest shall commence 30 days after receipt of the invoice from the contractor or 15 days after the payment is approved by the contracting agency, whichever is the earlier date. The rate of interest charged to the contracting agency on the amount due shall equal three times the discount rate on 90-day commercial paper in effect at the Federal Reserve Bank in the Federal Reserve district that includes Oregon on the date that is 30 days after receipt of the invoice from the contractor or 15 days after the payment is approved by the contracting agency, whichever is the earlier date, but the rate of interest may not exceed 30 percent. If the contract price exceeds $500,000, the contracting agency shall place amounts deducted as retainage into an interest-bearing escrow account. Interest on the retainage amount accrues from the date the payment request is approved until the date the retainage is paid to the contractor to which it is due.


Interest shall be paid automatically when payments become overdue. The contracting agency shall document, calculate and pay any interest due when payment is made on the principal. Interest payments shall accompany payment of net due on public improvement contracts. The contracting agency may not require the contractor to petition, invoice, bill or wait additional days to receive interest due.


When an invoice is filled out incorrectly, when there is any defect or impropriety in any submitted invoice or when there is a good faith dispute, the contracting agency shall so notify the contractor within 15 days stating the reason or reasons the invoice is defective or improper or the reasons for the dispute. A defective or improper invoice, if corrected by the contractor within seven days of being notified by the contracting agency, may not cause a payment to be made later than specified in this section unless interest is also paid.


If requested in writing by a first-tier subcontractor, the contractor, within 10 days after receiving the request, shall send to the first-tier subcontractor a copy of that portion of any invoice, request for payment submitted to the contracting agency or pay document provided by the contracting agency to the contractor specifically related to any labor or materials supplied by the first-tier subcontractor.


Payment of interest may be postponed when payment on the principal is delayed because of disagreement between the contracting agency and the contractor. Whenever a contractor brings formal administrative or judicial action to collect interest due under this section, the prevailing party is entitled to costs and reasonable attorney fees.


A contracting agency may reserve as retainage from any progress payment on a public improvement contract an amount not to exceed five percent of the payment. As work progresses, a contracting agency may reduce the amount of the retainage and the contracting agency may eliminate retainage on any remaining monthly contract payments after 50 percent of the work under the contract is completed if, in the contracting agency’s opinion, such work is progressing satisfactorily. Elimination or reduction of retainage shall be allowed only upon written application by the contractor, and the application shall include written approval of the contractor’s surety. However, when the contract work is 97.5 percent completed the contracting agency may, at the contracting agency’s discretion and without application by the contractor, reduce the retained amount to 100 percent of the value of the contract work remaining to be done. Upon receipt of a written application by the contractor, the contracting agency shall respond in writing within a reasonable time.


The retainage held by a contracting agency shall be included in and paid to the contractor as part of the final payment of the contract price. The contracting agency shall pay to the contractor interest at the rate of 1.5 percent per month on the final payment due the contractor, interest to commence 30 days after the work under the contract has been completed and accepted and to run until the date when the final payment is tendered to the contractor. The contractor shall notify the contracting agency in writing when the contractor considers the work complete and the contracting agency shall, within 15 days after receiving the written notice, either accept the work or notify the contractor of work yet to be performed on the contract. If the contracting agency does not, within the time allowed, notify the contractor of work yet to be performed to fulfill contractual obligations, the interest provided by this subsection shall commence to run 30 days after the end of the 15-day period.


(a) The contracting agency shall pay, upon settlement or judgment in favor of the contractor regarding any dispute as to the compensation due a contractor for work performed under the terms of a public improvement contract, the amount due plus interest at the rate of two times the discount rate, but not to exceed 30 percent, on 90-day commercial paper in effect at the Federal Reserve Bank in the Federal Reserve district that includes Oregon on the date of the settlement or judgment, and accruing from the later of:


The due date of any progress payment received under the contract for the period in which such work was performed; or


Thirty days after the date on which the claim for the payment under dispute was presented to the contracting agency by the contractor in writing or in accordance with applicable provisions of the contract.


Interest shall be added to and not made a part of the settlement or judgment. [2003 c.794 §150; 2005 c.103 §33; 2019 c.486 §1]

See also annotations under ORS 279.575 in permanent edition.

Notes of Decisions

Under Former Similar Statute (Ors 279.435)

In damage action for breach of contract to construct reservoir, where contractor-plaintiff claimed interest on balance withheld by water district, plaintiff was entitled to interest at rate in effect under this section at time of contract, rather than rate this section provided at time of judgment. Valley Inland Pac. Constructors v. Clack. Water Dist., 43 Or App 527, 603 P2d 1381 (1979)

Although interest on unreleased final payment is determined by this section, release of final payment is governed by contract. Contractors, Inc. v. Tri-Met, 94 Or App 392, 766 P2d 389 (1988), Sup Ct review denied

Trial court erred by awarding prejudgment interest under version of statute in effect when contract was entered, rather than amended version in effect at time of breach, and in adding prejudgment interest to judgment before computing post-judgment interest. Gilbert Pacific Corp. v. Department of Transportation, 110 Or App 171, 822 P2d 729 (1991), Sup Ct review denied

Attorney fees and costs on action to "collect interest due" are not available where action is brought to collect both principal and interest. Coats v. ODOT, 144 Or App 449, 927 P2d 108 (1996)

In General

Where city and contractor dispute amount owed under public improvement contract, interest is applied under ORS 279C.570 (9) upon resolution of dispute to judgment or settlement; interest does not simultaneously accrue under ORS 279C.570 (2) or (8). Big River Construction, Inc. v. City of Tillamook, 281 Or App 787, 386 P3d 19 (2016), modified 283 Or App 668, 391 P3d 996 (2017)

Atty. Gen. Opinions

Under Former Similar Statute (Ors 279.435)

Operative date of the Act concerning contracts and subcontracts, (1975) Vol 37, p 812; constitutionality of the Act, (1976) Vol 37, p 1269; constitutionality of the provisions, (1976) Vol 38, p 472


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Jun. 26, 2021