Alaska prompt payment act and retainage rules

On an Alaska public construction contract, the state or political subdivision must pay the prime within 30 calendar days of a compliant pay request (21 days after grant or federal money arrives on funded jobs). The prime must pay subs within 8 working days after it is paid, and late amounts carry interest at the state legal rate of 10.5 percent a year. Alaska is unusual in one respect: the public owner pays interest on retainage while it holds it. The statute is written for public work; private jobs run on the contract.

Owner payment deadlines on public work

AS 36.90.200 gives the state or a political subdivision 30 calendar days from receipt of a pay request that complies with the contract. Two exceptions shorten the clock but shift the trigger. If a political subdivision is paying with grant money, or the state is paying with federal money, it has 21 calendar days from the request or from the day it actually receives the money, whichever is later. That matters on rural water, airport, and road projects where federal reimbursement can lag. Two coverage limits apply to local owners: the section does not apply to contracts of a political subdivision with a population under 800, and under AS 36.90.265 the article reaches a political subdivision contract when the subdivision has a written contract with the state to fund the work. On a city or borough job, check the funding agreement before you count on these deadlines.

If part of a payment will be withheld for unsatisfactory work, or the request does not comply with the contract, the owner has 8 working days to say so in writing, stating specifically why and what remedial actions will free up the money. A notice that misses those requirements starts interest running from the eighth working day. Once the contractor fixes the problem, the withheld amount is due within 21 calendar days. Under subsection (b), if the prime is not paid on time, interest on the unpaid amount runs from the 21st calendar day after the required payment date.

Flow-down to subcontractors and suppliers

AS 36.90.210 does not just set a deadline. It requires the prime and every sub to put specific clauses in their subcontracts. The prime must pay the sub for satisfactory performance within 8 working days after receiving the payment the sub is to be paid from. A sub must flow the same 8 working day term to its own vendors and lower tiers. Working days exclude Saturdays, Sundays, and state holidays, so a payment received on a Thursday before a long weekend gives you more calendar time than it first looks.

• Late progress payments: interest at the AS 45.45.010(a) rate from the day after the required payment date until paid.
• Withholding from a sub: allowed for unsatisfactory performance if the subcontract permits it, but the prime must send a written notice (AS 36.90.240) stating the amount, the specific causes, and the remedy, and copy the contracting officer.
• After the fix: the prime pays within 8 working days of the correction. Skip the notice and interest runs from the eighth working day.
• Retainage to subs: within 8 working days after final payment from the owner or after the notice period under AS 36.25.020(b) expires, whichever is later.

Because the sub's clock starts when the prime receives payment, the statute builds in a pay-when-paid timing structure. It does not address whether a pay-if-paid clause could shift the risk of owner nonpayment entirely to the sub. Treat any such clause as a contract issue and read pay-if-paid vs pay-when-paid clauses explained before signing.

Retainage on Alaska public jobs

AS 36.90 does not cap the retainage percentage. The contract sets it. What the statute does is make holding money cost the owner something. Under AS 36.90.250, the state or a political subdivision pays the prime interest on retainage, including warranty retainage, at the 10.5 percent legal rate, from the date the pay request is approved until the date of payment. Political subdivisions with a population of 500 or less are exempt. The prime, in turn, must pay its subs interest on retainage it withholds from them.

Here is how that plays out. Say a mechanical sub on a $3,000,000 school renovation has $45,000 in retainage held from approved pay apps over the job. If that money sits for a year after approval, the interest at 10.5 percent is roughly $4,725, and the sub is entitled to its share. Track approval dates per pay app, not just the running retainage balance, or you cannot calculate what you are owed.

Private projects and state purchases

AS 36.90.200 to 36.90.290 is written for public construction and public works. No statewide prompt payment statute for private construction turned up in the Alaska Statutes reviewed for this page, so on a private job the payment schedule, retainage percentage, and release trigger come from the contract. Negotiate them. Your fallback is lien rights, covered in Alaska mechanics lien law. Separately, AS 37.05.285 sets a 30 day payment rule with 1.5 percent monthly interest for general state purchases of goods and services, but it expressly does not apply to contracts covered by AS 36.90.200 to 36.90.290, and it excludes purchases over $500,000.

Related Alaska guides

See Alaska contractor license requirements and Alaska prevailing wage for the other rules that shape a public bid. The prompt payment act glossary entry explains the concept in general. Smart Business Automator records approval dates and retainage on every pay app, which makes the interest math above a report instead of a spreadsheet project; see construction accounts receivable automation.