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When a contractor wins a bid for a large construction project, some of the money immediately goes to fund the start of the project. A construction retention payment (also called retainage) is the amount of money held back until the project is complete.
The retention amount is usually a percentage of the contract value, commonly ranging between 5% and 10%. The exact rate is agreed upon in the construction contract and may vary based on the project’s size, complexity, and contractual terms.
The retained funds, often referred to as retention payable, are released once the project is deemed complete. This typically includes resolving any punch list items or defects and meeting all contractual requirements. In some cases, a portion of the retention may be released earlier, such as at the end of substantial completion.
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