Retention is a portion of payment, typically 5-10%, that is held back until the project is completed. This ensures work quality and compliance with contract requirements before the contractor receives full payment.

How Retention Affects Project Cash Flow

Retention impacts both the Client and contractor’s cash flow. For clients, it ensures leverage to complete any outstanding work. For contractors, managing retention effectively is essential for maintaining positive cash flow throughout the project. Retention is released once all project deliverables are met and approved.

Best Practices for Managing Retention

Contractors should closely monitor the retention amount and ensure that all work is completed to quality standards. Maintaining good communication with clients to resolve any outstanding work will help ensure that retention is released promptly upon project completion.

Related Terms: Interim Payment, Progress Payment

FAQs

How much is typically retained in construction contracts?

A: Retention usually ranges between 5-10% of the contract value and is withheld until all project requirements are satisfied.

When is retention released?

A: Retention is typically released after the project is completed, and all work has been inspected and approved by the Client.

Retention Definition

How Retention Affects Project Cash Flow

Best Practices for Managing Retention

FAQs

How much is typically retained in construction contracts?

When is retention released?

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