{"id":435,"date":"2023-07-25T07:21:38","date_gmt":"2023-07-25T07:21:38","guid":{"rendered":"https:\/\/dudleyboys.xyz\/adil\/?p=435"},"modified":"2024-06-12T11:45:38","modified_gmt":"2024-06-12T11:45:38","slug":"retainage-101-what-contractors-must-know","status":"publish","type":"post","link":"https:\/\/dudleyboys.xyz\/adil\/retainage-101-what-contractors-must-know\/","title":{"rendered":"Retainage 101: What Contractors Must Know"},"content":{"rendered":"<p><img decoding=\"async\" class='wp-post-image' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2019\/11\/Screenshot_6.jpg\" width=\"257px\" alt=\"retainage in construction\"\/><\/p>\n<p>Sometimes, contractors have to retain a higher amount from subcontractors and suppliers to cover the cost of retainage applied to them. For example, if the contract stipulates five payments of $10,000 with a 5% retention rate, then $500 will be retained from each payment. Contractor retainage has been around for over 100 years in the US to safeguard owners and employers. The aim is to incentivize contractors to complete a job to the specified standard. You can also look into subcontractor performance bonds or retainage bonds as a unique alternative to traditional retainage. Subcontractor performance bonds are a special agreement  between a subcontractor and a surety.<\/p>\n<ul>\n<li>Project owners did this to ensure that full payment was only released upon completion of quality work.<\/li>\n<li>So, a retention contract also provides funds for the owner to employ someone else to finish the job.<\/li>\n<li>Some states have set limitations on how much can be withheld, and that can vary depending on whether it\u2019s a public project or a private project.<\/li>\n<li>So, how can you mitigate the impact construction retainage has on your finances?<\/li>\n<li>As a result, they are frequently required to wait for milestones or entire completion before being paid.<\/li>\n<li>The goal of this process is to\u00a0ensure an accurate completion of a construction project by a contractor or subcontractor.<\/li>\n<li>As the project progresses, the retainage percentage affects the payment schedule.<\/li>\n<\/ul>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_69 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #282828;color:#282828\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #282828;color:#282828\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/dudleyboys.xyz\/adil\/retainage-101-what-contractors-must-know\/#Be_the_first_to_get_billing_tips_industry_news_and_Siteline_updates_%E2%80%94_just_for_subs\" title=\"Be the first to get billing tips, industry news, and Siteline updates \u2014 just for subs.\">Be the first to get billing tips, industry news, and Siteline updates \u2014 just for subs.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/dudleyboys.xyz\/adil\/retainage-101-what-contractors-must-know\/#Are_you_ready_to_unlock_more_working_capital_for_your_business\" title=\"Are you ready to unlock more working capital for your business?\">Are you ready to unlock more working capital for your business?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/dudleyboys.xyz\/adil\/retainage-101-what-contractors-must-know\/#Decoding_Construction_Documents_Tools_Techniques_Best_Practices\" title=\"Decoding Construction Documents: Tools, Techniques &amp; Best Practices\">Decoding Construction Documents: Tools, Techniques &amp; Best Practices<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/dudleyboys.xyz\/adil\/retainage-101-what-contractors-must-know\/#Retention_Bonds_%E2%80%93_An_Alternative_to_Waiting_for_Retainage\" title=\"Retention Bonds \u2013 An Alternative to Waiting for Retainage\">Retention Bonds \u2013 An Alternative to Waiting for Retainage<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/dudleyboys.xyz\/adil\/retainage-101-what-contractors-must-know\/#Haryana_Code_on_Wages_Rules_2021\" title=\"Haryana Code on Wages Rules 2021\">Haryana Code on Wages Rules 2021<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/dudleyboys.xyz\/adil\/retainage-101-what-contractors-must-know\/#Retainage_the_law\" title=\"Retainage &amp; the law\">Retainage &amp; the law<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Be_the_first_to_get_billing_tips_industry_news_and_Siteline_updates_%E2%80%94_just_for_subs\"><\/span>Be the first to get billing tips, industry news, and Siteline updates \u2014 just for subs.<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>It is meant to serve as a financial incentive and an assurance that the contractor will complete the project in a satisfactory manner. Substantial completion is when a job has been sufficiently completed to the owner and\/or contract specification and the owner can use it for their intended purpose. Substantial completion could have specific items which might need to be met to happen like a permanent certificate of occupancy. Many projects will have a contractor bill retainage upon project completion or \u201csubstantial completion\u201d.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Are_you_ready_to_unlock_more_working_capital_for_your_business\"><\/span>Are you ready to unlock more working capital for your business?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div style='text-align:center'><iframe width='564' height='314' src='https:\/\/www.youtube.com\/embed\/vtpZ23SwIUg' frameborder='0' alt='retainage in construction' allowfullscreen><\/iframe><\/div>\n<p>This type of flow does not work well for many contractors because you are waiting for substantial completion on a job and different trades finish at different times on the same project. On the other hand, some projects may keep retainage until the project is substantially completed. Others may demand that funds be released at the conclusion <a href=\"https:\/\/www.bookstime.com\/articles\/retainage-in-construction\" target=\"_blank\" rel=\"noopener\">retainage in construction<\/a> of the project. Clients can sometimes specify that retainage is withheld indefinitely, even after the project is completed. Traditionally, owners will hold retainage until the contract has been fully executed. A satisfied contract, however, doesn\u2019t mean retained money will hit your bank account as soon as the project ends.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Decoding_Construction_Documents_Tools_Techniques_Best_Practices\"><\/span>Decoding Construction Documents: Tools, Techniques &amp; Best Practices<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>In an attempt to remedy poor performance, project owners came up with the practice of retainage\u2013withholding a portion of what is owed to a contractor for work performed until the contract is complete.<\/li>\n<li>Here are some forms and legal notices you may need to stay ahead on retainage.<\/li>\n<li>If stated in the contract, withheld percentages can also change throughout the project.<\/li>\n<li>Negotiate if you feel that the retainage percentage and terms are going to cause a cash crunch or make day-to-day operations difficult.<\/li>\n<li>MT Copeland offers video-based online classes that give you a foundation in construction fundamentals with real-world applications, like an introduction to construction law.<\/li>\n<\/ul>\n<p>Most contracts stipulate that retention is paid at final completion, once the punchlist work has been finished and the owner has moved in or taken ownership of the project. On large projects this final payment can be quite substantial, so it is in the contractor\u2019s best interest to finish the project quicklyso they can get paid. Legal advice may be necessary to navigate these rules effectively, especially in complex projects or  when disputes arise. This is especially true because the rules are very specific and vary from state-to-state and job-to-job.<\/p>\n<p><img decoding=\"async\" class='aligncenter' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2021\/10\/b40fd262-40d5-4d69-8e8b-9fa631eec595-400x300.jpg\" width=\"251px\" alt=\"retainage in construction\"\/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Retention_Bonds_%E2%80%93_An_Alternative_to_Waiting_for_Retainage\"><\/span>Retention Bonds \u2013 An Alternative to Waiting for Retainage<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>However, the most important thing governing the use of retainage on a project is always going to be the contract between the owner and the general contractor, or that between the contractor and the subcontractor. In the high-stakes world of construction finance, there are various arrangements and payment mechanisms that are specific to the industry. The PCC is considering whether these options could provide better transparency about retainage for companies in the construction industry. Sign up for early access today and see how you can simplify your construction accounting process. If you have any questions or concerns, it\u2019s critical to address them before signing a new contract. Don\u2019t hesitate to clarify things with your legal department or a qualified construction law attorney \u2013 you\u2019ll thank yourself later.<\/p>\n<ul>\n<li>It is meant to serve as a financial incentive and an assurance that the contractor will complete the project in a satisfactory manner.<\/li>\n<li>It\u2019s no secret that the construction industry is one of the toughest when it comes to managing cash flow.<\/li>\n<li>To protect your firm, you should insist on payments being released as soon as the project is completed, if not sooner.<\/li>\n<li>You can\u2019t get paid until you provide all of your close-out documents.<\/li>\n<li>To make you informed and ready for discussion, we provide you with an overview of the retainage specifics by location.<\/li>\n<\/ul>\n<p><img decoding=\"async\" class='aligncenter' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2021\/08\/4eb7d63f70.jpg\" width=\"251px\" alt=\"retainage in construction\"\/><\/p>\n<p>Clients may include these requirements in the contract to ensure that they are satisfied with the final product. If a chunk of work has not been finished or has been completed erroneously, retainage may be withheld after the project is completed. In these discussions, iron out payment timelines and unique details like earning interest. Try to negotiate a lower percentage and shortened timeframes if you can. Or advocate for a variable retention rate that eliminates retainage at an agreed-upon milestone, such as 50% complete.<\/p>\n<p><img decoding=\"async\" class='aligncenter' style='display: block;margin-left:auto;margin-right:auto;' src=\"https:\/\/www.bookstime.com\/wp-content\/uploads\/2021\/03\/717e4742-8b43-4259-8c79-543a1e342fb5-300x200.jpg\" width=\"258px\" alt=\"retainage in construction\"\/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Haryana_Code_on_Wages_Rules_2021\"><\/span>Haryana Code on Wages Rules 2021<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"Retainage_the_law\"><\/span>Retainage &amp; the law<span class=\"ez-toc-section-end\"><\/span><\/h2>\n","protected":false},"excerpt":{"rendered":"<p>Sometimes, contractors have to retain a higher amount from subcontractors and suppliers to cover the cost of retainage applied to them. For example, if the contract stipulates five payments of $10,000 with a 5% retention rate, then $500 will be retained from each payment. Contractor retainage has been around for over 100 years in the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[125],"tags":[],"class_list":["post-435","post","type-post","status-publish","format-standard","hentry","category-bookkeeping"],"_links":{"self":[{"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/posts\/435"}],"collection":[{"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/comments?post=435"}],"version-history":[{"count":1,"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/posts\/435\/revisions"}],"predecessor-version":[{"id":437,"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/posts\/435\/revisions\/437"}],"wp:attachment":[{"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/media?parent=435"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/categories?post=435"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dudleyboys.xyz\/adil\/wp-json\/wp\/v2\/tags?post=435"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}