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Boost efficiency, transparency, and accuracy in proposal management to improve contract outcomes.
Charting Your Course to Success
From foundational knowledge to advanced leadership skills, NIGP offers a wealth of tools and resources to help you navigate your professional journey and achieve your leadership goals.
Your step-by-step guide to a successful career in public procurement.
Get 20% off by registering 60 days prior to the course start date.
All the tools to help you successfully prepare for certification.
NIGP and Sourcewell are dedicated to lifelong learning and professional development for every member.
Start your job search in the field of Public Procurement.
A Network of 18,000+ Professionals working in the field of Public Procurement.
As volunteers serve the Institute, the Institute serves the profession, and the profession serves society.
Each year, NIGP recognizes members who have achieved hallmark status in the eyes of their peers.
Fostering stronger relationships between suppliers and our members.
Kirk Buffington
What is retainage?
Retainage, or retention or holdback, is a common practice in the construction industry where a portion of payment, typically 5-10%, is withheld until a predefined milestone is achieved on a building project. Retainage has a long history in the industry and can apply to both general and subcontractors.
The Purpose of Retainage
Retainage, when properly utilized, is designed to address several issues inherent to construction and other critical projects:
Retainage offers several benefits for both owners and contractors.
Challenges
While retainage has advantages, the practice may cause additional burdens on the contractor.
Best Practices
As with so many things across the industry, it all comes back to the contract between the owner and general contractor.
Negotiate
The first and most important thing to make clear is that in most jurisdictions, retainage is negotiable. This implies that the owner and the general contractor must agree on the money retained before beginning a project. For example, an owner and contractor might decide to keep 10% of the payments until the job reaches 50% completion, after which they will reduce the retainage on progress payments to 5%.
Once parties agree on the use and amount of retainage, owners, general contractors, and subcontractors should next decide on where to hold the retained payments
Some jurisdictions limit the amount of money that may be retained on payments, how that money must be held, and which types of projects are allowed to use retention in the first place. For example, in Florida, the statute requires that retainage cannot exceed 5 (five) percent for the project's life.
To explore the laws around retainage in the United States, see Levelset's interactive map: Retainage Rules Across the United States.
The most essential thing governing the use of retainage on a project will always be the contract between the owner and the general contractor or that between the contractor and the subcontractor.
Kirk Buffington
The most essential thing governing the use of retainage on a project will always be the contract between the owner and the general contractor or that between the contractor and the subcontractor.
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