Contracts
Retainage
A percentage of each progress payment withheld by the owner until project completion to ensure the contractor finishes the work and corrects deficiencies.
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In the Field
Standard retainage is 10%, sometimes reduced to 5% at substantial completion. Retainage is the owner's leverage — it motivates the contractor to finish punch list items. Subs should push for retainage release tied to their own scope completion, not the entire project.
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Rule of Thumb
On a $1M contract with 10% retainage, you are effectively financing $100,000 of the owner's project throughout construction. Factor the cost of carrying retainage into your overhead and profit.