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Last edited 15 Aug 2018
Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount due and retained by the client. Half of the amount retained is released on certification of practical completion, and the remainder is released upon certification of making good defects. The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract.
Holdback is the same contractual mechanism as a retention; a proportion of the final payment is ‘held back’ from the contractor until the client is satisfied that the works have been completed to the specification.
In some countries, more than one holdback can be applied. For example, in Canada, a basic holdback may be retained form the total project cost, released after practical completion. A finishing may then be retained from the value of the work left to be done, released after project completion.
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