Retainage in construction
In the United States, retainage is an amount of money withheld from progress payments to ensure that the construction work is completed. It acts as an incentive for the supply chain to fulfil all of their obligations under a contract, and provides a reserve of money to be drawn on if they do not complete and have to be replaced. The UK equivalent is known as ‘retention’.
Clients can retain money from main contractors who can in turn retain money from subcontractors who can retain from sub-subcontractors, and so on.
The amount of retainage varies according to the project and the region but it is calculated as a percentage of each interim payment. Typically 5-10%, the exact amount, and conditions for its release, can be negotiated between owners, contractors and subcontractors prior to signing contracts. Public projects often require retainage to adhere to state laws.
Whilst retainage is usually only a small portion of the payments made as the work is carried out, it can amount to a sizeable total value that can be a strong incentive to complete. However, it also creates cash flow problems for the supply chain, and can take a long time to release. As a result retainage has come under some criticism.
It is important that retainage is a fair amount, and that it is equitable, that is, that the amount withheld from subcontractors by the main contractor should not be greater than the amount withheld from the main contractor by the client. In addition, clients should release the retainage promptly once the work has been completed and accepted; and similarly, the main contractor must make prompt payment of the retainage to subcontractors.
In some contracts, the percentage of retainage will decrease as the work progresses to reflect the fact that the likelihood of failure to complete has also decreased. If payments are not made promptly, interest may be charged.
As an alternative to retainage, the contractor may deposit securities, and any interest accrued is then paid to the contractor.
[edit] Related articles on Designing Buildings Wiki
- Building codes.
- Construction supply chain payment charter.
- Contract sum.
- Final account.
- Holdback.
- Interim certificate.
- Mechanic’s lien.
- Miller Act.
- Practical completion.
- Retention.
- Retention held in trust fund.
- Right to payment.
- Stop work order.
- Subcontractor default insurance (SDI).
- Substantial completion.
- Surety.
- The problems with retention.
Featured articles and news
Plumbing and heating for sustainability in new properties
Technical Engineer runs through changes in regulations, innovations in materials, and product systems.
Awareness of the Carbon Border Adjustment Mechanism
What CBAM is and what to do about it.
The new towns and strategic environmental assessments
12 locations of the New Towns Taskforce reduced to 7 within the new towns draft programme and open consultation.
Buildings that changed the future of architecture. Book review.
The Sustainability Pathfinder© Handbook
Built environment agency launches free Pathfinder© tool to help businesses progress sustainability strategies.
Government outcome to the late payment consultation, ECA reacts.
IHBC 2025 Gus Astley Student Award winners
Work on the role of hewing in UK historic conservation a win for Jack Parker of Oxford Brookes University.
Future Homes Building Standards and plug-in solar
Parts F and L amendments, the availability of solar panels and industry responses.
How later living housing can help solve the housing crisis
Unlocking homes, unlocking lives.
Preparing safety case reports for HRBs under the BSA
A new practical guide to preparing structural inputs for safety cases and safety case reports published by IStructE.
Male construction workers and prostate cancer
CIOB and Prostate Cancer UK encourage awareness of prostate cancer risks, and what to do about it.
The changed R&D tax landscape for Architects
Specialist gives a recap on tax changes for Research and Development, via the ACA newsletter.
Structured product data as a competitive advantage
NBS explain why accessible product data that works across digital systems is key.
Welsh retrofit workforce assessment
Welsh Government report confirms Wales faces major electrical skills shortage, warns ECA.
A now architectural practice looks back at its concept project for a sustainable oceanic settlement 25 years on.
Copyright and Artificial Intelligence
Government report and back track on copyright opt out for AI training but no clear preferred alternative as yet.
Embedding AI tools into architectural education
Beyond the render: LMU share how student led research is shaping the future of visualisation workflows.
Why document control still fails UK construction projects
A Chartered Quantity Surveyor explains what needs to change and how.
Inspiration for a new 2026 wave of Irish construction professionals.
New planning reforms and Warm Homes Bill
Take centre stage at UK Construction Week London.