Retention / Retainage
A percentage of payment withheld from each progress payment until project completion to ensure satisfactory work.
Definition
Retention (or retainage) is the practice of withholding a portion (typically 5-10%) of each progress payment to a contractor or subcontractor. The retained amount is held until the project is substantially complete and all punch-list items are resolved. It serves as financial incentive for project completion.
Why It Matters
Retainage protects project owners from incomplete work. However, it must be tracked carefully per subcontract and released according to contract terms to maintain subcontractor relationships.
Examples
10% retainage
Sub invoices $100,000 for work completed. GC pays $90,000 and withholds $10,000 (10%) as retainage.
Retainage release
At substantial completion, the accumulated retainage of $45,000 is released after final inspection and punch-list completion.
How Aequo AP Helps
Aequo Build calculates retainage from the subcontract rate when a subcontractor invoice is approved, tracks held, released, and remaining amounts by job and vendor, requires approval for partial or full releases, and keeps a release history where a release can be reversed with a reason.
Start Free TrialFrequently Asked Questions
What is a typical retainage percentage?
Most commonly 5-10% of each progress payment. Federal construction contracts cap it at 10% (FAR 32.103), many states cap it on public work, and rates may reduce after 50% completion.
When is retainage released?
Typically at substantial completion of the project, after punch-list items are resolved and final lien waivers are collected.
Category
constructionRelated Terms
Deep Dive Guides
Retention Tracking
Construction AP workflow and product guidance.
Retainage Calculator
Model retention on a contract the way AP actually has to track it: what has accrued on billings to date, what reduces at the completion milestone, and what remains to release at closeout.
retainage accounting
Construction AP workflow and product guidance.
retainage laws by state
Construction AP workflow and product guidance.
Retainage Management for AP Teams: Calculation, Tracking, and Release
How AP teams should run retainage: the calculation including reduction milestones, the ledger treatment that keeps retention out of AP aging, the release workflow, and the register that makes it auditable.
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