Understanding Retention in Construction: Purpose, Process, and Significance
In the complex world of construction, there are various financial mechanisms and practices that play a crucial role in ensuring the successful completion of projects. One such mechanism is retention in construction, often referred to as "retention money." Retention is a financial tool employed in construction contracts to safeguard project quality, encourage performance, and manage risk.
In this comprehensive blog article, we will delve deep into the concept of retention in construction, explore what retention money means, understand its purpose, discuss its importance in the field of construction, and examine its proper processes. Furthermore, we will highlight the advantages and disadvantages associated with retention in construction.
What Is Retention in Construction?
Retention, in the context of construction, is a common practice where a portion of the contract sum is withheld by the client or principal (usually the project owner or developer) from the contractor for a specified period after the completion of the construction project.
This withheld sum is known as "retention money." The primary objective of retention is to ensure that the contractor fulfils its contractual obligations and delivers a project that meets the agreed-upon quality standards.
领英推荐
What is Retention Money in Construction?
Retention money, also known as retentions, is the specific amount of money withheld from each progress payment made to the contractor during the construction project. This money is typically calculated as a percentage of the contract sum and is intended to serve as a financial security mechanism.
The retained funds are not released to the contractor immediately upon project completion. Instead, they are held for a defined retention period, which can vary depending on the terms of the contract. During this retention period, the contractor's performance and the quality of the completed work are monitored closely.
The Purpose of Retention Money in Construction
The primary purposes of retention money in construction are multi-faceted and include: