ABSTRACT
Retention is a contractual mechanism whereby a proportion of all payments made to the contractor is held back by the employer until a later stage in the contract. It is important to appreciate that retention is money which the contractor has earned, in the sense that it is part of an agreed stage payment or an interim payment based on the value of work completed. According to the survey carried out for this research, the typical scenario is for retention to be set at 3%. Usually, one-half of this will be released when the works achieve practical completion and the remainder paid after the expiry of the maintenance or defects liability period. It is usual for the contract to provide that the employer may have recourse to accumulated retention money in satisfaction of any claims against the contractor (e.g. for liquidated damages in the event of failure to complete the works on time).
