ABSTRACT
Retention funds are widely accepted because they are a familiar and usual element of most standard-form contracts. They were found in 77% of the projects surveyed. They are generally about 3% of contract value. The cost to the contractor of operating under a retention fund is, in theory, the loss of interest on the money withheld, i.e. around 0.2% of the contract value per year of the contract. But main contractors often off-set their retentions by holding a corresponding retention from their sub-contractors. The survey revealed that the lost interest is not considered significant. More important is the long time for payment, especially for subcontractors whose work is early in the project, and the strong possibility that subcontractors will not be paid their retentions.
