Contractor Talk - Professional Construction and Remodeling Forum banner
1 - 11 of 11 Posts

·
DPDT, Momentarily on
Joined
·
718 Posts
Discussion Starter · #1 ·
So I've been getting more work and quite a bit of rfp's from commercial builders. This is great since repeat business with many builders is a basic part of my business plan.

Most of the larger outfits I've worked with keep 10% of any invoice as retainage. I understand the idea, how it's leverage used to keep you around if a need arises.

The questions are:

Is retainage always released when C.O. is given, or held even longer till the GC is totally done and pulling off the job?

Is it released to all subs at one time, or case by case when a super or pm says your piece of the puzzle is complete?

Are there hard and fast rules most outfits follow, or is it a free for all where everyone does what seems to work for them?

If you were a sub how long would you wait to start asking for it? Or would you wait till C.O.'s are done before asking for it?

Thanks,
-Brian-
www.appironworks.com
 

·
Super Moderator
Joined
·
24,787 Posts
Most always the super, PM & don't forget the Architect will release payment if they consider you finished w/the job. On the other hand I've seen payment held until the archy closes out the job. I've also seen small subs plead their case & get the funds released. Info like this is generally included in the job spec book.
 

·
Registered
Joined
·
6 Posts
Retainage - Reply

App ironworks:

You can negotiate early release of retention with the GC before you sign the contract. When you bid the job, you should also negotiate for no more than 5% retention during the work (10% is ridiculous in most cases and some states even prohibit it; all of your profit is tied up in the retention when it's that high). When you reach a billing of 95% on your line items, write to the GC with a request for early release of retention. If the Owner pays the Contractor, you'll be paid. Make your case in that letter; state that you've installed according to Plans & Specs; you've passed all special inspections; you've maintained schedule; and you've submitted all qualifying documents. The GC won't have any reason to withhold your retention if the Owner pays it.

To answer your questions: Retention can and is held by owners all the time for reasons that don't relate to your work. When that happens, all the subs are affected. You have to secure your company's position prior to the subcontract being executed in order to have any power at all at getting your retention released.

It is rarely released to all subs at once; it truly is the "squeaky wheel" idea with most GCs; those subs who are diligent about asking for it get it. Those who don't end up waiting. Be aggressive; it's your money.

You don't have to wait until a Certificate of Occupancy to ask for it but depending on how the subcontract was issued, you may have to wait until the GC is paid by the Owner. Early finish subs often have a difficult problem since they're complete and gone well before (sometimes a year or more) the completion of the job. You should make sure you address this in a very real, very professional way early in your subcontract negotiation.

This is a very quick overview of your options but I hope it helps. BC52
 

·
DPDT, Momentarily on
Joined
·
718 Posts
Discussion Starter · #5 ·
If this is true for anyone, they are doing it wrong. They are either slow or paying their employees too much. My profit is way more than 10%.
Yup I keep more margin than that, too.
Anymore I've been adding the retainage amount to OH, in my estimating, so I stay covered. On the size projects I've been working so far it's not a lot of dollars.

None the less any retainage held does come out of profits till it's remitted.

-Brian-
www.appironworks.com
 

·
Registered
Joined
·
6 Posts
My answer wasn't meant to imply that 10% is ALL your profit. You should be making more than that but negotiating for a 5% retainage will benefit your profit line monthly rather than waiting until the end of the job. Cheers! BC52
 

·
Contractor
Joined
·
4,767 Posts
in my limited experience, it's always been 10% on large jobs over $5000 and held until job completion, which may include inspection by management to concur the project was completed to specifications.
 

·
Registered
Joined
·
200 Posts
In a lot of cases, it is the lender who is demanding 10% retainage. They usually hold it on the entire amount of the GC's contract. The industry standare AIA pay application (G701 I believe) allows for variable retainage,but it's not always up to the GC.

As noted however, this needs to be addressed in a contract before any work starts.
 

·
Registered
Joined
·
301 Posts
App ironworks:

(10% is ridiculous in most cases and some states even prohibit it; all of your profit is tied up in the retention when it's that high). 2

10% retainage is pretty common around here. Practically boilerplate on every commercial contract I've seen so far whether the GC is huge (like Hoffman) or much smaller.

That doesn't stop us from trying to negotiate a lower percentage, or getting paid out upon completion, but 10% is typical.
 

·
Registered
Joined
·
301 Posts
The questions are:

Is retainage always released when C.O. is given, or held even longer till the GC is totally done and pulling off the job?
Typically I've seen the retainer held until 30-60 days after the GC gets its final payment. So that's typically after the GC is 100% done and has pulled off the job.



Is it released to all subs at one time, or case by case when a super or pm says your piece of the puzzle is complete?
As has been stated, you can negotiate earlier release or a smaller percentage retained, but that's on an individual basis and will likely depend on your scope of work and your relationship with the GC.

If your scope of work is less than ten grand, then it's more likely you can negotiate an earlier release.

Are there hard and fast rules most outfits follow, or is it a free for all where everyone does what seems to work for them?
Around here, typically 10% and it is held until the GC gets final payment.

If you were a sub how long would you wait to start asking for it? Or would you wait till C.O.'s are done before asking for it?
You should negotiate it up front, and put it in your contract. We usually try to get the retainage down to 5% whenever possible.
 

·
FloridaFishin
Joined
·
27 Posts
Almost all major companies I have dealt with retain 10% From Wal-Mart to Advanced Auto. Government sometimes retains up to 18% on larger scaled projects.

When you submit your bid request that your retainage be paid within 30 days of delivery. Assuming you’re a supplier not an installer. If you are an installer you may have trouble asking for your retainage so early. I keep retainage until I have the CO.

You can negotiate a reasonable decrease of the held amount. If your bids good most GC’s will agree to whatever you want.
 
1 - 11 of 11 Posts
Top