Magazine article Business Credit

Four out of Five Subcontractors Say Retainage Isn't Effective

Magazine article Business Credit

Four out of Five Subcontractors Say Retainage Isn't Effective

Article excerpt

A recent ASA survey shows that a large majority of construction subcontractors believe that the practice of retain age is not an effective means of ensuring that project work is completed to an owner's or prime contractor's satisfaction.

Out of 592 surveys that were returned to ASA Headquarters by ASA members in November and December, 80 percent responded "no" to the question: "Is retainage an effective means of getting you to return to a job to handle a punch list or other problems?" Only 17 percent of respondents answered "yes." Three percent had no opinion. The survey was sent to 5,500 ASA members to gauge opinion about retainage, which is a widespread practice in the construction industry.

Owners and prime contractors commonly include retainage provisions in contracts, which permit them to with-hold a portion of funds due to their contractors until they have completed a specified portion of work. Some owners and prime contractors say that the withholding of funds, also known as "retention" in some parts of the country, provides an incentive for contractors to complete work according to contract requirements. …

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