What is retainage is the question a small contractor asks on the first draw that comes back short, and the answer is arithmetic before it is anything else: retainage is the percentage of each payment the contract lets the owner hold back until the work is complete, as security that it will be finished and the defects made good. It is stated in the contract, applied to every draw, accumulates over the job, and is released at completion or in the stages the contract names. This page works it on the hub's own example, a $450,000 contract at 10%, says how it accumulates and is released, and points at the free schedule-of-values draw on this site that works each period's payment with the retainage held, with no account.
Retainage on one draw: the worked period
The contract is $450,000 and 35% complete; 20% was billed before; $12,000 of materials are stored on site; retainage is 10%. Work to date is $157,500; with stored materials, $169,500; less the $90,000 billed before, this period's work is $79,500. Retainage on this period at 10% is $7,950, and the current payment due is $71,550. The AIA G702 application and certificate for payment, linked below, is the form those lines are set out on, with the retainage shown against the work completed and against the stored materials separately where the contract treats them differently; the schedule-of-values draw on this site works the same lines from the same five inputs.
How retainage accumulates across the job
Each draw's retainage is added to the last: after the 20% billed before, $9,000 was held; after this period, $16,950; and if the job bills evenly to completion the total held reaches $45,000, 10% of the contract, before release. A contract that caps retainage, holding 10% until half the work is complete and nothing thereafter, changes the arithmetic from that point: the held figure stops growing at $22,500 and the later draws are paid in full. The record of every draw is what makes the held total a lookup rather than a reconstruction, and the construction project billing software guide on this site says what that record must keep.
When retainage is released, and what the contract says about it
Retainage is released when the contract says: at substantial completion, at final completion after the punch list, or in stages as parts of the work are accepted, and often less a further holdback for the items still open. The release is a draw of its own, billing the held total against the completed schedule of values, and it is the last money on the job. The rules on how long an owner may hold retainage and on what terms are set by state statute for public and sometimes private work; this page works the arithmetic and refers the rule itself to the statute and the contract, which is where a contractor's attorney reads it.
Retainage down the chain: the subcontractor's draw
A general contractor holds retainage on subcontractors' draws in the same way, usually at the same percentage the owner holds on the general, so that the money held above is matched by money held below. A subcontractor's schedule of values is the sub's part of the general's, and the sub's pay application is worked exactly as the general's: contract sum, work to date, previously billed, this period, retainage held, payment due. The free schedule-of-values draw on this site works either, and the paid plan keeps the subcontractors' draws against the project alongside the owner's, so the held totals on both sides are on record.
Questions people ask about what is retainage
What is retainage in construction?
The percentage of each draw the contract lets the owner hold back until the work is complete, as security for completion and defects. On a $450,000 contract at 10%, a $79,500 period bills $71,550 and $7,950 is held.
How much retainage is held over a whole job?
The percentage times the contract if it is held throughout, $45,000 at 10% on $450,000; less if the contract caps it after a stage, $22,500 if it stops at 50% complete.
When is retainage released?
When the contract says: at substantial or final completion or in stages as work is accepted, often less a holdback for open items. The release is billed as its own draw against the completed schedule of values.