Construction glossary term


Retention is a common practice where a certain percentage of the contract value is withheld by the client as a form of security against defects, equipment failures, or possible non-compliance with agreed-upon contract terms or standards. Typically, a retention percentage may vary from 3% to 5% of the total contract value and is usually paid back only after the completion of the project or after addressing defects. Retentions ensure that contractors perform their work to a satisfactory standard and meet all their obligations under the contract.

This practice is perceived as a risk management tool by clients, contractors, and subcontractors. It is also believed to motivate the contractor to deliver work at a higher quality and minimize disputes and conflicts. Retentions can have a financial cost, affect cash flow, and are often the subject of controversy between parties. Therefore, the fair and effective implementation of retention mechanisms is essential in promoting trust and positive relationships between project stakeholders.

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