Business FinancesQuestion 1149 of 1605
The primary purpose of retention (retainage) on a construction contract is to:
a.Increase the contractor's profit
b.Fund the contractor's overhead
c.Pay the sales tax on materials
d.Give the owner security that the contractor will complete the work and correct defects
Explanation
Retention is a percentage of each progress payment withheld by the owner as security that the contractor will finish the job and fix any punch-list or defective work. It is released after satisfactory completion, often after the lien period.
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Related questions on this topic
- In addition to the license bond, a qualifying individual who serves as RMO/RME for a licensee generally must file what?
- A contractor's bond is a form of surety bond. This means:
- An owner withholds 10% retention on a $40,000 progress billing. How much does the contractor receive on that billing?
- On most California public works projects, retention withheld by the public entity is generally limited to a maximum of:
- A contractor completes a $250,000 job on which the owner withheld 10% retention throughout. Assuming no deductions, how much retention should be released at closeout?
- Progress billing (progress payments) means the contractor:
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)