Dec. 6, 2004: Study Says Retainage Increases Costs
ALEXANDRIA, Va. - A study published by the Foundation of the American Subcontractors Association (FASA) concludes that the practice of retainage, widespread in the construction industry, "reduces competition and increases the cost of a project," inducing general contractors to increase contract prices by 2.2 percent, and inducing subcontractors to increase contract prices by 3.6 percent.
These effects of retainage are "in harmony with economic theory," noted Dennis Bausman, Ph.D., assistant professor in the Construction Science & Management Department at Clemson University, author of "Retainage Practice in the Construction Industry." The study also finds that retainage negatively impacts project relationships, and that there is support within the industry for changes to current retainage practice.