Retainage is the practice applied by general contractors of holding back a specified portion of a subcontractor’s payment until it has been determined that the job is complete and is acceptable. However, subcontractors say it often withholds their money for an extended period of time and can cause cash flow problems for them.
According to David Mendes, director of communications for the American Subcontractors Association (ASA), few subcontractors feel that retainage is what pushes them to finish a job and to get it right. “Four out of five say that retainage is not a motivating factor,” stated Mendes. Perform-ance bonds, he noted, are a more effective means of ensuring proper completion of a subcontract.