RETAINAGE
What is retainage in construction?
By DrawPrep editorial · Updated · 7 min read
Retainage is the portion of each progress payment held back until the work is complete. Here is how it is calculated, released and shown on a G702-style pay application.
KEY TAKEAWAYS
- Retainage is money earned but withheld from each progress payment until completion or another contract milestone.
- Rates are set by your contract; 5% to 10% is common, and some states and public owners cap or regulate it.
- On a G702-style summary, retainage is subtracted from work completed and stored to date before previous payments are deducted.
- Track retainage per line and per period so release requests reconcile cleanly.
What is retainage in construction?
Retainage is a portion of each progress payment that the owner or general contractor holds back until the work, or a defined part of it, is finished. It is money you have earned whose payment is deferred. It gives the paying party leverage to make sure punch-list work, closeout documents and warranties are delivered.
You will also hear it called retention or holdback. Owners typically retain from the GC, and GCs pass a matching retainage down to subcontractors through the subcontract.
What is a typical retainage rate?
Your contract sets the rate. Rates of 5% to 10% are common on commercial work. Some contracts reduce the rate once the job reaches a milestone, such as 50% complete, and many states and public owners limit retainage or set rules for when it must be released. Check your subcontract and any statute that applies to the project before assuming a rate.
How do you calculate retainage?
Retainage is the contract rate multiplied by the value of work completed to date. If your contract allows retainage on stored materials, apply the stored-materials rate to that amount as well.
Worked example (illustrative): a $200,000 subcontract with 10% retainage. Through period 3 you have completed $80,000 of work and have $10,000 of materials stored on site.
| Item | Amount |
|---|---|
| Completed and stored to date | $90,000 |
| Retainage at 10% | $9,000 |
| Total earned less retainage | $81,000 |
| Less previous certificates (periods 1-2) | $54,000 |
| Current payment due | $27,000 |
How do you bill retainage on a G702-style form?
On the G702 summary, line 4 reports total completed and stored to date. Line 5 shows retainage, split between completed work and stored materials. Line 6 is total earned less retainage. Subtract line 7, previous certificates for payment, to get line 8, the current payment due. Line 9, balance to finish including retainage, shows what is still owed on the contract.
If your contract uses different retainage rates by line, the G703 continuation sheet can carry a retainage column so each line's withholding is visible. See our line-by-line G702 and G703 walkthrough for every field.
How is retainage released?
Release terms come from the subcontract. Common triggers are substantial completion, final completion of the project, or completion and acceptance of your scope. Release is often requested on a separate, final pay application with closeout items such as final lien waivers, as-builts, O&M manuals and warranties. Set reminders for these milestones; retainage is easy to forget once crews leave the job.
Common retainage mistakes
- Applying a different rate from the one in the subcontract, or missing a rate reduction milestone.
- Calculating retainage on this period only instead of on work to date.
- Withholding on stored materials when the contract does not, or the reverse.
- Losing track of total retainage held across many projects.
DrawPrep calculates retainage per line from your project settings, flags a rate that changed from the prior application, and keeps the running total for every project. Explore how it works on the DrawPrep product page.
Track retainage by line and period with DrawPrep
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Frequently asked questions
- What is retainage in construction?
- Retainage (also called retention) is a percentage of each progress payment that the owner or GC holds back until the work, or a defined portion of it, is complete. It is earned money whose payment is deferred.
- How is retainage calculated?
- Multiply the retainage rate in your contract by the value of work completed (and, if the contract says so, stored materials) to date. For example, 10% of $80,000 completed to date is $8,000 retained.
- How do you bill retainage on a G702-style form?
- Report total completed and stored to date, subtract total retainage to get total earned less retainage, subtract previous certificates for payment, and the remainder is the current payment due.
- When is retainage released?
- Release terms come from your subcontract and applicable law. Common triggers include substantial completion, final completion, or completion of your scope, often with a separate release request and supporting waivers.
- Is retainage the same as a holdback?
- Yes. Retainage, retention and holdback generally describe the same practice of withholding part of a progress payment.
Billing guides by trade
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