Category: Contracts & management
Prepared by Eng. Ahmed Fathy, Projects Manager ·
Definition
Retention is a percentage deducted from each payment and held by the owner as security for remedying defects; part is released at handover and the rest after the defects period.
Why it matters on a project
It hits the contractor's cash flow directly, so release dates are tracked as a separate financial item.
Measurement and pricing
Set in the contract as a percentage of each payment.
Worked example
A 500,000 SAR payment with 10% retention: 50,000 SAR is held and 450,000 paid.
Common mistake
Forgetting to claim release of retention after the defects period ends.
Frequently asked questions
Is there a cap on retention?
Contracts usually cap it at a percentage of the contract value, after which deductions stop.
When is retention released?
Part at taking-over and the rest after the defects period and repairs, per the contract.
Related terms
- Payment application (IPC)A periodic payment request based on approved progress and executed quantities.
- Defects liability periodThe period after handover during which the contractor must repair defects at its own cost.
- Handover certificateA document evidencing the client’s acceptance of the works and start of the defects period.
- As-built drawingsDrawings updated to match what was actually built, handed over in the close-out file.
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