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Retainage: Dollars and $ense That Don't Add Up

Jun 1, 2000 12:00 PM, By EC&M Staff

Imagine how your dentist would react if you told him or her, prior to an appointment, that you were not planning on paying the bill until you were convinced the dental work was "defect-free." Using common sense, most people would either skip that appointment or be concerned about how their teeth would feel the next day!

Yet in the construction industry, the practice of customers holding back funds until work is "defect-free," or until some other performance-related criterion is met, continues to be very common. When compared to the scenario above, the "dentist" is a subcontractor or prime contractor and the "patient" is a prime contractor or owner. However, unlike the worried dental patients, many prime contractors and owners show up for their "appointments" still expecting subcontractors or prime contractors to perform work at the same level of quality. What happened to common sense? Shouldn't prime contractors and owners worry they will not receive the quality results they desire and deserve when they withhold funds?

The American Subcontractors Association (ASA), Alexandria, Va., is campaigning to inject common sense into the debate over the practice of "retainage" or "retention" in the construction industry. The campaign, "Retainage: Dollars and $ense That Don't Add Up," aims at educating private companies, legislators, and government agencies about the real effects of this practice.

What do contractors think? In a 1999 ASA national survey of subcontractors, results showed subcontractors not only dislike the practice of retainage, but they also consider it a self-defeating and ineffective way of assuring project quality and completion. While elimination of retainage is the association's goal, ASA believes reduced retainage levels can be an intermediate step in states where the issue is being seriously addressed for the first time.

You can get more information by calling ASA's Government & Industry Relations Department at (703) 684-3450, ext. 333.

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