NASCLA Accredited Commercial General ContractorGeneral RequirementsHard
A commercial general contractor is managing a project with a total contract value of $5,000,000. The contract specifies a 10% retainage to be held from each progress payment. If the contractor has completed 60% of the work and submitted progress payment applications totaling $3,000,000, how much retainage has the owner withheld to date?
- A$300,000
- B$600,000
- C$180,000
- D$500,000
Show answer & explanationAnswer & explanation
Correct answer: A. $300,000
Retainage is calculated as a percentage of the value of the work completed. If the contractor has completed $3,000,000 worth of work, and the retainage rate is 10%, then the retainage withheld is 10% of $3,000,000, which equals $300,000. The total contract value is not directly used in calculating retainage to date, only the value of work completed.
Why the other options are wrong
- B. This would be 20% of the completed work, or 10% of $6,000,000. Incorrect calculation.
- C. This would be 6% of the total contract, or 10% of $1,800,000 (if 60% of 3M was used). Incorrect calculation.
- D. This would be 10% of the total contract value, which is not yet fully earned.
Retainage
A portion of the agreed-upon contract price that is deliberately withheld until the work is completed to the satisfaction of the owner.
- Typically 5-10% of progress payments.
- Protects the owner against incomplete or defective work.
- Released upon substantial completion or final acceptance.
Memory trick: Money held back until the job is truly done.