Retention in Construction: How Much Is Yours, and When Do You Actually Get It

Retention is the slice of every payment the client keeps back as security. Typically three to five per cent, half released at practical completion and half at the end of the defects period.

It is your money. It is held by someone with no incentive to give it back quickly, and a surprising amount of it is never collected at all.

The number most contractors cannot state

Ask a contractor how much retention is currently held against them, across all jobs, and watch how long it takes to get an answer.

On a business turning over five million at three per cent retention, roughly 150,000 is sitting with clients at any one time. That is not a rounding error — on many contractors it is more than the annual profit.

It is also the cheapest money you will ever raise, because you have already earned it.

Track it per job, with dates

Retention needs four fields per contract, and the dates matter more than the amounts:

• Percentage withheld, and the cap if there is one
• Amount held to date
• Date of the first release — practical completion
• Date of the second release — end of the defects liability period

The second date is the one that goes missing. Practical completion is an event everyone notices. The end of a twelve-month defects period, eighteen months after the site team moved on, is an event nobody is watching — and that is precisely why the second half is the half that gets lost.

Put both dates in a calendar the day the contract is signed, not the day the job finishes.

The signal worth setting

If retention held exceeds five per cent of your forecast final value, and there is no release date in the programme, that is a flag.

Either the percentage is wrong, the cap is not being applied, or the release dates were never recorded. All three are common and all three are worth an hour to fix.

Why it goes uncollected

Rarely because the client refuses. Usually because nobody asks.

By the time the defects period ends, the project manager has moved to another job, the commercial file is archived, and the client has no process that releases money unprompted. The sum sits on their balance sheet until somebody on your side writes an email, and often nobody does.

The second reason is defects. An open defect is a legitimate reason to withhold, and a single unresolved snag can hold the whole balance. Closing out defects properly is a cash flow activity, not an administrative one, and it is worth treating with the urgency that implies.

Where it belongs in your forecast

Retention should appear in your cash flow forecast as a receipt on its expected date, not as part of the valuation it was deducted from.

Modelling it as though it arrives with the payment is one of the most common ways a cash flow forecast turns out optimistic. The margin was right; the money just was not there when the forecast said it would be.

And if your contract allows a retention bond in place of cash retention, price it. Trading a few hundred in bond premium for tens of thousands in working capital is usually a straightforward calculation — it is just one that nobody makes, because it has to be made at tender stage when the cash pressure is still hypothetical.

The point

Retention is not a cost. It is your own money on deposit with someone else, usually for longer than the contract says and sometimes forever.

Track it per job, diarise both release dates at signature, and chase the second one. It is the highest return per hour available anywhere in construction commercial management, and it requires no negotiation at all — only that somebody remembers.