BUSINESS
How to Price Construction Retainage
Contractor method for calculating how much a retainage clause holds back from each payment.
Retainage is a percentage the client holds back from each draw to protect against incomplete work. The risk is that it quietly ties up cash flow, so price it and plan for it before the contract is signed.
THE SHORT ANSWER
How do you calculate construction retainage?
Multiply the amount billed to date by the retainage percentage. On a fully billed $250,000 contract at 10%, $25,000 accrues; if the contract releases half at substantial completion, $12,500 remains held.
Read the contract clause
Retainage rates differ by project and sector. Ten percent is common on commercial work, and many public and private clients hold it until substantial completion.
- Confirm the percentage
- Check when it releases
- Note any half-release milestone
Multiply the contract value
For a $250,000 contract at 10%, the total retainage is $25,000. The amount actually withheld rises with the billed portion, not the whole contract up front.
Apply the release schedule
If the fully billed contract releases half at substantial completion, the amount still held falls to $12,500. The remaining half releases under the contract's final-acceptance terms.
Plan cash flow around it
The retained balance is money you have already earned but cannot collect. Build it into your payment schedule and cover it with working capital or a clear drawdown plan. Use the Construction Retainage Calculator to see the numbers.