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Construction progress payments and retainage.



Construction contracts generally embody em·bod·y  
tr.v. em·bod·ied, em·bod·y·ing, em·bod·ies
1. To give a bodily form to; incarnate.

2. To represent in bodily or material form:
 a unique and complicated system of payment for work completed, consisting of progress payments coupled with retainage. Industry form contracts and general practice call for the general contractor A general contractor is an organization or individual that contracts with another organization or individual (the owner) for the construction of a building, road or any other execution of work or facility.  to receive periodic payments (usually monthly) based upon the percentage of work actually completed on the project. Progress payments are sometimes tied to completion of specific phases of work, e.g. first payment upon completion of site grading. This system allows the owner to hold the contractor continuously accountable for the work schedule, permits the contractor to pay for materials and labor as they are consumed, and allocates the risk of breach between the parties.

Retainage is used to protect the owner against liens, claims, or defaults. Retainage is merely the withholding of a small percentage of each payment made to the contractor under the contract. Retainage has become the norm rather than the exception in most construction contracts. Retainage being held in favor of the owner is generally released, in whole or in part, when the project, reaches certain pre-specified levels of completion. Retainage is generally released upon substantial completion of the project, less estimated cost for incomplete items. Contracts generally provide that retainage must be released to the contractor when the project engineer certifies the project is substantially complete, minus any minor items that need correction. This gives the project engineer wide latitude latitude, angular distance of any point on the surface of the earth north or south of the equator. The equator is latitude 0°, and the North Pole and South Pole are latitudes 90°N and 90°S, respectively.  in determining when retainage should be released. Failure to make timely payments due under a construction contract is a breach on the part of the owner. The contractor is not without recourse A phrase used by an endorser (a signer other than the original maker) of a negotiable instrument (for example, a check or promissory note) to mean that if payment of the instrument is refused, the endorser will not be responsible.  for non-payment.

The federal practice was to withhold with·hold  
v. with·held , with·hold·ing, with·holds

v.tr.
1. To keep in check; restrain.

2. To refrain from giving, granting, or permitting. See Synonyms at keep.

3.
 ten percent of payments to the contractor until the project was fifty percent complete, whereupon where·up·on  
conj.
1. On which.

2. In close consequence of which: The instructor entered the room, whereupon we got to our feet.
 the contract officer could then release either part or all of the retainage to the contractor in his discretion. The federal practice now is not to withhold retainage for those contractors exhibiting good past performance histories in job completion. State agencies, with the exception of the Arkansas Highway and Transportation Department, withhold ten percent of the progress payments as retainage until the project reaches fifty percent completion, and not withhold any additional retainage after that time.

Retainage may be required by statute, or it may be permissible per·mis·si·ble  
adj.
Permitted; allowable: permissible tax deductions; permissible behavior in school.



per·mis
 but capped at a maximum percentage. Specific progress payment dates and retainage amounts may be negotiated in private contracts. The goal of negotiation should be to fairly allocate the risk of default between parties.

By Charles Darwin "Skip" Davidson

DAVIDSON LAW FIRM

Cantrell at State

Little Rock, Arkansas Little Rock, Arkansas

required military intervention to desegregate schools (1957–1958). [Am. Hist.: Van Doren, 556–557]

See : Bigotry
 72203

374-9977

www.davidsonlawfirnl.net
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Title Annotation:A PUBLIC SERVICE OF DAVIDSON LAW FIRM
Author:Davidson, Charles Darwin "Skip"
Publication:Arkansas Business
Date:Jul 7, 2008
Words:422
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