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The amount that a construction company is owed but is not paid until a project is completed and passes muster with the client. Retainage is a form of quality control.
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Money withheld and not paid until completion of a project and inspection of the goods or services provided.Typically,10 percent of a construction contract price will be withheld until final inspection.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
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Larson said most of the money was withheld as "retainage."
Exhibit 1: Identifying the Complexity and Prioritization of Services Accounts Payable Complexity Priority Process Vendor Medium High Invoices Process Purchasing High High Card (P-Card) Transactions Process Retainage High Medium Payments Prepare and Medium Medium Distribute Vendor Payments Process Employee Low Low Expenses Process Credit Medium Low Notices, Voids, and Cancellations Prepare and Low Medium Distribute 1099 Statements
“North Carolina retainage laws are meant to protect subcontractors from the withholding of payment for their services, so it is important that those in the construction industry completely understand these laws.
If financial weaknesses are a factor, consider using two party checks for suppliers or holding back additional retainage. Perform more frequent quality inspections and enhance your communication with the sub.
Contracts may include a provision that allows one party to withhold a certain percentage of the total payment called for under the contract until a project is substantially complete; the amount withheld is commonly referred to as a retainage. Retainages are intended to address concerns that a contractor will not finish a project if full payment already has been made.
The state will return to Granite $4.5 million in "retainage fund" money that the transportation department has been keeping, because the job is now "concluded."
There are 4 general types of construction project disbursements: progress payments, retainage, bond payments, and final payments (Gould, Joyce 2002).
Reported sales volumes in the company's financial statements will be adjusted for retainage, including usage, line loss and stripping of condensate, which has historically been some 6% below produced volumes, Panoro Energy said.
Norse Energy's final production figures, to be reported in the financial statement for the first quarter of 2010, may deviate somewhat, because reported sales volumes will be adjusted for 12.5% royalty and fuel retainage, which has historically been averaging about 4%, the company said.
Keep a close eye on retainage (final payment held by the owner).
FAR 52.216-8, 9, and 10 is amended to promote the withholding of retainage on contracts under the premise that this encourages contractors to expedite the contract close process.