Study explains payment ‘myths'
ALEXANDRIA, Va. - On some large, time-consuming construction projects, owners will sometimes make partial payments to general contractors during the process.
In order to ensure that the project is up to standards, some owners employ the practice of "retainage," which holds a percentage of payment until the project is completed.
According to the American Subcontractors Association Foundation, this widespread practice "reduces competition and increases the cost of a project," including general contractors increasing contract prices by 2.2 percent, and inducing subcontractors to increase contract prices by 3.6 percent. These figures are part of a new study released by FASA, "Retainage Practice in the Construction Industry," by Dennis Bausman, Ph.D., an assistant professor in the Construction Science & Management Department at Clemson University.
"The Foundation of ASA hopes that ‘Retainage Practice in the Construction Industry' will be a major contribution to the body of knowledge on retainage," said foundation President Richard Warner. "The study reveals the perceptions of retainage by different parties, and explores alternatives to retainage as it exists now. It dispels some of the myths about retainage, such as that retainage does not influence project relationships or that there is no substantial float time between the general contractor's receipt of subcontractor retainage and payment to the subcontractor."
The study is available for purchase by logging on to www.contractorknowledgenetwork.org.