Retainage
A percentage, commonly 5 to 10 percent, withheld from each progress payment and paid out only once the project reaches substantial completion, giving the owner leverage to make sure the contractor actually finishes the job.
Why it matters
Without it, a contractor could get paid nearly in full while a project is only mostly done, with little financial incentive left to finish the remaining, less profitable details. Retainage keeps a meaningful chunk of money tied to actual completion.
On a real project
A contractor bills $200,000 for a month's work, but the owner pays only $180,000; the other $20,000, 10 percent, is held as retainage and won't be released until the project reaches substantial completion.
Who this matters most to
A Project Manager has to plan cash flow around retainage being withheld throughout the entire project, then plan how to actually collect it at the end. A Contracts Administrator tracks exactly how much retainage is owed and pushes to make sure it's released promptly once it's earned.
Where this goes wrong
An owner keeps finding reasons to delay releasing retainage well after substantial completion, using it as leverage over unrelated, minor disputes. The contractor has already paid their subcontractors and suppliers in full months earlier, meaning the delay squeezes only the contractor's own cash flow while everyone they owed money to has already been paid.