Retainage exists to give the paying party leverage to make sure the work actually gets finished and punch list items get closed out. For the party being paid, it means a chunk of every invoice — and a chunk of that job's margin — doesn't show up until months after the work is done.
For subs running on a 10% margin, 10% retainage isn't a formality — it's the entire profit on the job sitting in someone else's account until final payment, with no guarantee it comes out on time.
Example
A sub bills $50,000 on a progress pay app. The GC pays $45,000 and holds $5,000 in retainage. That $5,000 doesn't arrive until the project reaches substantial completion — potentially months after the sub's crew has moved on to the next job.
Where this goes wrong on real jobs
Retainage held on thin margins isn't leverage for the sub — it's the whole profit, at risk until final payment.
“If you build in a 10% profit margin and your general contractor is withholding 10% retainage, stop kidding yourself. You are dependent on that retainage in order to make money on the job, and you shouldn't be.”
Related terms
Next step
Where this shows up in Datumel:
T&M Leak Audit$1,499 one-time
Where unbilled time-and-materials work leaks through your field documentation. Built for subs and foremen eating field changes that should be billed.