Masonry Magazine January 1978 Page. 13
Construction Industry Study
Should Retainage Be Retained?
This article is adapted from a construction industry study conducted by Don J. Cosgrove, Ph.D., professor of psychology and management, Xavier University, Cincinnati, Ohio, for the Construction Industry Advancement Program of Greater Cincinnati. The program is administered by Allied Construction Industries. Xavier's Institute for Business and Community Services was the vehicle for the study. The Institute, in cooperation with the industry, has presented numerous seminars and short courses for construction industry personnel. MCAA is grateful to the Mason Contractors Association of Cincinnati and its official publication, The Cincinnati Constructor, for permission to reprint portions of this study.
THE STUDY GROUP
Architects 16
Business Agents 11
Suppliers 9
General Contractors 26
Mechanical Contractors 11
Construction Users (Owners) 20
Structural Engineers 5
Subcontractors 61
Others 2
Total...161
Note: In the tables shown in this article, the percentages do not always add up to 100%. For all questions there was a "no opinion" answer that could have been checked. Percentages for this answer are not shown.
One of the most lively topics of the study was that of retainage. People expressed strong feelings on this one. It was a topic frequently brought up in the interviews which preceded development of the questionnaire.
Whether people have positive or negative feelings toward retainage agreements depends upon which segment of the industry they represent. Thus, when architects and owners were asked how they felt about the "usual" retainage agreements found in contracts, they answered in the positive. Subcontractors, mechanical contractors and, to some extent, general contractors answered in the negative.
The results looked like this: "How do you feel about the usual retainage agreements found in construction contracts?"
Excellent Arch. Owners Subcontrs. Contrs. Contrs.
Acceptable 81 60 16 27 38
Unfair 13 10 44 36 35
Very Unfair 39 36 19
Eighty-seven percent of the architects and 65 percent of the owners felt that the usual retainage agreements are at least "acceptable." High percentages of subcontractors, mechanical contractors and general contractors felt that these agreements are "unfair" or "very unfair."
The explanation, of course, is clear. Owners and architects want to hold back a certain percentage of payment until they are satisfied that the finished job meets specifications.
Contractors, on the other hand, want better access to retainage dollars to help ease cash flow problems and to give their profit on jobs.
When relating the question specifically to subcontractors and using 10% to the end of the job as the retainage rate, the results came out about the same: "The typical retainage of 10% to the end of a job of subcontractors is an appropriate rate."
Mech. Gen'l
Strongly Agree Arch. Owners Subcontrs. Contrs. Contrs.
19% 5% 2% 23%
Agree 13 55 11 19
Disagree 56 20 20 18 31
Strongly Disagree 13 5 67 82 23
The one change in the picture here is with the architects where 69% of the group disagreed with the 10% rate to the end of a job for subcontractors. The other groups responded in about the same way as they did to the earlier question, with the mechanical contractors taking the most clear position against the retainage practice described in the question.
When the question is changed in still another direction, we finally move toward agreement among architects, owners and contractors. This is the situation in which a subcontractor has completed his work which is guaranteed and the general contractor has been paid. Here there is agreement that the subcontractors should be paid: "On guaranteed work, subcontractors should be paid in full when their part of a job is completed, if the owner has paid the general contractor."
Mech. Gen'l
Strongly Agree Arch. Owners Subcontrs. Contrs. Contrs.
38% 35% 85% 91% 38%
Agree 63 40 15 9 38
Disagree 15 15 15
Strongly Disagree 4
It should be noted that the vote was not unanimous. A few owners and general contractors did not agree that subcontractors should be paid in full under the circumstances described.
Should We Do Anything About Retainage?
Still another question asked was whether there is a need for general contractors to review retainage provisions to see whether they can be made more acceptable to subcontractors. Here the trend in response was generally positive, with the subcontractors and mechanical contractors, of course, most strongly supporting a review of retainage practices. This was the question: "How great is tire ncod for general contractors to review retainage provisions to see whether these can be made more acceptable to sub-