The federal rule allows a maximum of 10 percent hold-back when progress is unsatisfactory, according to Acquisition.gov.
How much a public owner may hold back, in one paragraph
A public owner may withhold a portion of each payment, but the specific amount varies by the source governing the contract. The Acquisition.gov page for "52.232-5 Payments under Fixed-Price Construction Contracts" states that if satisfactory progress has not been made, the Contracting Officer may retain a maximum of 10 percent of the amount of the payment until satisfactory progress is achieved, according to Acquisition.gov. This provision is conditional on the status of the work; the page does not state a single fixed percentage for all circumstances. The same source also notes that progress payments shall not exceed 80 percent on work accomplished on undefinitized contract actions, according to Acquisition.gov. These figures apply to the specific federal contract clause named on that page. Other sources may print different percentages or release triggers. An estimator must identify which specific rule applies to the job before calculating the retainage line. Do not treat one government's rule as the rule for every job. The amount held back is not a profit margin or a change in bid markup. It is a temporary hold on funds. Check whether your project documents specify the exact percentage and conditions for your job. The federal page cited here provides one example of a cap and a condition. It does not cover every public owner in every state. When preparing a pay request, you must leave room for the hold-back specified in your contract. The hold-back reduces the amount of cash you receive in the current period. The total contract value does not change. The money is held, not forfeited. The release of that money depends on the conditions stated in the contract or the governing rule. For the federal clause cited, the condition is satisfactory progress. For other sources, the conditions may differ. You must read the specific page that applies to your contract. The percent held and the timing of release are distinct data points. One source may name a percent without naming a specific release day. Another may name a release trigger without a fixed percent. You must record both. Later sections list the specific caps and release triggers from the five sources discussed in this article. Each source is named with its specific page. The percent and the release timing are kept separate. This prevents blending different rules into one national percent. The federal 10 percent is tied to the condition of unsatisfactory progress. The federal 80 percent limit applies to undefinitized contract actions. These are two different rules on the same page. They serve different purposes. The 10 percent is a hold-back on progress payments. The 80 percent is a cap on the total progress payment amount for undefinitized actions. An estimator must understand which rule applies to the current pay request. If the contract is definitized, the 80 percent cap on undefinitized actions may not apply. If progress is satisfactory, the 10 percent hold-back may not apply. You must check the status of the contract and the progress of the work. The pay application screen in your estimating software does not replace the contract clause. It does not determine the legal amount of retainage. It is a tool for organizing your data. The contract clause is the legal authority. You must read the contract clause and the applicable rule. Then you must enter the correct percent in your pay request. The sections below provide the specific details for the five sources.
Key takeaways for read retainage caps before the next pay request
The federal rule allows a Contracting Officer to retain a maximum of 10 percent of the payment amount if satisfactory progress has not been made, according to Acquisition.gov. This hold continues until satisfactory progress is achieved. Minnesota law states that a public contracting agency may reserve retainage from any progress payment on a public contract for a public improvement in an amount not to exceed five percent of the payment, according to Minnesota Revisor of Statutes. The same Minnesota statute requires the agency to release all retainage no later than 60 days after substantial completion, subject to the terms of that subdivision, according to Minnesota Revisor of Statutes.
Washington law requires public bodies to reserve a contract retainage not to exceed five percent of the moneys earned by the contractor, according to Washington State Legislature. This reserve acts as a trust fund for the protection and payment of claims arising under the contract and state taxes. Oregon law notes that when contract work is 97.5 percent completed, the contracting agency may reduce the retained amount to 100 percent of the value of the contract work remaining to be done, according to Oregon Public Law. This reduction happens at the agency’s discretion and without application by the contractor.
The retainage percent each publisher names
The federal rule printed on Acquisition.gov sets a specific ceiling for holdbacks when progress is lacking. According to Acquisition.gov, if satisfactory progress has not been made, the Contracting Officer may retain a maximum of 10 percent of the amount of the payment until satisfactory progress is achieved. This 10 percent figure is the specific limit tied to the condition of unsatisfactory progress in that document. The same page also addresses payment limits for undefinitized contract actions. According to Acquisition.gov, progress payments shall not exceed 80 percent on work accomplished on undefinitized contract actions. This 80 percent cap applies specifically to work on undefinitized contract actions, distinct from the 10 percent retainage condition.
Moving to state-level rules, the Minnesota Revisor of Statutes provides a clear cap for public improvements. According to Minnesota Revisor of Statutes, a public contracting agency may reserve as retainage from any progress payment on a public contract for a public improvement an amount not to exceed five percent of the payment. The five percent figure here is the maximum reserve allowed from any progress payment under this specific statute.
Washington State Legislature rules also specify a five percent limit, but with additional context regarding trust funds. According to Washington State Legislature, public improvement contracts must provide, and public bodies must reserve, a contract retainage not to exceed five percent of the moneys earned by the contractor as a trust fund. This five percent reserve is designated for the protection and payment of claims arising under the contract and for state taxes, increases, and penalties. Furthermore, the same Washington statute addresses withholdings at lower tiers of the contract chain. According to Washington State Legislature, the contractor or subcontractor may withhold payment of not more than five percent from the moneys earned by any subcontractor or sub-subcontractor or supplier contracted with by the contractor to provide labor, materials, or equipment to the public project. This second five percent limit applies specifically to payments flowing from the prime contractor or subcontractor down to lower-tier suppliers and subs.
When comparing these figures, note that the federal 10 percent is conditional on progress status, while the 80 percent is a payment cap for undefinitized actions. The Minnesota and Washington rules both name five percent as the maximum retainage, but Washington specifies its use as a trust fund and extends a similar five percent withholding right to lower-tier payments. Each percentage is tied to the specific page and condition printed in the source. Do not blend these into a single national percent; each source prints its own limit for its own scope.
When retained money must be released
Release timing depends on the specific language printed in the governing statute for the project’s location. Depending on the source, retained money comes back through a release deadline, an agency's discretionary reduction, or a contractor's request for reduction. You must identify which rule applies to your contract before calculating the cash flow impact of the hold-back.
In Minnesota, the statute requires the public contracting agency to release all retainage within 60 days after substantial completion at the latest, subject to the terms of that subdivision, according to Minnesota Revisor of Statutes. This rule sets a fixed deadline tied to the milestone of substantial completion.
Ohio provides a two-stage release process. First, when the major portion of the project is substantially completed and occupied, in use, or otherwise accepted, and no other reason to withhold retainage exists, the retained percentages held for that portion, plus the interest accrued on them, are payable to the primary contractor within thirty days, according to Ohio Laws. The agency may withhold only that amount reasonably necessary to assure final completion of the project. Second, any retained funds withheld after substantial completion and pending final completion, along with accrued interest, shall be paid to the primary contractor not later than thirty days after the date of final completion of the project, according to Ohio Laws. This creates a final payment deadline tied specifically to the date of final completion, distinct from the earlier substantial completion payment.
Oregon lets the agency reduce or eliminate retainage as work progresses. As work progresses, a contracting agency may reduce the amount of the retainage and may eliminate retainage on any remaining monthly contract payments after 50 percent of the work under the contract is completed if, in the contracting agency’s opinion, such work is progressing satisfactorily, according to Oregon Public Law. After 50 percent of the work is completed, the agency may eliminate retainage on the remaining monthly payments if, in its opinion, the work is progressing satisfactorily. Additionally, when the contract work is 97.5 percent completed, the contracting agency may, at its discretion and without application by the contractor, reduce the retained amount to 100 percent of the value of the contract work remaining to be done, according to Oregon Public Law. This later trigger allows the agency to adjust the hold-back to match the remaining work value near the end of the project.
A filled reference table of retainage rules by publisher
The following table summarizes the specific retainage caps and release conditions printed on each cited source page. Each row lists the publisher, the exact percentage or threshold stated, the condition for release or reduction, and the source page where that rule appears.
Use this table to verify the specific cap printed in your contract against the source page.
How to read your contract beside these caps
Compare the specific clause in your contract against the limits printed on the cited source pages for your jurisdiction. Do not assume a single national rule applies to every project, as the amount a public owner holds back varies by source. Your contract clause is the primary document for your specific job.
In Washington, the contractor at any time may request the contract retainage be reduced to one hundred percent of the value of the work remaining on the project, according to Washington State Legislature. When reviewing your contract, check if it contains language that restricts this request or sets a different reduction schedule. The contractor may request that contract retainage be reduced to 100 percent of the value of the work remaining.
For Oregon projects, the rules include specific financial mechanisms that your contract should reflect. If the contract price exceeds $500,000, the contracting agency shall place amounts deducted as retainage into an interest-bearing escrow account, according to Oregon Public Law. Verify that your contract acknowledges this escrow requirement if the project value crosses that threshold. Additionally, the contracting agency shall pay to the contractor interest at the rate of 1.5 percent per month on the final payment due the contractor, interest to commence 30 days after the work under the contract has been completed and accepted and to run until the date when the final payment is tendered to the contractor, according to Oregon Public Law. This interest provision applies specifically to the final payment, not necessarily to progress payments, so your contract should distinguish between these payment types.
Do not treat a software field as a legal test for these rules. The pay-application screen in your estimating tool does not replace the contract clause or the statutory language. Use the tool to track the numbers, but rely on the contract and the cited pages for the legal requirements. If your contract includes a retainage percentage that differs from the statutory cap, verify the amount for your specific jurisdiction. The goal is to ensure your pay request accounts for the correct amount of retained money based on the actual contract terms and the applicable law.
A blank sheet for the retainage line on one pay request
Write these blanks on the pay request: percent held _ _, release timing _, page name , and date ___. Fill in the percent held, the release timing, the page name, and today's date. This worksheet helps you verify that the pay request aligns with the terms stated in the agreement.
Related guides
FAQ about retainage on a pay request
What is retainage on these pages?
Retainage functions as a hold-back from progress payments, serving as a mechanism for protection or ensuring satisfactory progress. On the federal Acquisition.gov clause, this hold-back remains in place until satisfactory progress is achieved.
Which percent does each page name?
The federal page names a maximum of 10 percent retainage when satisfactory progress is lacking, according to Acquisition.gov. The Minnesota statute specifies that a public contracting agency may reserve an amount not to exceed five percent of the payment as retainage, according to Minnesota Revisor of Statutes. Oregon pages say the agency may reduce retainage as work progresses and may eliminate it on remaining monthly payments after 50 percent completion if progress is satisfactory, may reduce the retained amount to 100 percent of the work remaining when work is 97.5 percent completed, and owes interest of 1.5 percent per month on the final payment.
When must it be released?
The Minnesota rule requires a public contracting agency to release all retainage within 60 days after substantial completion at the latest, subject to the terms of that subdivision, according to Minnesota Revisor of Statutes. The federal page ties the release of the 10 percent hold-back to the achievement of satisfactory progress, according to Acquisition.gov. Ohio pays the retained percentages for the substantially completed major portion within thirty days once it is occupied, in use, or accepted and no other reason to withhold exists, keeping back only what is needed to assure final completion, and pays any remaining retained funds not later than thirty days after final completion.
What is the 80 percent line about?
The 80 percent line limits progress payments on work accomplished on undefinitized contract actions, according to Acquisition.gov. This provision states that progress payments shall not exceed 80 percent on such work, regardless of other contract provisions, according to Acquisition.gov. It is a separate payment limitation distinct from the standard retainage hold-back.