PMI PMP Project Manager Certification

Answer: False - Retainage is a percentage of a payment withheld that is paid when the final work is completed. The retainage fee has technically been earned, but is not disbursed until the end of the project. In some cases, this is placed in escrow and earns interest. A retainer fee is typically not associated with the success of a project or based on achieving particular results. A retainer is often paid in a single, lump sum, or on an ongoing basis (typically monthly or quarterly).

Key Takeaway: Retainage is an effective way of providing a contractor an incentive to finish a project earlier. We wanted to include a specific question around the concept as we believe it is a good tool to use in your procurement process. This is a relatively common practice in the construction world where payments need to be made on an ongoing basis to fund both labor and materials.