What is the term used for the percentage of contract funds that an owner withholds until project completion?

The term for the percentage of contract funds that an owner withholds until project completion is known as retainage. This practice is commonly utilized to ensure that contractors fulfill all their obligations as per the contract, providing a financial incentive for them to complete the project satisfactorily. By withholding a certain percentage of the funds, the owner can protect themselves against potential issues with workmanship or unfinished work. Typically, the retainage amount is specified in the contract, and it is only released once the project is completed and has passed all inspections, ensuring that the contractor addresses any deficiencies or concerns.

Liquidated damages refer to a pre-determined amount that a contractor must pay the owner for each day that the project is delayed beyond its scheduled completion date, serving as a penalty for delays rather than a withholding of funds. Modifications are changes made to the original contract terms, and while they can affect the total contract price or scope of work, they do not pertain directly to withholding funds. Allowance typically refers to a predetermined amount included in a contract for specific materials or costs that may not be fully defined at the time of contract signing, which also does not relate to the concept of withholding funds upon project completion.