Can a prime contractor hold retention on a federally funder project if thier contract is not subject to retention? What subpart is that located?

4 months ago

our customer is withholding retention on 2 federal projects because it was in a contract we doc u signed and did not catch, but we also have 2 additional contracts with them were retention is not be held. I am asking them to release our retention, just need the link-proof to send to them to prove my point.

Senior Legal Associate Levelset

Great question. On a federal construction project, if retainage is set out in the contract between a contractor and their sub, the contractor is entitled to withhold retainage pursuant to that agreement. So, withholding retention is allowed, but it can only be done to the extent allowed by the contract. Plus, a contractor who’s using retainage on federal projects should be careful about how they’re billing the public agency, as Levelset discusses in this article: Can Contractors Withhold Retainage on Federal Construction Jobs? In some situations, the False Claims Act might come into play.

In a situation where there’s no retainage allowed in a contract between a contractor and their sub for a federal job, withholding retention is generally not allowed. Payments should be made in accordance with the contract for work. And, as discussed in that above article, a contractor could run into real liability if they’ve been billing the public agency in full but failing to release proper payments down the payment chain.

If you’ve got other questions about federal construction projects, here are some resources that might be helpful:
(1) Getting Paid on Federal Construction Projects – 3 Things You Must Know
(2) The Presence of Federal Funds Doesn’t Automatically Trigger the Miller Act
(3) The Miller Act: What You Need to Know and How to Make a Claim
(4) Working on Federal Jobs? Better Know Your Certified Payroll Requirements

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