Is there a better way to retrieve your retainage faster??

[joedirt]

Just wondering if anyone had some ideas recovering there retainage faster? What I am getting at, we have done a couple of projects that take over a year from start to finish to complete. As we all know, the dirt contractor is first on site. Consequently, we dump a ton of money into the front end of the job and wait for over a year to receive our retainage. Granted our name is on the 287 page contract stating this is how we will be paid. Ultimately just trying to see if there are different angles to approach this problem or just bid accordingly and hope you are the successful bidder an can afford the waiting period. Thanks for your thoughts.

 

[dayexco]

i've heard of guys building in an extra value for the retainage into their bid...i've heard of allowing a 50% deduct on the retainage only if paid when your part of the job is completed/accepted...it's a PITA, i hate it myself. we're 2nd in line on projects, and what happens is they sit on your profit for a year. there's no reason why the owners of projedts, architects, engineers can't reduce that retainage down to 1-2% if you can provide lien waivers for all material/fuel/labor, etc...and the work has been completed, accepted.

 

[Big Iron]

It often depends on the project, whether or not it is a government or private, length of the project, dollar value, ect. If it is government there are some avenues that you can take, especially if you are a small business or minority contractor. these will require research and generally a lot of paper work, but can be very worth while.
We have negotiated with clients on particularly long projects to receive a percentage of the retainage upon substantial completion of a given line item; however it is usually done during contract negotiation before the project startup.
Typically retainage is in lieu of a bond on private projects (such as the $8m I am presently working on has a 10% retainage. (that’s a lot of dough over 2 years)) to cover any subs or work related issues. If you can get them to write off on a particular phase of the work and show that your subs have been paid it will be up to them to allow or disallow releasing a portion of the retainage (keep in mind the client will not want to give up the retainage that he is either collecting interest on or using to supplement he cash flow). You will have to show some advantage to him to entice him into releasing it, meabe in the form of some early payment reductions, such as a percentage off the bill for 10/20/30 day payment terms, ahead of schedule completion of certain line items, ect.
Like I said it is far better to get these things out of the way during contract negotiations so it is up front.

 

[joedirt]

Thanks for the ideas Big Iron / dayexco. I can honestly say I have one heck of a problem still today of not following through with the paper work. Like you mentioned, we would be way better off to get this up front as opposed to begging for it now. A heart felt warm hand shake doesn't mean didley squat any more.

Big iron I like the idea of approaching with an early pay incentive. We have done this in the past with regular draws or billing but never consider this for retainage.

Dayexco, you are dead right on the lien releases. Fortunately we have stayed up with our subs and vendors for every draw we have received. Maybe we can shove this in their face and continue to beg for our money.

Thanks again for the ideas.. If you need to contact me, I'll be down at the mission...:crying

 

[oisinirish]

I've found in many cases that if you are in regular contact with the owner and, if they have one,project manager one can usually negotiate release of at leastr part of retainage. Especially if materials installed costs are included in the total retainage calculation.
For instance if we purchase 200,000lf of pipe and get paid for "materials stored on site" then as these materials are installed, inspected and accepted I go for the reduction of retainage.
We ALWAYS garauntee workmanship for a minimum of one year past substantial completion so the owner doesn't feel lonely once we leave the site. This usually seems to help getting retainage released.
Also field drawings and as-builts kept up to date also make this process much easier.

I shudder to offer an incentive for someone to pay me what they contractually owe me. I

 

[Speedpup]

make the deal you want up front in the contract. Trouble is in many municipal masonry jobs I do the owner holds 5% until completed from the GC so they can't pay me unless I write the deal up front. These owners all want the warranty period from one year after acceptance. They get to use the build and the jerk the GC around for another year or more about a faulty door knob or other BS to extend their one year period of warranty. Really sucks!