Retention, held then released in two halves

On a FIDIC Red or Yellow Book contract, retention is a percentage held back from each Interim Payment Certificate as security for the Contractor performance. On the multi-year programmes running under Vision 2030, the sums held can be very large, and the two release dates are the difference between financing your own security and getting it back on time.

How it is deducted

Under Sub-Clause 14.3 the Contractor deducts retention in the Statement at the percentage stated in the Contract Data, applied to the certified value of the Works. It accumulates certificate by certificate up to the retention limit set in the Contract. Once the limit is reached, no further retention is deducted, and the running total simply sits held until release.

The first half: at Taking-Over

Under Sub-Clause 14.9, when the Taking-Over Certificate is issued for the Works, the first half of the retention is certified and released. This is the point the Works are handed over and the Employer takes possession, so half the security is no longer needed. On a project handed over in sections, retention is released proportionately as each section is taken over, which is worth watching on a phased giga-project where sections complete months apart.

The second half: end of the Defects Notification Period

The remaining half is released after the Defects Notification Period expires and the Contractor has made good any notified defects. This is the balance of the security, held through the maintenance period against the risk of latent defects, and returned once that risk has run its course. The trigger is the expiry of the period, so the date is knowable from the Taking-Over date and the length of the Defects Notification Period in the Contract Data.

Why the dates get missed

• The first half. Released against the Taking-Over Certificate, which is a document event, so it depends on the certificate actually being issued and processed.
• The second half. Released on the expiry of a period that may be a year or more after Taking-Over, long after the site team has moved on to the next job.

The discipline

Record the retention held to date on every certificate, diary the Taking-Over date for the first release, and diary the Defects Notification Period expiry for the second. On a long Saudi contract the second half is the money most often left uncollected, purely because the release date falls after everyone has stopped looking at the job.