A contractor completes $50,000 worth of work in a billing period. If the contract specifies 10% retainage, what amount should be requested in the payment application?
Correct Answer
C) $45,000
With 10% retainage, the owner withholds 10% of each payment until project completion. Therefore, $50,000 × 0.90 = $45,000 should be requested in the payment application, with $5,000 held as retainage.
Why This Is the Correct Answer
Retainage is a percentage of each payment that the owner withholds until project completion to ensure the contractor fulfills all obligations. When a contract specifies 10% retainage, the contractor can only request 90% of the work completed in each billing period. Therefore, from $50,000 worth of completed work, the contractor requests $45,000 while $5,000 is held as retainage. This protects the owner and ensures the contractor returns to complete any punch list items.
Why the Other Options Are Wrong
Option B: $55,000
This amount ($40,000) would represent 20% retainage, not the 10% specified in the contract. This calculation error would result in the contractor requesting $10,000 less than entitled.
Option D: $50,000
This amount ($50,000) represents requesting 100% of the work completed, which ignores the 10% retainage requirement entirely. The owner would reject this payment application as it doesn't comply with the contract terms.
Memory Technique
Remember 'R.A.P.' - Retainage Always Protects the owner. The contractor gets paid the work amount MINUS the retainage, never the full amount until project completion.
Reference Hint
Florida Building Code, Chapter 1, Section 107 - Fees and Permits, or contract administration sections dealing with progress payments and retainage
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