A project has a contract value of $2,500,000 with 10% retainage. After the contractor submits Application for Payment #8 requesting $180,000, how much should the owner pay if all previous payments have been made correctly?
Correct Answer
A) $162,000
The owner should pay 90% of the requested amount due to 10% retainage. $180,000 × 0.90 = $162,000. The remaining $18,000 is held as retainage until project completion.
Why This Is the Correct Answer
When a contractor submits an application for payment, the owner withholds the retainage percentage from that specific payment request. Since the contract specifies 10% retainage, the owner pays 90% of the requested amount regardless of previous payments or total contract value. The calculation is straightforward: $180,000 × 0.90 = $162,000, with $18,000 held as retainage.
Why the Other Options Are Wrong
Option B: $180,000
This would mean paying 100% of the requested amount without withholding any retainage, which violates the contract terms that specify 10% retainage must be withheld from each payment.
Option C: $198,000
This amount ($198,000) is actually 110% of the requested payment, which makes no sense as it would mean paying more than what was requested and is mathematically impossible under normal payment procedures.
Option D: Cannot determine without knowing total work completed
The total work completed is irrelevant for this calculation because retainage is applied to each individual payment request, not based on cumulative work completion or remaining contract balance.
Memory Technique
Think 'R.A.P.' - Retainage Applied to Payment request. Each payment gets 'rapped' by the retainage percentage, reducing what you actually receive.
Reference Hint
Florida Building Code, Chapter 1, Section 107 - Fees and Permits, or AIA A201 General Conditions Article 9 - Payments and Completion
More Contract Admin Questions
A project experiences a 30-day delay due to unusually severe weather. The contract includes a liquidated damages clause of $1,000 per day for delays. If the weather delay is excusable but not compensable, what liquidated damages apply?
A commercial project requires a total of 12 inspections. The building department charges $85 per inspection for the first 5 inspections, $65 for inspections 6-10, and $45 for any additional inspections. What is the total inspection fee?
What document must be posted at the job site before a Certificate of Occupancy can be issued for a commercial building?
A mixed-use development requires a variance for reduced setbacks. The property is located within 500 feet of a hospital. What additional consideration must be addressed?
A LEED project requires tracking of regional materials. Materials are considered regional if they are extracted, harvested, or recovered, as well as manufactured within what distance of the project site?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Project Management
60 questions · 70% to pass