A project requires the contractor to submit monthly payment applications. The contract value is $500,000, and 60% of the work is complete. If the contract includes 10% retention, what is the amount due to the contractor?
Correct Answer
B) $270,000
Work completed = $500,000 × 0.60 = $300,000. With 10% retention held: $300,000 - ($300,000 × 0.10) = $300,000 - $30,000 = $270,000. Retention is held until project completion.
Why This Is the Correct Answer
The correct answer is A) $270,000 because it properly calculates the payment due after retention. First, we determine the value of work completed (60% of $500,000 = $300,000). Then we subtract the 10% retention that the owner holds back ($300,000 × 10% = $30,000). The contractor receives $300,000 - $30,000 = $270,000. Retention is a standard practice where owners withhold a percentage of each payment until project completion to ensure contractor performance.
Why the Other Options Are Wrong
Option C: $300,000
This amount doesn't correspond to any logical calculation in the retention process and appears to add rather than subtract retention.
Option D: $450,000
This represents 90% of the total contract value rather than 90% of the completed work value, ignoring that only 60% of the work is actually complete.
Memory Technique
Remember 'CPR': Complete work value, then subtract Percentage Retention. Think 'Complete first, Retain second' - you can't retain what hasn't been completed yet.
Reference Hint
Florida Building Code Chapter 1, Section 105 - Permits and Construction Documents, or AIA Contract Documents regarding payment procedures and retention
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