A lump sum project price is $160,000 with 10% retainage. The contractor has received progress payments for 75% of the project. The final payment amount should be for?

A lump sum project price is $160,000 with 10% retainage. The contractor has received progress payments for 75% of the project. The final payment amount should be for?

• A. More than $50,000
• B. About $40,000
• C. Less than $30,000
• D. Exactly $60,000

Answer: (A)

Retainage mechanics drive the final payment. When a contract includes a 10% holdback, the owner pays progress payments for work completed but keeps 10% of those payments until project completion. So, with 75% of the work finished, the value of work done is 0.75 of the contract price, which is 120,000. The owner would have actually paid 90% of that amount (retaining 10%), so the money already paid to the contractor is 108,000, and 12,000 is still held as retainage. What remains to be paid for finish is the value of the unfinished portion: 25% of the contract price, which is 40,000. When the project ends, the retained 12,000 is released, so the final payment combines the remaining work value with the release of retainage: 40,000 + 12,000 = 52,000. Thus the final payment should be 52,000, which is more than 50,000.

Retainage mechanics drive the final payment. When a contract includes a 10% holdback, the owner pays progress payments for work completed but keeps 10% of those payments until project completion. So, with 75% of the work finished, the value of work done is 0.75 of the contract price, which is 120,000. The owner would have actually paid 90% of that amount (retaining 10%), so the money already paid to the contractor is 108,000, and 12,000 is still held as retainage.

What remains to be paid for finish is the value of the unfinished portion: 25% of the contract price, which is 40,000. When the project ends, the retained 12,000 is released, so the final payment combines the remaining work value with the release of retainage: 40,000 + 12,000 = 52,000.

Thus the final payment should be 52,000, which is more than 50,000.