Discuss the effect of a monthly retain age percentage on bot

Discuss the effect of a monthly retain age percentage on both the owner and contractor organization in terms if cash flow and risk management???

Solution

Effect of a monthly retain age percentage on both the owner and contractor organization

Proponents argue that it provides financial protection for the owner and ensures performance while imposing minimal financial hardship on contractors. Opponents submit retainage reduces competition and increases project cost, provides a financial disincentive for timely completion of the work, and places a severe financial hardship upon contractors and subcontractors.

Impact on Construction Cost
Proponents of a reduction or elimination of retainage argue that retainage reduces competition and increases the cost of construction.

Impact on Performance(risk management)
Intuitively most owners can rationalize the relationship between retainage and price, but even with the increase in cost many believe that retainage affords a needed level of financial protection to ensure contractor performance.