Construction Retainage and Cash

Estimated reading time: 1 minute

AIA’s payment guidance separates completed value, retainage and prior payments. Its release guidance says partial release depends on project requirements.

Fictional contractor model: previously recognized work totaled $100,000, with $10,000 retained and $90,000 paid. That payment is already spent.

Now cumulative work reaches $160,000. Assume the parties validly authorize reducing total retained funds to $8,000. No stored materials, change orders, disputed amounts, taxes or other adjustments apply.

Cumulative payable value is $160,000 − $8,000 = $152,000. Subtracting $90,000 previously paid leaves $62,000 for this period, not $152,000.

Reconcile it another way: $60,000 of new work plus $2,000 released from earlier retainage equals $62,000. The release is not new work or an increase in contract price.

Assume that payment arrives before $65,000 of project bills, with only $2,000 opening cash. Available cash is $64,000, leaving a $1,000 funding gap.

Confirm the retained amount, certification and receipt date before planning borrowing. Arithmetic does not authorize release or guarantee payment. This original exercise is not an AIA form.