Retention protects the client — but the capital cost of that held-back money is real, and almost never tracked separately by contractors.
Retention money is the percentage of each bill (typically 5-10%) that clients withhold until the defects liability period ends, as security against defects. It is standard practice — but it is also capital that is unavailable to the contractor for months to years. Retention held is usually tracked as "money owed" in accounts receivable, not as a financing cost, so the opportunity cost of that locked capital rarely gets calculated or negotiated for.
A contractor with ₹1.2 crore billed and 8% retention held for 14 months at a 14% cost of working capital has over ₹1.25 lakh in pure financing cost on a single project — capital that a bank guarantee substitution, where available, would free up for a fraction of that cost.
Experienced contractors negotiate retention caps at tender stage, offer bank guarantees in lieu of cash retention where the client allows it, and track retention release dates against the contractual defects liability period to chase overdue releases immediately.
Experienced contractors negotiate retention caps at tender stage, offer bank guarantees in lieu of cash retention where the client allows it, and track retention release dates against the contractual defects liability period to chase overdue releases immediately.
Rebota's Billing module tracks retention held per invoice and flags amounts past their contractual release date, so overdue retention gets chased before it becomes a forgotten receivable.