What is the term for the funds withheld from a contractor until the project is completed?

The term for the funds withheld from a contractor until the project is completed is retainage. Retainage is commonly used in construction contracts to ensure that the contractor has a financial incentive to complete the project according to the agreed-upon specifications and timeline. By withholding a percentage of the payment, typically a small amount of the total contract value, the owner or project manager can ensure that the contractor remains invested in the quality and timely completion of the work. Once the project is satisfactorily completed and any necessary inspections are passed, the retained funds are then released to the contractor.

In contrast, a deposit refers to an upfront payment made before work begins, a contingency is often a budgeted amount set aside for unexpected costs, and escrow involves holding funds by a third party until certain conditions are met, which is different from the specific context of retainage in construction projects. Each of these financial mechanisms plays distinct roles in contractual agreements, but retainage specifically pertains to the withholding of payment until project completion.