What is sliding scale retention?
The sliding scale retention feature was designed for Procore users in Australia and New Zealand—where it is an industry-wide best practice and legally regulated standard—to assure contractors and subcontractors meet all of the job's contractual obligations. However, this feature is available to Procore Project Financials customers in all countries.
Sliding scale retention refers to the portion of a contract amount due that is withheld from a contracted party (the party doing the work) by the contracting party (the party paying for the work). The amounts withheld are based on a set of variable standards defined in the contract's scope of work. It is an industry-wide best practice in Australia, as well as legally regulated, to assure contractors and subcontractors meet all of the job's contractual obligations.
Example: Applying Sliding Scale Retention in Procore
Although the terms of the retention on your construction project's contracts will vary from contract to contract, below is an example to show how sliding scale retention is designed to work:
- Let's assume you are a general contractor who has executed a $400,000.00 subcontract with a heavy equipment operator.
- During the course of the project, you plan to make progress payments to the subcontractor. Per your agreement, let's assume you have an industry-standard contract that obliges you to deduct 10% of the amount due on each subcontractor invoice until 5% ($20,000.00) of the original subcontract's value ($400,000.00) is held back.
- When 100% of the work on the subcontract's Schedule of Values (SOV) is complete, your agreement obliges you to release the first portion of the amount held back. In this example, you would want to release the first 2.5% ($10,000.00) of the original subcontract's original value ($400,000.00).
- In six (6) or twelve (12) months after the first portion of the retention amount was released, your subcontract's terms require you to release the remaining 2.5% ($10,000.00) withheld from the subcontractor.