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 commitments on your construction project's will vary, here's an example to show how sliding scale retention typically works:
- Let's assume you are a main 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. As such, you want to deduct 10% of the amount due on each payment application until 5% of the original commitment value ($20, 000.00) is held back.
- When 100% of the work on the subcontract's Bill of Quantities (BOQ) is complete, you are obligated to release the first portion of the amount held back. In this example, you want to hold back 2.5% of the £20,000.00 (or £10,000.00).
- In six (6) or twelve (12) months after the first portion of the retention amount was released, your subcontract's terms requires you to release the remaining $10,000.00 that was withheld from the subcontractor.