Withholding of Funds from Construction Contract Progress Payments Purpose . This Policy Letter is intended to provide uniform policy guidance regarding the retention or withholding of funds from progress payments made under Federal construction contracts.
Most construction contracts provide for monthly progress payments to be made to contractors.
The progress payments are based on the contracting officer's estimate of the work completed by the contractor and the value of delivered materials. These regulations are subject to varying interpretations. Some agencies routinely withhold a percentage of each progress payment. Retainage should not be used as a substitute for good contract management, and contracting officers should not withhold funds without cause. Such decisions will be based on the contracting officer's assessment of past performance and the likelihood that such performance will continue.