Subcontractors tend to bear the brunt of retainage provisions, especially subcontractors performing work early on in the construction process. The main reason for this, is because many contractors pass down the owner's right to withhold retainage to the subcontractor, but frequently withhold more than is being withheld from them. For example, a subcontractor performing site work may complete its work in the first few months of the construction project, but generally is not allowed to recover the amount withheld from the owner and contractor until the project is "substantially complete", which could take a few years depending on the size of the project. Coupled with a contingent payment clause, the retainage can cause significant financial distress to a subcontractor.
