Western Australia · retention

Retention on Western Australia subcontracts: what's normal, and what to watch

The market-normal position across the subcontracts we've analysed is retention of 5% of the contract sum - typically 10% of each payment until the cap is reached - with half released at practical completion and the balance at the end of the defects liability period. Drafting that holds 10% overall, ties release to the head contract, or restarts the defects period on every rectification is where subcontractors' money gets stuck.

The market position

Median retention in the contracts we've analysed is 5% of the subcontract sum. Ten per cent overall - the position some contracts open with - is double the market and worth pushing back on by that fact alone; subcontractors have negotiated it to 5%, or to two 2.5% bank guarantees in place of cash retention, on exactly that argument.

The stronger ask isn't always the percentage - it's the instrument. Bank guarantees keep the cash in your business; unconditional ones can still be called, but they beat cash deductions for cash flow on every job.

Release: where the real risk hides

Two clauses quietly extend retention past what the percentage suggests. Release tied to the head contract - "on practical completion under the Head Contract" - makes your money wait on a project completion you don't control. And a defects liability period that restarts whenever you rectify a defect can hold the final tranche years past the stated end date.

The positions to ask for: release keyed to your own practical completion and your own DLP, a fixed outside date regardless of rectifications, and release on request rather than on the builder's initiative.

The WA angle

WA's 2021 Act phases in a retention trust scheme for contracts under the new regime - check whether your contract date brings you inside it.

Two regimes run in parallel: contracts entered into from 1 August 2022 sit under the 2021 Act (East Coast model), while older contracts stay under the Construction Contracts Act 2004 with its 90-business-day adjudication window - the contract date decides which set of rules you're under.

From the Australian Subcontract Index - live data

median retention · n=34

From 54 subcontracts analysed to date · see the full Index

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Frequently asked questions

Is 10% retention normal on a WA subcontract?

It appears in opening drafts, but it's double the market: median retention across the subcontracts we've analysed is 5% of the contract sum. The 10%-of-each-payment mechanic is normal; the overall cap is what to negotiate.

When does retention have to be released?

When your contract says - which is exactly the problem with drafting tied to the head contract or to a restarting defects period. Market position: half at your practical completion, the balance at the end of your own defects liability period, with a fixed outside date.

Keep reading

How much retention is normal on an Australian subcontract? →Bank guarantees on a subcontract - what should I check? →What does the defects liability period actually oblige me to do? →How long can a builder take to pay a subcontractor in Western Australia? →Time bars in Western Australia subcontracts: what you lose, and when →How adjudication works in Western Australia →Not being paid in Western Australia: when can you lawfully stop work? →Variations on Western Australia subcontracts: getting changed work paid →

General information for Australian subcontractors, not legal advice. Statutory deadlines change and have exceptions - verify against the Act and current guidance, or with a construction lawyer, before acting on them.