The contract retainage cap you must check before sending the final bill is five percent on public improvement contracts, as specified in RCW 60.28.011.
Key takeaways for how much of a construction payment can be held back as retainage
- Washington State caps the reserve on a public improvement contract at five percent.
- Florida Statutes section 255.078 allows a public entity to withhold an amount not exceeding 5 percent of each progress payment on a construction services contract, according to The Florida Senate .
- Minnesota Statutes section 337.10 sets a five percent cap for retainage on a building and construction contract, according to Minnesota Office of the Revisor of Statutes .
- The federal fixed-price construction payments clause permits a Contracting Officer to retain a maximum of 10 percent of a payment only if satisfactory progress has not been made, according to Cornell Law School .
- That same federal clause limits progress payments to 80 percent on work accomplished on undefinitized contract actions, according to Cornell Law School .
What retainage cap to read before you send the final bill
Public improvement contracts must provide, and public bodies must reserve, a contract retainage not to exceed five percent of the moneys earned by the contractor, according to Washington State Legislature . This five percent reserve functions as a trust fund for the protection and payment of claims arising under the contract, according to Washington State Legislature . The reserve also covers the state with respect to taxes, increases, and penalties imposed pursuant to Titles 50, 51, and 82 RCW which may be due from the contractor, according to Washington State Legislature . This rule applies specifically to public improvement contracts and does not set a cap for private repair invoices, according to Washington State Legislature .
When you bill a construction job, identify whether the contract is a public improvement contract to determine if this five percent limit applies to your final payment. If your job falls under this scope, the maximum amount the public body can hold back from your earned moneys is five percent, according to Washington State Legislature .
Open the contract you are about to bill, find the retainage line, and write the percent next to the matching sentence from the state or federal page that actually covers that job.
Washington's five percent reserve on a public improvement contract
This five percent reserve applies specifically to public improvement contracts and is not a cap on a private repair invoice. The contractor or subcontractor may withhold payment of not more than five percent from the moneys earned by any subcontractor or sub-subcontractor or supplier contracted with by the contractor to provide labor, materials, or equipment to the public project, according to Washington State Legislature . After completion of all contract work other than landscaping, the contractor may request that the public body release and pay in full the amounts retained during the performance of the contract, and sixty days thereafter the public body must release and pay in full the amounts retained (other than continuing retention of five percent of the moneys earned for landscaping) subject to the provisions of chapter 39.12 RCW and this chapter, according to Washington State Legislature . The sixty-day release sentence on this page follows completion of contract work other than landscaping, and it still allows continuing retention of five percent of landscaping moneys. A contractor may submit a bond for all or any portion of the contract retainage in a form acceptable to the public body and from an authorized surety insurer, according to Washington State Legislature . The bond sentence is an option on a Washington public improvement contract. It does not say a private customer must accept a bond. If your contract is a public improvement project in Washington, verify that the retainage line matches the five percent ceiling and note whether landscaping work is excluded from the sixty-day release trigger.
Florida's 5 percent public-construction ceiling, and the permission to hold less
Chapter 255 Section 078 of the 2025 Florida Statutes sets the limit for public construction contracts. According to The Florida Senate , a public entity may withhold from each progress payment made to the contractor an amount not exceeding 5 percent of the payment as retainage. This 5 percent figure is a ceiling, not a fixed requirement. The same section explicitly states that the law does not prohibit a public entity from withholding retainage at a rate less than 5 percent of each progress payment. The statute also allows the public entity to incrementally reduce the rate of retainage pursuant to a schedule provided for in the contract. If your contract includes such a schedule, the percentage held back can drop as the project progresses.
The law further permits the public entity to release at any point all or a portion of any retainage withheld. This release can be attributable to the labor, services, or materials supplied by the contractor or by one or more subcontractors or suppliers. According to The Florida Senate , if a public entity makes any payment of retainage to the contractor which is attributable to the labor, services, or materials supplied by one or more subcontractors or suppliers, the contractor must timely pay such retainage to those subcontractors and suppliers. This downstream payment duty applies specifically when the retainage payment is attributable to work done by others.
Before sending a final bill on a Florida public construction job, check the contract for a retainage schedule. If the contract specifies a rate lower than 5 percent or a reduction schedule, use that figure for your calculations. If the public entity releases retainage early, verify which portion belongs to your subcontractors. Ensure you pay that portion to them promptly, as required by the statute. Do not assume the full 5 percent is held back if the contract or the public entity’s actions indicate a lower rate or a partial release. For how to time the final bill itself, see partial billing rules for estimate approval .
Minnesota's five percent cap, the 60-day release, and the paperwork hold
Sec. 337.10 MN Statutes sets the ceiling for building and construction contracts in Minnesota. According to Minnesota Office of the Revisor of Statutes , retainage on a building and construction contract may not exceed five percent. The statute clarifies that this subdivision does not require retainage to be withheld, but if a contract includes it, the five percent limit applies. When reviewing your contract, locate the specific clause governing retainage to confirm it aligns with this statutory boundary.
The release of these funds follows a strict timeline tied to project milestones. According to Minnesota Office of the Revisor of Statutes , the owner or the owner's agent must release all retainage no later than 60 days after substantial completion, subject to the terms of that subdivision. The phrase "subject to the terms of this subdivision" indicates that specific conditions within the statute may modify how this release occurs, so reading the full text is necessary to understand any exceptions.
Downstream payment flows are also regulated to protect subcontractors. According to Minnesota Office of the Revisor of Statutes , a contractor must pay all remaining retainage to its subcontractors no later than ten days after receiving payment of retainage. There is a specific exception if a dispute exists about the work under a subcontract. In that case, the contractor must still pay out retainage to any party whose work is not involved in the dispute. It creates a clear chain of payment obligations that you should verify in your subcontractor agreements.
Two specific holdback amounts are permitted under this section for corrections and paperwork. According to Minnesota Office of the Revisor of Statutes , an owner may withhold 250 percent of the cost to correct or complete work known at the time of substantial completion. This figure is a limit on what may still be withheld for known defects and is not a profit markup. Additionally, according to Minnesota Office of the Revisor of Statutes , an owner may withhold one percent of the value of the contract or $500, whichever is greater, pending completion and submission of all final paperwork by the contractor or subcontractor. This $500 or one percent amount is an alternative hold for administrative tasks and is not a flat fee to charge the customer.
The federal construction clause's 10 percent and 80 percent lines
The federal fixed-price construction payments clause contains two distinct percentage lines that differ from the state retainage caps discussed earlier. One line addresses unsatisfactory progress, while the other limits payments on undefinitized work.
If satisfactory progress has not been made, the Contracting Officer may retain a maximum of 10 percent of the amount of the payment until satisfactory progress is achieved, according to Cornell Law School . It is not the 5 percent state cap. The retention continues until satisfactory progress is achieved.
A separate line in the same clause states that progress payments shall not exceed 80 percent on work accomplished on undefinitized contract actions, according to Cornell Law School . It is not a margin target. The clause specifies that this limit applies notwithstanding any provision of the contract. For progress payment timing, see progress payment clock rules .
Additionally, on completion and acceptance of each separate building, public work, or other division of the contract, for which the price is stated separately in the contract, payment shall be made for the completed work without retention of a percentage, according to Cornell Law School . This federal sentence applies when a separate building or division has its own stated price and that work is completed and accepted.
Open the federal contract you are about to bill, locate the payments clause, and verify whether the 10 percent retention or the 80 percent limit applies to your specific work scope.
A filled reference table of the retainage rules
The following table lists the specific retainage figures and contract scopes for the three states covered above.
| Publisher | Retainage Figure | Contract Scope | Source |
|---|---|---|---|
| Washington State Legislature | Not to exceed five percent | Public improvement contracts | Washington State Legislature |
| The Florida Senate | Not exceeding 5 percent | Contract for construction services | The Florida Senate |
| Minnesota Office of the Revisor of Statutes | May not exceed five percent | Building and construction contract | Minnesota Office of the Revisor of Statutes |
Use this table to match the specific contract type in your file to the corresponding percentage limit before calculating your final bill.
FAQ about retainage before the final bill
What percent does Washington reserve on a public improvement contract?
RCW 60.28.011 requires public bodies to reserve a contract retainage not to exceed five percent of the moneys earned by the contractor, according to Washington State Legislature . This five percent reserve serves as a trust fund for the protection and payment of claims arising under the contract and state taxes. It applies specifically to public improvement contracts and is not a cap on a private repair invoice.
What does Florida allow a public entity to withhold?
Florida Statutes section 255.078 allows a public entity to withhold from each progress payment an amount not exceeding 5 percent of the payment as retainage, according to The Florida Senate . This provision applies to any contract for construction services. The statute sets a ceiling on the withhold amount, permitting the public entity to withhold less than the maximum if desired.
What does Minnesota's cap say?
Minnesota Statutes section 337.10 states that retainage on a building and construction contract may not exceed five percent, according to Minnesota Office of the Revisor of Statutes . This section establishes a five percent cap for building and construction contracts. It also notes that the subdivision does not require that retainage be withheld, meaning the cap limits the amount if withheld but does not mandate the practice.
When does the federal clause allow 10 percent?
The federal fixed-price construction payments clause allows the Contracting Officer to retain a maximum of 10 percent of the payment amount if satisfactory progress has not been made, according to Cornell Law School . This retention continues until satisfactory progress is achieved. The 10 percent figure is distinct from the five percent state caps and applies only when progress is unsatisfactory.
What does the 80 percent line limit?
The federal clause states that progress payments shall not exceed 80 percent on work accomplished on undefinitized contract actions, according to Cornell Law School . This 80 percent limit applies specifically to undefinitized contract actions. It is not a profit margin target or a required billing amount, but a cap on progress payments for that specific type of contract action.