10% Retention Money , 1st and final billing- 100% complete

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10% Retention Money , 1st and final billing- 100% complete

Post by auditormommy on Mon Jun 09, 2014 3:41 pm

Good afternoon.
We are requiring an agency to let its contractors pay the 10% retention fee even if their contractors requested for payment only after 100% completion of the project. The agency told us that there is no need to pay 10% retention since IRR does not require it for projects which are 50% completed Their legal officer told us that per their comprehension, the purpose of the retention money is for warranty for future defects. Since their contractors already paid their warranty security, retention money is no longer needed?
How can we convince this legal officer that aside from the performance security and warranty security, 10% retention money is required? We have noticed that their contractors are requesting for payment when the projects reaches more than 50% completion and no retention is paid. Thanks



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Re: 10% Retention Money , 1st and final billing- 100% complete

Post by regina avelino on Tue Jun 10, 2014 10:36 am

the legal officer misunderstood the procurement law. The retention money shall cover the uncorrected discovered defects and third-party liabilities from project completion up to final acceptance (defect liability period). This retention money along with the performance security, if unutilized, shall be returned to the contractor upon issuance of certificate of final acceptance. The final acceptance is usually one year from project completion. After the return of the retention money and the performance security upon final acceptance, the contractor shall in turn post warranty security which shall be good for one year from final acceptance. This warranty security shall cover against structural defects and failures.

In summary, retention money will cover defect from completion to final acceptance while warranty security will cover defects within one year from final acceptance.

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Re: 10% Retention Money , 1st and final billing- 100% complete

Post by auditormommy on Wed Jun 11, 2014 2:48 pm

Thank you.
So it means that aside from the performance security, 10% retention money shall be imposed. Then after the completion of the project, warranty security shall be secured.

How about during the construction progress up to completion, do we still need to ask for warranty security or insurance such as CARI?

Thanks


Last edited by auditormommy on Wed Jun 11, 2014 2:49 pm; edited 1 time in total (Reason for editing : error in typing)

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Re: 10% Retention Money , 1st and final billing- 100% complete

Post by RDV @ GP3i on Thu Jun 12, 2014 1:48 pm

auditormommy wrote:Thank you.
So it means that aside from the performance security, 10% retention money shall be imposed. Then after the completion of the project, warranty security shall be secured.

How about during the construction progress up to completion, do we still need to ask for warranty security or insurance such as CARI?

Thanks

I hope nobody minds if I join in the discussion.

Performance Security is posted by the winning bidder during contract signing while Retention Money (RM) is collected every time the contractor submits a progress billing. Both are returned upon final acceptance, which is one year from completion. Warranty Security shall be secured upon final acceptance or one year after completion of the project.

In addition to all those above, the contractor will still be required to secure a Contractor's All-Risk Insurance or CARI during construction period.
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Re: 10% Retention Money , 1st and final billing- 100% complete

Post by auditormommy on Mon Jun 16, 2014 2:30 pm

Thank you Smile

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Re: 10% Retention Money , 1st and final billing- 100% complete

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