Meaning
Staged disbursement refers to the release of portions of a withheld fund to a contractor as they meet specific progress requirements. Each retention drawdown tranche reduces the amount of capital held back by the project owner as security for defects. This mechanism improves the cash flow of the contractor while maintaining some leverage for the client.
Payment Schedule
Specifications in the payment schedule define exactly when each portion of the money becomes available for withdrawal. In a typical agreement, a retention drawdown tranche might be scheduled for the practical completion date. Another portion is usually held until the end of the maintenance period.
Project Milestone
Technical experts verify the achievement of a project milestone before the owner approves the release of funds. The retention drawdown tranche serves as an incentive for the contractor to finish the work to the required standard. Failure to rectify minor issues can result in the withholding of the final payment.
Conditions Liability Period
Conditions during the liability period protect the owner from latent defects that appear after the project is finished. A final retention drawdown tranche is only paid out once the defects liability certificate is issued. This ensures that the contractor remains responsive to repair requests even after they have moved their equipment off the site.
