FIDIC / Legal Reference: FIDIC Red Book Clause 14.3 / 14.9
A percentage of each interim payment withheld by the employer as security for the contractor’s obligations to complete the Works and rectify defects. Under FIDIC, retention is typically 5% — half released on Taking Over, and the remaining half released on the Performance Certificate.
What it means in practice
Retention gives the employer financial security against the risk of contractor default. The FIDIC Red Book provides for a Retention Limit (typically 5% of the Accepted Contract Amount) at which point no further retention is deducted from interim payments.
The contractor may sometimes substitute a Retention Bond (an unconditional bank guarantee) for the withheld cash retention — releasing the cash while maintaining the employer’s security. This is commercially attractive for contractors managing cash flow on large projects.
Where disputes arise
Employers who withhold the second half of retention beyond the Performance Certificate are in breach of contract. In UAE projects, retention disputes are particularly common on public sector contracts where the employer’s financial approval processes delay payment even after the Engineer has certified release.
UAE Context
UAE law does not specifically regulate construction retention. Some UAE employers have adopted retention bonds as an alternative, particularly on EXPO-related and infrastructure projects.
Related terms
Retention disputes and release entitlement are managed by e-Basel as part of our construction payment claims advisory services.
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