Retention Money Security (Retention Bond) is the type of performance bond that protects the client after a contract or project is finished. It guarantees that the contractor will carry out all necessary work to correct structural and/or other defects discovered immediately after completion of the contract, even if full has been made to the contractor. Normally it is provided by the contractor once only at or near to the commencement of the contract for the full amount of the retention i.e. 10% of the contract price. The bond is released in stages; one half upon issue of Take-over Certificate [Practical Completion Certificate] with the final half being released upon issue of Defect Liability Certificate [Completion Certificate/Performance Certificate]. The major difference between this bond and Retention Money is that no monies are deducted in the interim certificates since the contractor has already provided bond equivalent to the total retention. Furthermore, it applies the same principles of releasing retention money. I believe that most of us we have come across cases where Procuring Entities fail to release the retention monies as per terms and conditions governing the contract. This is because the monies are retained in their accounts and used for other activities forgetting that the retention monies are contractors’ monies.
Is it the time right now to have Retention Money Security in lieu of Retention Money? Discuss.