NCARB Practice Test Question 21
Hello NCARB Community.
With question 21 of CE NCARB practice test, I want to understand why do we take the retainge of amount that is paid in full or 100% complete. For instance the Engineering and Perfomance bond is 100% complete in this schedule of value. Does that not mean that no retainge will be withheld by the owner/architect for those two items?
NCARB solution considers the retainge of that two items as well. Can someone please explain, why?
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The reason the retainage is taken from the 100% completed bond and engineering is because it is being processed as part of this application for payment and listed on this continuation sheet. It's part of the "work completed" this period and the portion of the total to be billed is Column E minus the variable retention rates as shown in the question.
The contractor gets paid for the work completed and on each application for payment, retainage is withheld until certain overall project thresholds are reached and get paid out when those milestones are achieved as a means to incentivize the contractor to stay on schedule and work within the defined project margins. In this instance, they'll be paid for the completed bond and engineering, with the 5% retainage withheld from payment on this application to be paid later on.
Here's a Procore article that dives into what retainage is: link
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Thank you abruno168. I think something that is still confusing me is the word 'withheld'. The question asks the total amount of retainage that will be holdback. If the engineering service was 100% completed, wont we be paying that retainage amount to the contractor in this pay app? instead of holding back?
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Architect_inprocess
In the question, it's stated that retainage is withheld from each application for payment. We can't make assumptions about when the retainage is paid out in full or at what project milestones it gets paid out, as this is beyond the ask for this scenario. For this question, we can work with the fact that each portion of completed work (partial or full) will have an amount retained.
In this instance, 100% of the Engineering work is completed at $6k. The agreement indicates that hard costs have a retainage of 10%, and soft costs at 5%. Engineering is a soft cost, so 5% of the completed Engineering work ($6k * .05 = $300) is withheld as part of the agreed upon retainage percentage for this pay application.
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Retainage will be withheld from each application for payment based on the work completed that period. For the next application, work completed that period will be applicable for the next portion of payment and retainage to be withheld, it will not include work already completed with retainage withheld from it. So on Application No. 2, Engineering and Performance Bond will not be apart of the due amount because they're done and have had their retainage amount withheld.
Hypothetical: on the next payment application, the GC only does concrete repairs at $20k. 10% retainage will be withheld from this amount for that portion of work completed this period. The engineering and the bond work will have already been completed and retainage withheld, so neither amounts apply to the next application. Those amounts from the previous application will be shown in column D to indicate total progress and value of work done.
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