Oregon Construction Contractors (CCB) Practice Test

In project management, what is the purpose of retainage?

1. Incentivize contractors

2. Ensure project completion

3. Balance contractor payments

4. Cover material costs

The correct answer is: Ensure project completion

Retainage serves a critical function in project management by providing a financial incentive for contractors to complete a project satisfactorily. When a percentage of a contractor's payment is withheld until the completion of a project, it encourages them to fulfill their obligations and ensure that the work meets the required standards. This practice helps to ensure that all aspects of the project are completed properly, providing a safeguard for the project owner against incomplete work, subpar quality, or delays. Withholdings in the form of retainage can help mitigate risks associated with construction projects. By retaining a portion of the contractor’s fees, project owners can ensure that stakeholders are motivated to address any outstanding issues or deficiencies before the final payment is made. This also helps to facilitate communication and resolution of potential disputes, ultimately leading to a better outcome for the project. While the other options relate to important aspects of contract management and financial controls, they do not capture the primary purpose of retainage as effectively as ensuring project completion does.