The retention money as stated in the contract (usually 5 per cent in the UK but subject to some maximum value), must be deducted from the total amount calculated as due to the contractor in interim certificates for work done. When a substantial completion certificate is issued, the retention held is halved for that portion or whole of the works to which the certificate applies, the amount so released being paid to the contractor. During the defects correction period (often termed the maintenance period) which is stipulated in the contract, the contractor undertakes to correct all matters listed by the engineer as needing remedial action. At the end of this period the remainder of the retention is to be released although a portion may be held back sufficient to cover any outstanding defects.
The performance bond which may have been provided by the contractor is normally not released until all defects have been dealt with, so the employer has some protection against default of a contractor in this respect. It is sometimes accepted that, after completion, any retention can be released by substitution of a retention bond.
The contractors insurances will normally lapse once work, including remedial work, has ended. It should be remembered, however, that after substantial completion the normal contractors insurance cover does not cover the works themselves since these have become the employers responsibility.
The resident engineer must forewarn the engineer when substantial completion of part or all of the works is likely. If this is later than the contract period, or any extended period, liquidated damages may apply, as set out in the contract. If any are applicable, the employer may wish to deduct them from any payment due to the contractor, otherwise they may be more difficult to recover later. At completion the engineer will need to re-assess any extension of time due to the contractor and advise the employer regarding any damages due. Deduction of damages is not a matter for the engineer to certify, but for the employer to decide and apply.