Are monies paid for compensation event subject to retention?

The Contract is ECC option B priced BOQ. The contract states that the retention free amount is 50% of the total of the prices at contract date and that retention is 20% of the prices.

Am I correct in saying that the 20% retention held on monies paid is applicable on all monies paid including compensation events and not just monies paid on the original scope of work?

I have applied retention to the total of the prices to date (compensation events included). The Contractor is of the opinion that retention is only applicable to original contract value.

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Retention is withheld against the Price of Work Done to Date. It makes no mention of “at Contract Award” and therefore retention should be withheld against CE’s as well as original scope items within the Works Information.

I wanted to add an additional angle to Glenn’s answer which I otherwise agree with.

While retention is paid against PWDD and retention will be deducted on an ongoing basis there does not seem any intention in the contract that the Employer should be able to hold additional retention on varied or added work. The 20% “works” because there is a retention free amount. It therefore generates a sensible (if slightly high) retention overall of 10%.

While not explicit or completely clear in the contract the retention free amount and the percentage recovery thereafter is on the assumption of the original total of the Prices. That is the real basis on which the agreement was formed. Therefore, where you increase the total of the Prices you need to recalculate the retention to be applied once the original total has been reached to maintain the parties intentions of, here, a 10% retention fund. The same would, in principle, be true if you reduced the total of the Prices.

Therefore, while you wouldn’t distinguish the retention on a work type basis as you go you do need to have a reckoning once you exceed the original total of the Prices.

Whether your contract contains the words “at contract award or not” I think the answer will remain the same unless there is explicit wording to evidence the intention to increase the retention for increased scope (or decrease it for reduced scope).