We are working to a main contractor under Option c as detailed above. Contract arrangements in respect of retention specify once we get to 80% PWDD 25% retention is then claimed on PWDD above the 80%.
We assume the PWDD reflects the target price including CE’s, but our client has stated the target price remains fixed in terms of the 80% level. Although they state that all CE’s within the PWDD are included within the 80%.
Therefore we have carried out a considerable amount of CE works and are due to do further, under our clients understanding all CE’s plus the final 20% will incur 25% retention, which causes considerable strain on our cash flow.
Our understanding is that whilst CE’s are included in the PWDD they should also be included in the target cost thus limiting our level of retention when calculated over the whole project value to 5% maximum (20% x 25%).
Please advise which should be the correct interpretation of this scenario.