Note
Retention: Collecting What Your Projects Have Earned
Retention is standard in Thai factory installation contracts. When a project closes, a fixed percentage is withheld against defects and released at the end of the defect liability period (DLP), typically six to twelve months after the signed handover. The money is earned but will not move without a re-invoice at expiry, and most contractors do not track those dates.
What Is Retention and When Does It Apply?
Retention is a contractual holdback. The customer keeps a fixed percentage of each payment until the DLP ends. The purpose is to give the customer recourse if defects appear in the months following handover.
For Thai electrical contractors, retention clauses appear in nearly all commercial and industrial contracts. A typical structure:
- Retention rate: 5 percent of the total contract value (some larger projects run to 10 percent)
- DLP duration: six to twelve months from the date of the signed handover document
- Release condition: no outstanding unresolved defects, confirmed in writing by the customer’s representative
The retention is not a bonus. It is money already earned: labor, materials, and fuel were paid out weeks or months earlier. The release invoice is simply the final payment on a closed job.
How Quickly Does Outstanding Retention Compound?
Consider a contractor completing 8 projects a month with a 12-month DLP and 5 percent retention on each. During the first twelve months, every completed project adds to the retention pool. From month thirteen onward, the earliest projects become releasable. If no re-invoices go out, the pool keeps growing.
Here is a calculation you can run on your own numbers:
- Count the number of projects your business completed in the last 12 months.
- Multiply by your average retention amount per project (total contract value times your retention rate).
- The result is the maximum retention pool currently sitting with customers.
Not all of it is past its DLP yet. But some fraction is. And unless someone is tracking expiry dates, the fraction that should already be invoiced is invisible.
A contractor running 8 projects a month for 18 months has 48 projects past a 12-month DLP from the first six months of that period. If no release invoices went out on time, the outstanding amount is material regardless of individual contract size.
Why Does Retention Collection Break Down?
The breakdown follows a predictable pattern.
The DLP clock starts on the handover date. If that date is filed in an email folder or a paper binder rather than a queryable list, “DLP expires this month” requires a manual search across every project file.
The original project manager often moves on. The person who ran the project knew when the DLP ended and had the customer’s billing contact. When they leave without recording it, that knowledge leaves too.
There is no automatic trigger. Even when the expiry date is known, the release invoice requires someone to act. Without a prompt appearing in the right queue thirty days before expiry, it waits for someone to remember.
The customer does not prompt you. Every additional month is a month they do not have to pay.
What Does a Late Release Actually Cost?
There is an obvious cost: working capital tied up longer than the contract requires. For a cash-flow-constrained operation, carrying 5 to 10 percent of a project’s value for fifteen months instead of twelve is real.
There is also a less obvious cost: the customer’s situation changes. Factory ownership transfers. Finance managers leave. The person who originally signed the handover may no longer be there. A retention claim raised two years after handover because nobody tracked the date is harder to collect than one raised the week the DLP expires. The evidence is less fresh. The contact who can authorize payment may need to be re-established from scratch.
The earliest possible re-invoice, issued the week the DLP expires, is always the easiest to collect.
What Does a Retention Tracking System Actually Need?
The information required to release retention on time is not complicated. For each site, you need five things:
- Handover date (the DLP start)
- DLP duration agreed in the contract
- Calculated release date (handover date plus DLP duration)
- Retention amount outstanding
- Customer billing contact for the release invoice
This information exists for every project. The problem is that it exists in different places: in the signed contract, in the handover document, in an email thread. Consolidating it into a single register, where all sites appear together and upcoming release dates are visible, turns a reconstruction project into a ten-minute monthly task.
With that register in place, the start-of-month question changes from “which retention might be due?” to “here are the three release invoices due this month.”
A Worked Example
An electrical contractor completes an average of 8 projects a month. Contracts include a 5 percent retention clause and a 12-month DLP. The contractor tracks handover dates in a site register.
At month 13, the register shows that the projects from month 1 have crossed their release date. The office raises three retention release invoices in the first week of the month. At month 14, four more. The process is mechanical: the register shows what is due, the office acts on it.
Without the register, the same business reaches month 18 and discovers 48 projects have passed their release date. Many customers pay on request. Some raise questions because the gap makes them uncertain about what they are paying for. A few need a site visit to confirm DLP conditions before releasing. The difference is not the contract terms: it is whether the release dates were tracked.
FAQ
Does a warranty callback during the DLP reset the retention release date?
Most contracts specify that the DLP is not extended by a resolved warranty visit, only by a formal notice of defect that could not be resolved in time. Document each callback and the customer’s sign-off on the fix. That record is usually sufficient evidence that the DLP condition is met. Check your specific contract language, as terms vary.
What if the customer disputes the retention release?
The most common dispute is about work quality during the DLP. A contractor with documented warranty responses (dates, work done, customer sign-off) is far stronger than one whose records exist only as chat messages. The handover document and any resolution records are the evidence that DLP conditions were met.
What if the handover date was never formally recorded?
If no signed handover document exists, the DLP start is ambiguous and the customer can challenge it. A formal handover matters beyond billing because it fixes the date from which every post-handover obligation is measured. A disputed start date is a harder problem than a late invoice.
The TRACE 30 program builds a site register from every closed job. The handover date that starts the warranty clock also starts the DLP. With release dates visible across the full portfolio, monthly retention collection becomes routine rather than reconstruction. If you run six or more projects a month and have not mapped your outstanding retention, a short call is a reasonable place to start.