Earned In Month Two, Retention Paid In Month Twenty-Two
Mass grading is finished before the foundation is poured, and the retention on it stays out until somebody else's building reaches substantial completion.
Retention is timed to the end of a schedule, and this trade's work falls at the very front of it. A trade finishing near closeout waits weeks for release, while a grading sub waits the entire length of the vertical build. Finishing early is what makes the wait long. You get punished for the one thing the GC asked you to do first.
The size of it
On a $1.2M sitework contract at 10%, that's $120K out of the business for roughly twenty months while you fund the next mobilization on a line of credit. That's a full crew's annual payroll parked on somebody else's balance sheet.
Grading earns most of its contract value in the first ninety days of a two year build, then waits on every trade behind it to release the last ten percent. Mass grade is commonly 60% to 75% of a sitework contract, and it's complete before the first footing goes in. Retention of 5% to 10% is withheld against the general contractor's substantial completion date, which has nothing to do with the day your work was accepted. No trade on the job starts earlier, so no trade waits longer between earning money and collecting it. Pay when paid stretches the progress billings on top of that, which pushes your working capital need well past the retention itself.
Three moves, in order
Step 07: Monthly cadence
Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month.
What else costs grading contractors money
The same mechanism in other trades
What grading owners ask
When do I get retention on a sitework contract?
Mass grading is finished before the foundation is poured, and the retention on it stays out until somebody else's building reaches substantial completion.
What does it cost?
On a $1.2M sitework contract at 10%, that's $120K out of the business for roughly twenty months while you fund the next mobilization on a line of credit. That's a full crew's annual payroll parked on somebody else's balance sheet.
What do I do first?
Build one schedule of every open retention balance by job, with the GC's projected substantial completion date beside each one, and update it monthly.
What are grading contractors supposed to be making?
Grading runs 18% gross margin, 16% overhead and 2% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 5 points below it. The CFOS target is 10%.
Which part of the system fixes it?
The step is number 07, monthly cadence. Weekly bookkeeping, cost to complete, and one CEO report, on the same days every month. It comes from chapter 7 of CONTROL: The Construction Financial Operating System.
Everything on this page is something you can install yourself, andCONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for grading contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, run by the same author.
Wrote CONTROL, the 8 step system behind these figures. More about the author.