You Earn It in Month Two and Collect in Month Twenty-Six
You were in the dirt before the steel got there, and you'll see that retention when the building opens.
Plumbing goes in the ground first and trims out last, and no other trade on the job owns both ends. A site contractor bills early and closes out early. A finish trade bills late, then waits a short time for release. Plumbing bills at the front of a two year schedule and collects at the back of it, so the retention on your earliest and most exposed work is held the longest and funds somebody else's project the entire time.
The size of it
Retention held on a plumbing contract routinely exceeds the entire profit on that job for most of the job's life. You earned that margin in month two and you collect it in month twenty-six, after financing it the whole way.
Plumbing is usually the first subcontractor billing on a building after sitework and one of the last to finish, so retention gets withheld on the earliest money and released on the latest date. Underground and underslab go in before the slab, which comes before steel, which comes before everything else. Retention of 5 to 10 percent comes off every progress payment and doesn't release until final completion of the whole building, 18 to 24 months later. You can't claim early substantial completion the way a site trade can, because your crew comes back for trim and final test. The last 10 to 15 percent of contract value is that trim, and it's gated by drywall, paint, and tile, so you stall at 85 to 90 percent billed for months with the balance and every dollar of retention still out.
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 plumbing contractors money
The same mechanism in other trades
What plumbing owners ask
Why is plumbing retention held so long on commercial jobs?
You were in the dirt before the steel got there, and you'll see that retention when the building opens.
What does it cost?
Retention held on a plumbing contract routinely exceeds the entire profit on that job for most of the job's life. You earned that margin in month two and you collect it in month twenty-six, after financing it the whole way.
What do I do first?
Put retention receivable on its own line by job and read it every month next to the profit on that same job, so what you're financing becomes a number and stops being a feeling.
What are plumbing contractors supposed to be making?
Plumbing runs 25% gross margin, 16% overhead and 9% net profit before taxes at $1M–$5M. The all-trade average is 7%, so this trade is 2 points above it. The CFOS target is 12.5%.
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 plumbing 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.