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Purpose of Retention Money

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Purpose of Retention Money

Post by jairemic on Tue Nov 09, 2010 12:42 am

my teacher asked me what is the purpose of the retention money and I wasn't able to give him my feedback....
somehow I am confused of the relationship between retention money and surety bond...
can somebody help me out with this Smile
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jairemic
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Re: Purpose of Retention Money

Post by RDV @ GP3i on Tue Nov 09, 2010 9:19 am

jairemic wrote:my teacher asked me what is the purpose of the retention money and I wasn't able to give him my feedback....
somehow I am confused of the relationship between retention money and surety bond...
can somebody help me out with this Smile

The retention money serves as a warranty security. For procurement of Goods, the retention money is warranty for any patent or latent defects of the delivered goods during its warranty period. For procurement of Infrastructure Projects, the retention money is deducted from the progress billing of the contractor to cover for any damage or destruction of the works, except those caused by force majeure, and also for the safety, protection, security, and convenience of the contractor's personnel, third parties, and the public at large, as well as the works, equipment, installation and the like to be affected by his construction work.
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Re: Purpose of Retention Money

Post by engrjhez® on Tue Nov 09, 2010 5:02 pm

jairemic wrote:my teacher asked me what is the purpose of the retention money and I wasn't able to give him my feedback....
somehow I am confused of the relationship between retention money and surety bond...
can somebody help me out with this Smile

Retention money covers the 'defects liability period' which is from completion up to final acceptance (1 year). For Goods, it may be released earlier once consumed (or after 3 months) for expendable supplies provided the goods delivered free from latent defects.

Surety Bonds are applicable only to Infrastructure Projects and may be posted (aside from other forms such as cash, bank guarantee, etc.) after the 'defects liability period' prescribed in Sec.62.2.3.2 of the Revised IRR of RA 9184.

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