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Para 4.13 - Retention Money Release | KartavyaDesk

WORKS_MANUAL

Original Rule Text

i) After the amount reaches half the value of the limit of retention money; and ii) After the amount reaches the maximum limit of retention money. One-half of the retention money (or BG, which replaced retention money) shall be released on the issue of the taking-over certificate; if the Taking Over Certificates (TOCs) are issued in parts, then in such proportions as the engineer may determine, having regard to the value of such part or section. The other half of the retention money (or BG, which replaced the retention money) shall be released upon expiration of 365 days after the DLP of the works or final payment, whichever is earlier, on certification by the engineer. In the event of different defect liability periods being applicable to different sections or parts, the expiration of defect liability period shall be the latest of such periods.

What This Means

Para 4.13 of the Works Manual deals with the release of retention money (or Bank Guarantee, if used instead) to contractors after a project is completed. Retention money is a portion of the contractor's payment held back by the government to ensure they fix any defects that appear after the work is done. This rule specifies when and how that money is returned.

The rule outlines a two-stage release process. The first half of the retention money (or BG) is released when the 'Taking Over Certificate' (TOC) is issued, signifying that the project is substantially complete and ready for use. If the TOC is issued in parts for different sections of the project, the release is proportional to the value of each section. The remaining half is released after the Defect Liability Period (DLP) has ended, or after 365 days from the issue of the TOC or final payment, whichever is earlier, provided the engineer certifies that there are no outstanding defects. If different parts of the project have different DLP durations, the longest DLP determines when the final release occurs.

This rule affects contractors working on government projects, engineers responsible for project oversight and certification, and accounts officers handling the release of funds. It ensures that contractors are paid promptly while also protecting the government's interests by ensuring defects are rectified before full payment is made.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Retention money (or BG) is released in two phases.
  • •First half released upon issuance of the Taking Over Certificate (TOC).
  • •Release proportional to the value of the section if TOCs are issued in parts.
  • •Second half released after the Defect Liability Period (DLP) or 365 days after TOC/final payment, whichever is earlier, with engineer's certification.
  • •If different sections have different DLPs, the longest DLP applies.

Practical Example

M/s Sharma Constructions completed the construction of a new bridge for the PWD, valued at ₹5 crore. The PWD retained ₹25 lakhs as retention money (5% of the project value). A Taking Over Certificate was issued for the entire bridge on July 1, 2024. As per Para 4.13, ₹12.5 lakhs (half of the retention money) was released to M/s Sharma Constructions immediately. The Defect Liability Period for the bridge was one year.

On July 1, 2025, the engineer certified that there were no outstanding defects. Therefore, the remaining ₹12.5 lakhs was released to M/s Sharma Constructions. If, however, a minor defect had been identified and rectified by Sharma Constructions on August 1, 2025, the final payment would have been processed then, assuming all other conditions were met.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What is a Taking Over Certificate (TOC)?▼
A Taking Over Certificate is a formal document issued by the engineer, signifying that the project (or a part of it) is substantially complete and ready for use.
What happens if defects are identified during the Defect Liability Period?▼
If defects are identified during the DLP, the contractor is responsible for rectifying them. The release of the remaining retention money may be delayed until the defects are rectified to the satisfaction of the engineer.
What is the Defect Liability Period (DLP)?▼
The Defect Liability Period is a specified period after the completion of a project during which the contractor is responsible for rectifying any defects that may arise.
Can a Bank Guarantee (BG) be used instead of retention money?▼
Yes, a Bank Guarantee can be provided by the contractor as a substitute for retention money. The same rules for release apply to the BG as would apply to retention money.
What if the final payment is made before the TOC?▼
The rule states that the second half of the retention money is released after the DLP or 365 days after TOC/final payment, *whichever is earlier*. So, if the final payment is made before the TOC, the 365-day period starts from the date of the final payment.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Para 4.13 of the Works Manual, under what condition is the first half of the retention money (or Bank Guarantee) released to the contractor?

Related Rules

Para 3.2.4Manual for Procurement of Works, 2022 - Para 3.2.4 - Chapter 3Para 3.5.13Manual for Procurement of Works, 2022 - Para 3.5.13 - Chapter 4Para 3.2.6Manual for Procurement of Works, 2022 - Para 3.2.6 - Chapter 3Para 4.10Manual for Procurement of Works, 2022 - Para 4.10 - Chapter 4Para 4.11Manual for Procurement of Works, 2022 - Para 4.11 - Chapter 4

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