Negotiate Retainage for Services

Ability to negotiate retainage can be used for complex services where these services require extensive collaboration between the buying and supplying organizations.

Complex services can include consulting, advertising, construction, research and development, and professional services, and they typically require negotiated contracts with complex terms and payment arrangements that span a period of time. These projects are typically high dollar value, long project duration (extending over months or several years) and complex payment terms that are governed by percentage of work completion.

Retainage

Retainage is a practice where you withhold funds from payment to ensure that the supplier finishes work as agreed. The buying organization releases these funds only after verifying that the supplier has fulfilled all contractual obligations. Retainage terms include retainage rate and maximum retainage amount.

Retainage Rate (%)

The retainage rate is the percentage of the amount requested that's withheld before releasing payments to the supplier. Retainage rate is passed on the purchase order line if the document style enables the use of retainage.

Maximum Retainage Amount

The maximum retainage amount is the maximum amount that's withheld on the line. The maximum retainage amount is passed on the purchase order line if the document style enables the use of Retainage.

Negotiate Retainage

To apply retainage, do these tasks:

1. Create an RFQ by selecting a retainage enabled PO as outcome.

2. In the Overview train stop, select the Allow suppliers to negotiate retainage response rule.

3. In the Lines train stop, enter values for retainage rate and maximum retainage amount for every line in the RFQ.

4. Invite suppliers and publish the RFQ.

   Suppliers create responses by negotiating the retainage rate and maximum retainage amount.

5. Analyze RFQ.

6. Close the RFQ and award the RFQ to the best supplier.

7. Generate the complex work purchase order.