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Build UK has set out a new set of minimum standards for using cash retentions, which the organisation has described as “problematic” for all parties in the construction supply chain.
The Minimum Standards on Retentions are based on principles including:
- Any arrangements for retention are no more onerous than those implemented by the client in the tier 1 contract
- Retentions are only deducted from payments made in respect of permanent works
- Any retention is deducted from the payment immediately following practical completion
- Retentions should be progressively phased out on the basis of contract value.
Build UK has also provided detailed drafting guidance for incorporating the standards into both JCT and NEC forms of contract.
Meanwhile, Build UK said it was pushing for government legislation to abolish cash retentions altogether, supported by its Roadmap to Retentions, which was first published in 2017.
So far, the government has not made any commitment to deliver policy change on this issue.
Jo Fautley, deputy chief executive of Build UK, said: “Build UK is proactively delivering on its roadmap to zero retentions, and clients, contractors and the supply chain can all implement these practicable steps as part of the transition over the next few years. The construction industry needs to change, and achieving zero retentions is a vital part of becoming a more collaborative and efficient sector.”
Brian Morrisroe, chief executive of concrete contractor Morrisroe Group, said: “Retentions have always been difficult for us to manage and a realistic plan of how the industry could move forward on this issue is most welcome. If clients that do feel the need to withhold a cash retention start to use the new minimum standards in their contracts, it will make a real difference to businesses like ours. Retentions starve the supply chain of much needed working capital but clients will need confidence that we can address the quality issues often experienced in the defects period to enable a move away from retentions.”
Peter Rogers, co-founder of developer Lipton Rogers, said: “I am very pleased to see the work that Build UK is doing to eliminate the use of retentions through its roadmap. With over 30 years’ experience of not using retentions on our projects, we are firmly convinced that they add nothing of benefit, and are often used by the industry to improve cash flow, without improving the quality of construction.”
