The collapse of Kent-based contractor, R Durtnell & Sons, has sparked renewed calls for the government to adopt a long-delayed bill aimed at reforming the way retentions are used in construction.
The so-called Aldous Bill, put forward by Conservative MP Peter Aldous following the collapse of Carillion last year, proposes protecting construction subcontractors by holding cash retentions in a third party account.
But a second reading of the Bill, whose advocates claim it has the support of more than half a million businesses and self-employed professionals, has been pushed back multiple times.
Now the Specialist Engineering Contractors Group (SEC) has warned that Durtnell’s collapse provides further evidence that such a bill is needed.
SEC Group said it had examined Durtnell’s March 2019 accounts and found that retentions totalling £630,000 were owed to the company, the bulk of which would have been deducted from their supply chain payments.
It also claimed that the low level of retentions on its troubled £15m refurbishment of the Grade-I-listed Brighton Dome Corn Exchange and Studio Theatre (amounting to £10,000) suggested that Durtnell owed substantially more to its supply chain in retentions than it was owed.
And it warned that as trade credit insurers withdrew cover from many contractors, it left supply chains exposed.
Rudi Klein, the SEC Group CEO said: “While it is extremely sad to lose such a long-established firm, there is now concern for Durtnell’s sub-contractors.
“The retention monies belong to the businesses – mostly SMEs – in Durtnell’s supply chain and for the most part would have represented their profit margins. The government must now act to adopt Peter Aldous Bill, already in Parliament, that protect these monies from upstream insolvencies.”
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While there has been legislation relating to late payment – government and the civil service have never grasped the nettle that no payment is worse than late payment.
The supply chain is an inherently important element of our construction industry; an industry that lives on a knife-edge of hand-to-mouth workload.
Protection of retention monies is a sensible step and way behind time.
I agree with what Rudi Klein is saying. It is high time an alternative is found to the practice of withholding retention monies, which after all belongs to the downstream party, but has no protection against the upstream party becoming insolvent. Equally, as a construction professional and lawyer who specialises in construction disputes, I can also see the need for the upstream party to protect itself, from the costs of rectifying latent defects. Some form of balance needs to be found. There are existing options of project bank accounts, trust accounts or retention bonds but few projects that I am aware of use such facilities compared to the size of the industry. The problem is that the industry has been talking about this for decades but nothing really changes.