Further consultation on retentions announced
The government has launched another consultation on retentions.
The Department for Business, Energy & Industrial Strategy has published the paper “to seek information on the practice of cash retention under construction contracts”.
Business minister Lord Prior of Brampton said: “Despite examples of positive changes, there is some evidence that there is still scope for improvement in relation to payment practices in the construction sector.
“Concerns have been expressed by parts of the industry about unjustified late and non-payment of retention payments and the impact on small businesses.”
The government is also calling for views on the findings of a research document that it commissioned from consultant Pye Tait and has now published.
Pye Tait found that retention monies being lost due to contractor insolvency was affecting a large proportion of contractors that use retentions. It also found evidence that a proportion of construction customers may be making payment of the retention conditional on the performance of obligations under another contract.
“This indicates that some contractors may still need to be informed about what the 2011 amendments to the ‘Construction Act’ mean for payment of retentions,” the consultation document says.
With unjustified late and non-payment of retention monies a significant issue for some contractors, the use of project bank accounts is suggested as an alternative.
The Electrical Contractors’ Association (ECA) and the Building Engineering Services Association (BESA) are calling for any cash held as retentions by construction clients and major contractors to be “held in trust at the nearest opportunity”.
They want to see cash retentions completely phased out to protect suppliers from poor retention practices.
In a joint statement, ECA director of business services Paul Reeve and BESA director of commercial and legal Rob Driscoll, said: “While the significant and unacceptable problems of cash retentions in construction have been identified by independent research, and even acknowledged by government, the government has chosen to consult once again on the extent of the problem and what to do about it.
“The BESA and the ECA will continue to call on the government to ensure that all cash retentions are held in trust as soon as possible, and to phase them out entirely by the early 2020s.
“For the good of the economy, and the supply chain, we need a firm commitment to remove the retentions issue.”
You can reply to the consultation online at: beisgovuk.citizenspace.com/im/retention-payments-in-the-construction-industry
The deadline for responses is 19 January 2018.