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Retentive memory

Comment

How much can contractors and subcontractors be trusted? This is the question which lies at the heart of the current all party Commons Trade & Industry select committee investigation into the use of retentions in construction.

For the uninitiated, retention money is held back from contractors by clients after a project is finished, in case defects need repairing. Similar sums are also held back from subcontractors by main contractors, who pass defect risks down the supply chain.

Often retentions can equate to the value of the profit a contractor can expect to make on a job, providing an incentive to get the work right first time.

Eventually this money is released, but only after an agreed defect free period has ended.

Problems arise because the system is often abused by clients and contractors who withhold money to boost their own coffers, regardless of the need to repair.

When this happens lawyers are set loose to scrabble over contracts, and fight over who is owed what, perpetuating construction's reputation for conflict.

But why does the 21st century construction industry need them? You would think that with all the partnering, framework agreements and general attempts to introduce a greater degree of trust within the industry, the need for retentions is disappearing.

Not so, says the Department of Trade & Industry, the Construction Clients Forum and the Construction Confederation, in their evidence to MPs.

Sadly it seems that defect free construction is still something of a holy grail for many projects.

Consequently there has to be a mechanism to protect clients from contractors' mistakes.

Which brings us onto the subcontractors. They often bear the brunt of retention abuse to the point where many are pushed to collapse. Spurred by their predicament at the bottom of the supply chain, their trade body the Specialist Contractors Group (SCG) looked into the consequences of scrapping retentions.

In its submission to the committee it showed that some clients have found doing so was relatively successful especially if their contractors were employed on long term partnering deals.

In one example, Gosport Borough Council ran two projects, one with retentions and one without, and found that 10 times more defects emerged in the project where money was held back. In another, a housing association found that its contractors could produce zero defects without retaining any cash.

So why is the system needed?

One suspects that by accepting it, contractors allow themselves psychologically to accept that there will always be defects.

They protect themselves and perpetuate the situation by jacking up their prices to offset the loss of money withheld.

Inexperienced, one off clients unable to use long term partnering arrangements will inevitably prevent retentions from becoming extinct. But for the rest of the industry it seems that clients and main contractors are generally reluctant to try something which could do everyone some good. Even though they are part of the solution, retention abuse, it seems, is not their problem.

Andrew Bolton is New Civil Engineer's news editor

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