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Retentions bill: Let me set the record straight

Rudi Klein

‘The Retentions War’ – that was the title of Lucy Alderson’s excellent feature in the last issue of CN. While it was eye-catching, some perspective is required.

All industry bodies want an end to cash retentions. Furthermore, they all want legislation to implement change to a system that has bedevilled the industry for years, especially small firms.

So, one might ask, what is the argument about?

The answer comes down to agreeing the best way forward. We are all familiar with the proverb, ‘a bird in the hand is worth two in the bush’ – that it is preferable to have an immediate benefit than the potential of a greater one some time in the future.

This was acknowledged by the firms commenting in CN’s article and by the hundreds of companies across the UK that I’ve spoken to over the last few years.

As explained in the feature, attempts have been made in the past, mainly by SEC Group, to get rid of cash retentions – but government has been reluctant to act.

What is the problem?

The proposals of the Construction (Retentions Deposit Schemes) Bill – commonly referred to as the Aldous Bill – would stop the withholding of cash retentions unless they are ringfenced in an independent scheme.

But one of the contributors to CN’s feature, Suzannah Nichol from Build UK (who is unable to obtain a consensus among her members for the bill) argues that the Aldous Bill “doesn’t fix the problem”.

“Ms Nichol says the Aldous solution is a “quick fix”. But there isn’t any indication of what a statutory ‘slow-fix’ solution would look like”

What is the problem? Retention monies are unprotected (unless you happen to work directly for a public body) and are never released on their due dates. The bill would fix both issues. 

Ms Nichol says the Aldous solution is a “quick fix”. But as another commentator observed, there isn’t any indication of what a statutory ‘slow-fix’ solution would look like.

Rest assured

She adds there is not enough time to expend energy on this bill, and that the industry’s time would be better spent targeting legislation to abolish retentions. Let me put her mind at ease on this.

The Aldous Bill is already in parliament. All the industry needs to do now is to inform the government that it should support (or, better still, adopt) the bill’s proposals without further delay.

If the government wishes to amend the bill, the industry would be receptive to a dialogue on this.

If the bill was to become law, it will reduce the demand for cash retentions, thus making further legislation unnecessary. 

If the monies cannot be used and abused, there would be little advantage to be gained from withholding them in the first place.

This approach now seems to have been accepted by the Construction Leadership Council (CLC), the government’s industry sounding board.

The CLC’s recently published Procuring for Value report stated: “The objective should be to have a statutory mechanism that protects cash retentions and to eliminate retentions by 2025.”

There can be little excuse for the industry not uniting around this objective. In fact, the overwhelming majority of firms would expect anyone opposing this to have some very cogent reasons. 

Rudi Klein is CEO of the Specialist Engineering Contractors’ Group

Readers' comments (1)

  • If I were to buy a car and say to the dealer that it's fine but I am going to withhold up to 5% of the payment indefinitely just in case something might go wrong with it, I would be laughed off the premises. The same would be true for anything else I buy. So why then, as an industry does anyone put up with the notion that monies will be withheld just in case your work might not be in accordance with the contract after all? It is and always was a ridiculous facet of the industry born out of long outmoded ways of working under outdated standard form contracts which were 'traditional' when I came into the industry over 40 years ago. Today, there already are robust methods of dealing with this 'just in case' issue, but the industry, as ever, remains completely divided as to how to deal with the problem. Until everyone, including building procurers develops a consensus about it we are not going to solve the issue. A ring fenced retention scheme forced onto the industry will I fear merely add to the inherent administrative burdens already prevalent within our industry without actually solving anything.

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