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Government delivers a cruel blow to the campaign against the hated retention system

THE GOVERNMENT has made a mockery of the industry's war on the retention system by totally dismissing the recommendations of a House of Commons inquiry into the hated practice.

A concerted lobbying campaign by contractors persuaded the Trade and Industry select committee to call on the Government to phase out retentions from public contracts by 2007.

But Whitehall mandarins have ignored the headline recommendation and a host of construction-friendly initiatives in their response, published last Thursday.

The reply states: 'The Government considers that it is not appropriate to adopt a target that focuses on a feature that results from poor client confidence, but rather on ways to remove the cause of this lack of confidence.'

The Government also rejected the committee's call to scrap retentions held by prime contractors on Private Finance Initiative deals, saying 'the practice is essentially a contractual matter between private sector parties'.

Rudi Klein, chief executive of the Specialist Engineering Contractors group, said: 'I think this is dreadful - from the Government's response, the select committee might as well have not reported in the first place. The grounds for optimism in the original report have been blown away.

'The galling thing is that the Government acknowledges there is no practical link between retentions and the quality of work.

'We're forced to assume that authorities need retentions at the expense of firms' cashflow. You detect the hand of the Treasury in this.'

The SEC group is planning a crisis meeting with the National Specialist Contractors Council and Federation of Master Builders today (Thursday) to plan a renewed lobbying campaign.

The specialist bodies will urge sympathetic MPs to bombard the Government with more questions and attempt to secure a parliamentary debate on the issue.

The response also rejected calls for a uniform approach to retentions across government departments, saying it was 'inappropriate, due to the great differences in size and scope'.

Suzannah Nichols, NSCC chief executive, said: 'We have written to the Office of Government Commerce to clarify the situation.

'The Government could have said this without even reading the report. It is simply not listening to the industry.'

A Construction Confederation spokesman said: 'The really disappointing aspect is the lack of a commitment from the Government to take a leading role as a client.'

Derrick East, managing director of Accolade Building Services, who gave evidence to the inquiry last October, said: 'The Government has shown little understanding of how the private sector works.'