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Retentions response is disgraceful

AGENDA Viewpoint

Subcontractors will continue to suffer after the DTI's latest decision, writes Suzannah Nichol

SO THE main contractors have yet again passed the buck down to the subcontractor - those specialists that employ the workforce, deliver the project and bear the costs of the outdated practice of retentions.

It has recently been reported that the Construction Confederation sought support from the Office of Fair Trading to prohibit resolutions by the Pre-cast Flooring Federation and the British Constructional Steelwork Association for members not to accept retentions in their contracts. The Federation of Piling Specialists has had such a resolution for the last 10 years - approved at the time by the OFT - which is now at risk of more negative action by the OFT.

The chief executive of the confederation is quoted as saying: 'This ban was a flawed idea from the start. It failed to remove retentions from the industry and simply altered where the cost implication fell.' So it is all right for the costs to fall on the specialist contractor?

We couldn't possibly have the main contractors bearing the cost could we? After all, the specialist already pays the majority of labour and unfixed materials costs, so why not hold the 2-3 per cent profit the specialist makes in retentions as well? So much for integrating the supply chain and accelerating change.

Unfortunately, the subcontractor has no one to pass the retention on to. He can hardly say: 'Sorry Jim, you will only get paid 95 per cent of your wages this week, I'll pay you the rest in two years. That's if you're lucky and really pester me for it!' or how about 'There's 95 per cent of your bill Mr Supplier, you'll get the rest after the defects liability period - as long as no-one else's materials fail.'

If main contractors recognise the unfairness of retentions (and they do, because they don't wish to bear the cost), why do they not join the campaign to rid the industry of this adversarial practice? The subcontractor continues to suffer retentions in the JCT forms of contract because they are a step down from the main contract. Perhaps the Construction Confederation could negotiate retentions out of the main contract so there would be no need to pass them down the chain.

And then we have the DTI response to the Trade and Industry Select Committee inquiry. We weren't expecting much but is this the best our sponsoring Government department can do? After the time put in by the members of the committee, and the effort expended by contractors to collate evidence, providing clear examples of the ineffectiveness of retentions, detailing the effects on small businesses and demonstrating that the link between defects and retentions is a misnomer, it is a great disappointment.

Indeed, from the mantra published as the Government reply, it would seem the verdict had been reached before the evidence had even been heard. Now the message is somewhat confused. Are retentions kept to prevent defects or because it would be a too difficult for all Government departments to have the same approach to procurement?

The Government should come out from behind the 'defects' argument which we all know to be a smokescreen and introduce a consistent approach to procurement. Select the contractor you trust and want to work with at the right price, truly integrate the teams and you will no longer need the reviled retentions.

Go on, be adventurous, put your foot down and let's really accelerate change in our industry.

Suzannah Nichol is chief executive of the National Specialist Contractors Council