There has been a heated debate for many years in the construction industry about the pros and cons of the practice of holding back a percentage of money due under building contracts. Employers see the significant benefit of withholding cash while works are carried out as a guard against, and incentive for a contractor to rectify, defects – money talks. However, contractors see it as an unfair denial of payment for work done and a strain on their cash flow, together with the risk of never seeing the money in the event of insolvency of the paying party.
Now, the Government has announced a review of the practice of retentions. The Department for Business, Innovation & Skills (BIS) hopes to develop robust evidence about the practice of retentions and the alternatives, particularly the costs, benefits and impacts for the construction industry and for clients.
BIS has commissioned Pye Tait Consulting to undertake this research on their behalf and if you have strong views we suggest you get in touch with them (www.pyetait.com) or do contact us if you would like assistance with any submission.
The Government launched its Construction Supply Chain Payment Charter in April 2014 and one of the commitments was to move to zero retentions by 2025. It may be that this new research will result in revised guidance or even legislation as part of the review of the Construction Act planned for the autumn of 2016.