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Retentions Roundabout

17 July 2019
Progress on Construction Industry Payment Protection

The construction industry is seeking much needed improvements in ensuring prompt payment to its supply chain and protection retention monies held do cover defective works. Various initiatives are being actioned but are we really making any progress?

 

First: The Aldous Private Members Bill has had its first reading, proposing third party trust schemes for retention monies, in January 2018. The second reading is much delayed and more than a year later there is no current date scheduled.

Second: In January 2019 a Labour MP Debbie Abrahams introduced a 10 minute rule Bill proposing project bank accounts for all public sector projects worth more than £500,000 aimed at protecting businesses from contractor insolvency higher up the supply chain. The intention is for all monies on these projects to be made through a project bank account system thereby ensuring contractors get paid on time and have protection from insolvency of the main/tier 1 contractors. This is moving forward to a second reading.

Third: Build UK have entered the scene. It was created after a 2015 merger of the UK Contractors Group and National Specialist Contractors Council, is said to represent 40 per cent of the construction industry from clients and tier one contractors to specialists and trade bodies. Last year they, together with the Civil Engineering Contractors Association, rejected the Aldous Bill in favour of the abolition of retentions. Other industry bodies have aligned themselves with this view.

Build UK are committed to see retentions disappear by 2023 and their members have now agreed to ban retentions on contracts lower than £50,000. Additionally above £50,000 the retention percentage will be a maximum of 1.5%. The body has also issued contractual guidance to incorporate these minimum retention standards in contracts.

 

Summary: There is an industry consensus on the need to protect payments in the construction supply chain. Whilst Bills are being proposed in Parliament this is seen to be a lengthy process and it now looks as though the industry itself is taking the lead with the actions of Build UK.

However there is one other current initiative to take note of. The Government and the Construction Leadership Council (CLC) worked to deliver the Construction Sector Deal which aims to transform the industry’s performance through a £72m investment in the Construction Innovation Hub. Included in its remit is changing the way clients procure, contract, pay and incentivise to adapt and unlock the latent productivity and innovation that sits across the construction suppliers.

 

Is this the top down action the industry needs to actually achieve progress and get us off the roundabout?

Further Reading

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