Saturday, September 19, 2009

Call to abolish retentions

Construction risk specialist CR Management is calling for retentions to be abolished across the industry.

Experts at the firm believe the collection of retention funds by main contractors is becoming increasingly problematic with employers refusing to accept that defects have been cleared.

Employers are also accused of hiding behind "trifling excuses" to avoid paying out cash which rightfully belongs to the contractor and its suppliers.

CR Management has worked with a number of contractors who are owed more than ВЈ1m in retention cash.

CR wants to abolish retentions and instead pay valuations gross so even if the employer goes into liquidation the money is safe and both main contractor and subcontractors will have collected what they are owed.


Call to abolish retentions


Jason Farnell, Partner of CR Management said: "The industry needs to embrace a modern way of dealing with retentions. Everyone is suffering all down the chain, from the largest contractors to the smallest sub contractors.  The retentions have been earned so they should be passed down.

"All retention money does is protect the employer against problems, but there are better ways of doing this that would deal with the underlying issue and the particular company responsible rather than penalising the whole supply chain.

"At the very minimum contractors should insist on retention monies being set aside in separate trust accounts and resist any contract amendments that would remove this right.  Likewise sub-contractors would do well to request that the contractor obtains this right on their behalf. 

"However, the ideal would be to avoid retention funds and seek alternative forms of security, such as bonds, then, rather than wasting industry resources collecting, administering and disbursing retention, we can deal with the real issues of value and quality. Therefore we call for an abolition of retentions and a more enlightened approach to disbursing cash and addressing performance risks."

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