C2S Construction Focus – Retention & fall-out from Carillion

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C2S Construction Focus – Retention & fall-out from Carillion

A full house of members of C2S and Constructing Excellence members attended the joint Focus Group Meeting hosted by Allcooper. Many thanks to Roman Cooper for his overview on Allcooper and all the team at for their very kind hospitality.

We heard from Tom Rolfe from the Channel Partnership on Credit Insurance – a timely conversation considering the issues and fallout from Carilion.

The morning included a lively debate, open discussion and an overview on retention from C2S and Kevin Harris Head of Business Services at 79 Group and Chair of Constructing Excellence Gloucestershire on the practice of cash retentions in construction.

Retention is a contractual practice originally introduced to provide security against defective work or the insolvency of construction firms.  It is customary that the first half is released at practical completion and that the other half is released following the expiry of a defects liability period.  Sub-contractors often find that main contractors will not release any retention until PC of the main contract works, and often seek to hold on to retention for 18-24 months (rather than the “typical” 12months). In theory, retention encourages efficiency and productivity for the construction project.  It helps ensure that contractors achieve practical completion on a timely basis so their initial retention payment is released.  The use of retentions also acts as an incentive for a defect-free project at the end of the defects liability period.

Delays in paying retentions appear to be commonplace.  Average delays at each tier of the supply chain are several months.  The extent of this average delay is significantly longer further down the supply chain (or for tier 2 and 3 contractors compared to tier 1 contractors.

Anna Wood, Senior Associate at BPE Solicitors and Vice Chair of Constructing Excellence Gloucestershire explained briefly about the legal contractual obligations around retentions, reminding those in the room always to check their contract carefully both before signature and during the works so that all parties are aware of, and adhere to any administrative obligations regarding retention. Also highlighted were the difficulties of finding retention terms to equally suit the funder, employer, contractor, sub-contractors and tier 3 suppliers.