SEC pushes for five year public sector retention phase-out

The Specialist Engineering Contractors’ (SEC) Group’s recommendation for the phasing out of retention payments by 2007 in all public sector work contracts was rigorously put to the recent Department of Trade and Industry (DTI) Select Committee’s oral hearing into the use of retention payments in the construction industry. The timescale is aligned to the Accelerating Change strategic targets.

The point was made that if the public sector - both central government and local government - is committed to being a ‘best practice client’ then it should dispense with retentions that only reflect a lack of trust and an adversarial approach to contracting. It was confirmed that Defence Estates, the National Health Service (NHS) and the Highways Agency have all indicated their willingness to discontinue the practice of retention payments.

Rudi Klein, chief executive of the SEC Group, said, ‘At the moment £10 billion worth of public sector work is retention free, but we still have a long way to go to reach our desired target by 2007.’ He continued, ‘Retentions are holding back real potential, and the overall cost to firms is phenomenal in terms of inflated prices and lack of resources available for investment in health and safety, training, innovation, and IT research and development.’

The Select Committee took note of the fact that retentions were at risk from insolvencies upstream. The SEC Group has also invited the committee to request, as an interim measure in public contracts, that retention payments are returned to the subcontractor on completion of his work.

The SEC Group believes that retentions are contrary to the push for a no defects performance culture within construction, Klein concluded that, ‘The only way that we can eliminate the risk of defects is through the government backing of an industry wide quality inspection scheme. That way those firms which qualify, and only they, should be given public sector contracts.’

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