The causes of defects (listed in descending order of importance) were:
- Unclear or missing project information
- Design not working
- Low-quality design
- No co-ordination of design
- Lack of buildability
- Designer not understanding materials.
In August 2000 the DTI published a paper on behalf of the Built Environment and Transport Foresight Panel, which said: "Design-based defects are a major cause of customer dissatisfaction."
On the other hand, in the process plant industry, there is much anecdotal evidence that defects are often found in manufactured items and equipment.
But, the point of this discussion is not to lay blame at the door of consultants and manufacturers. My point is that the causes and incidence of defects (including the rectification of defects) have nothing to do with retentions. Research carried out last year by the Building Services Research and Information Association revealed that retention monies were not used for the purpose of rectifying defects.
This has been acknowledged by the House of Commons' trade and industry committee. Last year, its inquiry into retentions received more than 30 written submissions from the industry and its clients. The committee also took oral evidence from representatives from the industry, clients and government. In December, it recommended the phasing out of retentions in the public sector and PFI by 2007. The practice was, it reported, "outdated" and "frequently harmful", especially to smaller businesses.
The government's response was lacklustre. Usually matters rest there but – unusually – the committee has now published a second report as a commentary on the response (or lack of it).
Retentions constitute an unbelievable amount of waste – £4bn a year
The committee did not pull any punches. The practice of retentions constitutes an unbelievable amount of waste. About £4bn a year (including a needless cost to the public purse of £750m a year) is wasted. The committee said it had not received any evidence of benefits from this outlay of funds.
The committee has this to say: "It is now commonplace for such [retention] monies never to get paid." And it was dismissive of the government's position: "The government was content to accept any conclusion or recommendation directed at third parties, [but] it did not accept any that would require it to take specific action itself."
Essentially, the government was saying that it would not agree to a target of 2007 for phasing out of retentions because it wanted to see defect-free construction achieved first. Apart from the fact that the government had not produced any evidence linking the defects and retentions, this was simply a formula for doing nothing.
The committee concluded:
- Government departments should set an example and eliminate retentions as soon as possible.
- The objectives of defect-free construction and the elimination of retentions are complementary and "should be pursued with equal enthusiasm".
- The government's progress toward defect-free public sector construction and the impact this has on retentions will be monitored by the committee.
The government is to respond by mid-November. The (relatively) new construction minister, Nigel Griffiths, has gone on record saying that in 10 years' time people will have difficulty remembering the meaning of the word "retentions". I share his confidence.
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group.