The move comes after extensive lobbying by the Specialist Engineering Contractors' (SEC) Group. The SEC Group is collating evidence to submit to the inquiry and is confident of progress. "We would like to see a recommendation that all public sector contracts are let without retentions sometime in 2003," explained SEC Group chief executive Rudi Klein.
Retention sums are meant to be held by clients as an incentive to contractors to avoid defects, but are often used for cash flow. Sums are not protected from upstream insolvency and m&e contractors often suffer long waits trying to get money back.
"Local authorities use monies to invest in the market and to fund other projects," said Rudi Klein. "It is financed by those at the bottom of the chain who are least able to do it and corrupts the industry's ability to perform as it should."
The SEC Group is promoting the use of qualified firms and integrated teams, where everyone is treated fairly, as a better way to tackle defects. It will be drawing on the experience of clients that have abandoned retentions – Defence Estates, NHS and the Highways Agency in the public sector, and the likes of Tesco, John Lewis, Slough Estates and Stanhope in the private sector – in its submission to the Committee.
The SEC Group is focusing on the public sector as it accounts for 40% of the total construction spend. However, despite breakthroughs with the likes of Defence Estates, there is evidence that some main contractors are not passing the benefits of zero retentions down the line.
Estimates put retention monies taken in excess of £3 billion. The SEC Group is encouraging firms at the sharp end to come forward: "We need firms to give us examples of retention abuse," said Klein. "I've had one example of it taking one firm 12 years to recover £700 from a client."
Source
Electrical and Mechanical Contractor
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