Dame Judith Hackitt has made it clear that retentions abuse hampers the delivery of safer buildings. Maria Balermpa of Actuate UK explains how our sector is working to change this and improve building outcomes.
In May 2018, over 100 MPs from across all political parties provided their support for a move to ring-fence retention monies. This wave of support came largely on the back of the collapse of giant contractor Carillion in January that year, leaving many millions owed to sub-contractors.
Peter Aldous MP, who had tabled a Private Members Bill to bring about the legal protection of retentions, noted the moment as: “A golden opportunity to improve industry for the better, level the playing field for SMEs and protect thousands of jobs.”
Unfortunately, the Bill slipped down the government agenda as Brexit swept up Parliamentary focus and time and a raft of matters have since kept the subject under the radar. However, problems due to retentions abuse have not gone away, and their effects have been directly linked to one of the most important issues facing industry today: Building safety.
In January 2022, the Department for Levelling Up Housing & Communities (DLUHC) introduced its Guidance on Collaborative Procurement for Design and Construction to Support Building Safety. The Guidance makes an explicit link between the use of retentions and ‘poor behaviours’ that compromise the delivery of safe buildings.
At a launch event for the Guidance, Dame Judith Hackitt, whose groundbreaking report on Building Safety following the Grenfell disaster ushered in the Building Safety Act, commented: “The Guidance is very clear in stating that retention policies in contracts which withhold payment to those in the supply chain are totally inconsistent with collaborative procurement.”
Dame Judith pointed out that many suppliers assume they will never receive their retentions payments. Therefore, in too many projects where retentions are applied, sub-contractors seek to cut costs and save money in whatever way possible. The result is reduced spending on training, a poor attitude to competence and even product substitution with substandard or non-compliant materials.
With a clear and direct link between retentions and compromised building safety, the industry must act – and should have government support once again to drive positive change. The ECA has therefore been working with sector partners through Actuate UK and the Construction Leadership Council, to put retentions firmly into the political arena and to keep it there.
By working with others and tackling the issue from several directions simultaneously, the aim is to pull as many levers as possible to deliver a workable solution to the problem.
Dame Judith Hackitt’s observations highlight that retention abuse is a deep-seated problem for the construction sector. ECA CEO Steve Bratt leads the Actuate UK policy on Business and the CLC Business Models working group. He explains the different strands of work involved: “We are looking at short-term and longer-term measures; from more collaborative procurement methods and transparency in supply chain contracts to alternatives to retentions or how they can be protected. Ultimately, we want retentions to become redundant, so it is important to tackle the issue at its root cause, therefore a CLC sub-group is looking at how best to deal with the question of defects”
David Frise, CEO of BESA, leads this sub-group and comments: “The long-term aim is to eliminate the need for retentions altogether. To achieve this we need mechanisms that can reduce and eliminate defective construction work, and a procurement and delivery model that recognises, incentivises and rewards good quality work by competent companies and awards work to those who have a good track record of quality and payment history”.
Retention abuse is being tackled across England, Wales, Scotland and Northern Ireland. In England, the cause has now been taken up by Lord Aberdare in the House of Lords. He introduced an Amendment during the Building Safety Bill process, with the aim of raising the retentions issue for discussion at high level.
Lord Aberdare says: “The first time I came across the issue of retentions was in 2015 and it is frustrating that after reviews, consultations, debates, the Carillion collapse and the Grenfell disaster, the abuse of the system continues. Retentions are a cancer affecting the construction industry and fixing this issue will require legislative intervention to root out bad practice. There is a lot of good guidance for best practice, often sponsored by Government departments, but there is a lack of either incentives or compulsion to follow it. I will be looking for other opportunities in the forthcoming legislative programme to raise the issue again.”
The governments of Scotland and Wales have also conducted formal and informal consultations on retentions, and are working on a response, possibly through legislation for their nations. In Northern Ireland the discussion has revolved around using project bank accounts for protecting retentions, and discussions are ongoing.
In this way, the campaign to change industry practice is knocking on as many doors as possible to push for solutions.
It’s vital that Actuate UK continues to hear from ECA Members about how retentions are affecting their businesses. The high-profile quarterly Building Engineering Business Survey (BEBS) asks about this important issue, so we ask all ECA Members to ensure they complete the survey when it arrives. It may seem like a small step but gathering supporting evidence will help us to achieve changes that will benefit our sector and improve safety outcomes for all buildings, their owners and crucially, their occupants.
Maria Balermpa is Operations and PA Manager at engineering services umbrella body Actuate UK
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