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Payment Bill receives industry-wide support

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  1. As a Construction Director I agree. Everyone needs more protection, but let’s not stop here. Why not review the entire payment process for all parties and make it fairer for all, for main contractors, subcontractors and consultants.

    Why do we have a system that allows clients to fund their projects through others?

  2. This bill, whilst welcome in improving the situation, does not address the root cause, which is the imposition of cash retentions in the first place.

    Also retentions are ultimately a cost to the client in that the cost of money is reflected in the contractor’s overhead

    Our industry, I believe, is alone in having retentions imposed upon it. Can you imagine holding 10% when you buy a new house or car ?

    Also the article was silent on who determines whether or not the retention should be released? As we all know our business is riddled with excuses to hold money back from subs for reasons some of which are spurious some of which are genuine. The difference between spurious and genuine is, like beauty, “in the eye of the beholder”.

    No the answer is to establish the use of retention bonds in UK practice. Apart from guaranteeing all the things that retention guarantees it would also, because of the investigation of the bond company or bank into the financial viability of the subcon, help to weed out those subs who did not have the financial capacity to fund their work.

    John Porter
    FCIOB

  3. Although I welcome the reforms in retention I don’t understand why no one is looking at the 120-day payment terms that Carillion were imposing on their subcontractors. The loss from having not being paid for up to 150 days of work would have been much more than the retention.

    Payment terms need further reform and the UK should adopt a system similar to the Security of Payments legislation in Australia which gives maximum payment terms of 15 days for head contracts and 30 days for subcontracts. This ensures that the main contractor is in positive cash flow while providing reasonable terms to the subcontractors.

  4. Having read an article in CM by Colin Harding, I am like him in thinking Old School.
    Retention percentage is held by the contractor’s QS off all subcontract payments although the LO subbies are not happy. In turn, the client reduces payment to main contractor by the same retention percentage. In my experience, retention money has to be claimed by the subcontractor rather than be paid automatically in a lot of cases.
    There is an argument for withholding retention in that getting snagging done is more likely to be less problematic when retention is held. Therefore, I cannot imagine the retention scenario changing.

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