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Some 40% of construction clients already operate quite happily without requiring retentions and the list is growing. Peter Kitson, partner at Russell-Cooke reviews current practices and examines some alternatives—but why not scrap them, he asks?
Retentions have long been the subject of criticism for being cumbersome and potentially putting payees at risk if the client or main contractor goes insolvent
This risk is particularly acute for main contractors who are dealing with sub-contractors and other specialists
Since the collapse of Carillion, construction representative organisations have pushed for cash retentions to end by 2025
The Construction (Retention Deposit Schemes) Bill—a potential solution to these problems—would require any retained sums to be held in a 'retention deposit scheme'
This solution is complex, and many parties may choose to forfeit retentions rather than engage with those complexities
There are a number of fairly well developed alternatives: retention bonds, project bank accounts and even integrated project insurance. But how should parties decide?
I doubt that many transactional construction lawyers have spent much of their career arguing about retentions beyond the occasional discussion as to whether three or five per cent is the right level. In
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