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Tue January 19 2021

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Scotland to set up working group on cash retentions

6 Nov 20 The Scottish government has said that it will form a short-life working group to consider the way forward for cash retentions in construction projects.

It has published an analysis this week of the findings of its public consultation, which looked into the practice of cash retention in public and private sector construction contracts in Scotland.

The Scottish government said that responses to the consultation along with its stakeholder event held on 5th March have helped to provide a greater understanding of the issues associated with the practice of cash retention in construction contracts in Scotland. Its statement said: “We will use the outputs from both to help inform our work in this area and we will form a short life working group to carefully consider the emerging policy options including; the possibility of a retention deposit scheme, the phasing out of retentions completely or the viability of alternative mechanisms of assurance.”

Almost all respondents to the consultation agreed that ‘some form of assurance is needed in construction contracts’, with only 6% disagreeing.

However, a majority of respondents thought that the current practice of cash retention was not ‘the best form of assurance within construction contracts’.

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The majority of respondents fully agreed or partially agreed that a ‘retention deposit scheme’ and/or holding retentions in trust could eliminate some of the critical issues associated with their use and provide surety against defects.

The Pye Tait report, Retentions in the Scottish Construction Industry, had been published in conjunction with the opening of the consultation process.

It illustrated the benefits and challenges with retentions, in particular understanding the extent to which this practice has positive but also negative impacts and what solutions would be effective and proportionate in addressing these.

The consultation received 33 responses, 25 of which were from organisations - mostly subcontractors and clients. There were 8 responses from individuals.

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