In announcing the consultation, Scottish government minister for business Jamie Hepburn said: “Cash retention in construction industry contracts is common practice, including in the public sector. Its purpose is to ensure the contractor completes the job. However, it must be used proportionately and responsibly. The Scottish Government believes in fair and transparent working practices and a culture that supports prompt payment is essential to secure investment and jobs. Having listened to the construction industry’s concerns, a public consultation on the use of retentions in construction contracts will take place in spring next year."
SEC Group Scotland chairman Eddie Myles said he was delighted that the Scottish Government had decided to act on this issue. He added: “This announcement follows representations made by SEC Group Scotland at a meeting of the Cross-Party Group in the Scottish Parliament attended by the business minister. He was urged to act now rather than wait for any solution promulgated by the UK government which could take four or five years to come to fruition.”
Alan Wilson, SEC Group’s national executive officer, said that the Scottish government had already been presented with a solution by the co-chairmen of the Review of Public Sector Construction Procurement whose report was published over five years ago: “The review recommended that retention monies should be ring-fenced in a trust fund akin to the status accorded to monies held in project bank accounts. We expect the consultation to invite responses on this option.”
Ken Gillespie, chair of Construction Scotland, also welcomed the move. "Construction Scotland welcomes the Economic Action Plan’s intention to step up engagement with the construction sector and believes that, in the case of retentions, the aim should be to see them abolished completely by 2023. The failings in the system are widely recognised and there have been many calls for the industry’s customers and contractors to end their use. These have failed to gain traction, due principally to the lack of experience of, or research into, the use of alternative forms of project assurance.
SEC Group Scotland said that it is estimated that over £0.5bn of cash retentions will have been lost in the insolvency of Carillion. Carillion was withholding retentions from its supply chain on works at Faslane but did not have to provide a retention to the client, the Defence Infrastructure Organisation.
SEC Group Scotland represents six trade associations in Scottish construction: British Constructional Steelwork Association, Building Engineering Services Association, Lift & Escalator Industry Association, Select (Electrical Contractors Association of Scotland), SNIPEF (Scottish and Northern Ireland Plumbing Employers’ Federation) and Scaffolding Association.