'At last!' says HVR editor Paul Braithwaite in this month's editorial.
That's all I can say about the Olympic Development Authority's decision to ban retentions for its Tier 1 contractors.
'No m&e contractor can put his hand on his heart and say 'this is not my issue'. It's everyone's issue'
OK, it does add that in some cases, it will require a bond but
I can live with this as there are a number of ways around the issue.
I suspect that you can live with that too because the alternative
is retentions.
Let's look at retentions. Only construction has this toxic law. It think the nearest is the ABTA Bond, which means that the public gets its money back if a holiday company goes to the wall. And that is as it should be.
But I digress. Retentions mean that in many cases the client or the main contractor withholds 5% of the sub-contractor's money throughout the period of the work. On practical completion, 2.5% of this is handed over and the other 2.5% is given, in theory, a year after the job is finished. I say 'in theory' because there is many a slip 'twixt cup and lip.
There are many stories about mechanical contractors which have not received their monies when they have completed the project because other contractors have not finished their work or, sometimes, those who work for the main contractors have not finished. And 5% is a lot of money.
In these times when profits are falling, 5% is sometimes the profit on a job and sometimes it is more than the profit.
The HVCA says that hundreds of thousands of pounds are still outstanding from work done and money not received.
When I interview readers for my Contractor Profile articles, I always ask the retentions questions. Most of you have other contractors for whom you will not work because you do not get paid. It is no use throwing good money after bad, you say.
However, while we must congratulate the ODA on its announcement, there are other issues on retentions.
First off, no m&e contractor can put his hand on his heart and say 'this is not my issue'. It is everybody's issue.
Further, while the ODA will police the Tier 1 contractors, there is nothing to stop sub-contractors down the line from withholding retentions and so on. You do not need to do this, so don't. There is a recession. Every firm needs its cashflow, now perhaps more than ever.
What may seem a small amount to retain could mean the difference between a sub-sub-contractor going bust or not.
Once again I applaud the ODA. The big question for the industry
is: when are the government and other big industry clients going to follow suit?
1 March 2009