星空传媒

The September edition of EMC carried two letters concerning retentions. The ECA鈥檚 position is that retentions should become obsolete through improved procurement practice and that retention abuse should be outlawed.

Referring to Allan Wells鈥� point and industry standard forms of contract, the JCT Standard Form, as between client and contractor, states that 鈥渢he employer鈥檚 interest in retention is fiduciary as trustee for the contractor鈥︹�� and goes on to say, 鈥渋f the contractor so requests鈥� (the employer shall) place the retention in a separate banking account鈥�. It also gives the option for not holding retention at all, with the contractor providing a retention bond in lieu.

The reality is that a retention bond is as rare as England winning the World Cup and that the rules for setting up a trust fund are usually deleted, with the client retaining retention monies. Neither of these options cascade into the JCT Subcontract Conditions. The 2005 JCT Short Form of Subcontract requires the contractor to pay 95% of the value of work carried out by the subcontractor, thereby making no reference to retention.

Unfortunately, the reality is that even when standard forms recognise the issues caused by retentions (as in the JCT Main Form) employers usually amend them to suit themselves.

For these reasons, ECA has focused on promoting less adversarial procurement routes, through partnering and integrated teams, which bring benefits to both employer and contractors and render retentions obsolete. However, realising change of attitudes takes time, the Association believes that the immediate concern is the abuse associated with holding retentions, as illustrated by John Ewen. In Constructing the team, Sir Michael Latham said: 鈥淎n effective way to deal with this problem is by setting up trust funds for interim payments (and also retentions) and they should be underpinned by legislation.鈥�

The issue of retention is complex but what is clear is that any payment properly due should be protected. Trust funds and project bank accounts protect money which is due to the payee, remove the incentive to the payer to withhold and provide security of payment in the event of an upstream insolvency.

Martin Wade, Head of commercial, contracts and legal ECA