HOW DOES RETENTION IMPACT ON YOUR BUSINESS?

In construction, Retention is a percentage of the contract payment value which is withheld by the client for a defined period. Half should be released at project completion. The other half should be released following the expiry of a defects liability period. Holding retention money is a long established way for the client to provide an “insurance” for the effective delivery of construction Works. However, there are a number of issues associated with how retentions work in practice. There is evidence of frequent late and non-payment of retention monies, and in some cases this has known to be for unjustified reasons.

Aside from being a source of frustration for you knowing that after a hard fought tender process and a successful project delivery, your retention (and lets be honest invariably your profit margin), is being withheld for an extended period of time, there are numerous ways that Retention impacts on your construction business. See below some examples of same;

• • Retention has an adverse effect on your cashflow.
  • Retention reduces your profit margins.
  • Retention increases your financial exposure if your client becomes Insolvent.
  • Late payment of retention drains your administrative and management resources resulting in loss of productivity and missed opportunities.
  • Late retention payment can lead to dispute with your clients and often debt reduction or even write off!

Whilst retention is often an obligatory part of construction contracting which is here to stay at least for the foreseeable future, there are steps you can take to minimise the impact on your business. The above issues often occur when you sign up to a contract without knowing all the specific Retention contract conditions or where your client fails to administer the contract in accordance with the agreed contract provisions for example;

• • The retention % applied on sub-contracts is often in excess of the main-contractors’ terms with their client.
  • Retention is often unfairly applied to early trades for extended periods tied back to the main contract.
  • Retention is often incorrectly withheld on labour only contracts.
  • Retention is often not released at the 1st Moiety Stage (Project Completion)
  • Retention is often not released at the 2nd Moiety Stage (After Defects Liability Period)

If you have experienced any of the above issues and would like to have a trusted Retention partner on your side to manage all your retention needs from pre contract reviews to post contract retention management and full recovery, we would love to hear from you.

RetentionBack operate a specialist management consulting practice to assist main contractors, subcontractors and sole traders to manage and recover retention monies that has unduly been withheld by their clients.

We operate on a No Win, No Fee basis so we don’t get paid unless you get paid. We will provide you with a Fixed Fee in advance so there are no surprises.

Please get in touch today by completing our 30 Second Web Form, Call us or connect via Linkedin and our experienced team will contact you to arrange a Free no obligation consultation. 

Yours Faithfully,

Your Retention Back Team