Cash retention under construction contracts: consultation analysis

2. Conducting the consultation exercise

On the 4 December 2019, the Scottish Government published a consultation paper which sought information on the practice of cash retention under construction contracts and gathered views on the supporting documentation. The consultation was open for 23 weeks and closed on the 13 May 2020.

The purpose of this consultation was to seek information on the practice of cash retention in public and private sector construction contracts in Scotland and to gather views on the findings of the supporting documentation. 

The Pye Tait report on Retentions in the Scottish Construction Industry^[7] was 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 a negative impacts and what solutions would be effective and proportionate in addressing these. 

A number of key issues were identified by the research: 

• Evidence suggests that a significant proportion of companies say they deliberately avoid business in which retentions are involved. 
• It suggests that the current system operates to the advantage of clients and Tier 1 contractors but to the disadvantage of medium and smaller companies, particularly where a contractor insolvency might occur. 
• Qualitative evidence suggests that late and non-payment of retention monies is a significant issue for some contractors; and 
• There is a need to investigate a fairer, more neutral and more protected approach to assurance in construction contracts. 

Unjustified late and non-payment of a retention or any other amount owed is unacceptable. This consultation gathered views and information on: 

• the effectiveness of existing prompt and fair payment measures for retentions; 
• views on the Pye Tait independent research on retentions in the construction industry; 
• late and non-payment of retentions; 
• the effectiveness of existing alternative mechanisms to retentions; and 
• the benefit of holding retentions in a retention deposit scheme or trust account.