Guidance > Commercial > Retention

Retention - the FPS Position

The Policy  to resist retention was the outcome of extensive discussions and research which revealed that:-

a) at the time of the survey (in 1993), over £10 million was owed to 15 Member companies in retention – of which £3 million was overdue for repayment;

b) over the previous 3 years those 15 Members had lost more than £1 million through the insolvency of companies holding retention monies due to them;

c) the cost of monitoring and chasing retentions (whether held legitimately or not) was a significant overhead for most companies;

d) the amount of retention held, particularly on smaller contracts, did not cover the cost of mobilisation back to site if defects were found and therefore did not fulfil the stated purpose of holding retention in the first place;

e) some clients and main contractors were quite open about the use of retention monies to maintain their own cash flow;

f) the interim Latham report ‘Trust and Money’, which at the time had just been published, recommended the use of retention bonds instead of withholding retention in cash.

In view of these factors Members agreed a resolution on 28 October 1994 to cease giving retention. The Resolution was adhered to by Members of the Federation and there have been no known instances where clients or employers have experienced difficulties due to the absence of cash retention. When  the Resolution was rescinded in 2003 it was replaced by a Retention Policy.

Companies have varied in their attitude to supplying a retention bond – especially for small contracts – and in some instances prefer to offer a company indemnity instead. The circumstances under which such bonds could be called are exceptional (ie where there is a defect and where the piling contractor is unable or unwilling to return to site) so the likelihood of such bonds being called is considered to be very low and similarly the risk to Clients if no retention is held is correspondingly low.

From a Client point of view, the best guarantee lies not in financial leverage, but in the selection of a properly qualified specialist contractor, able to carry out high quality work, with an established reputation to maintain. FPS Members have always acknowledged that In the event of a defect after leaving site, it is their own professional integrity which brings them back, not the possibility of losing the retention sum (which anyway may not cover the costs of remediation).