Recovering security in construction contracts: Learnings from Western Australia

Most commercial construction contracts require contractors to provide security in relation to their performance of the works, usually in the form of retention or bank guarantees. Such security is generally required to be partially released under the contract upon reaching practical completion or the issuance of the Certificate of Practical Completion. The remaining portion is released when the Final Certificate is issued after the defects liability period expires and subject to the principal or contractor up the line having recourse to it.

But what if that security is not returned in line with the contract? This can create cashflow challenges for the contractor. If a bank guarantee has been provided, this could affect the contractor's ability to secure further bank guarantees from financial institutions for future projects.