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ARTICLE · 15 OCTOBER 2019

Is It Time To End Retention Payments?

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FINOLA MCCARTHY, Partner, Ronan Daly Jermyn, examines alternative means to retention of providing protection for clients, and questions what real value retention brings to projects.

IrelandReal Estate and Construction
Finola McCarthy
Finola McCarthy
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Retention is a longstanding feature of construction and engineering projects whereby a percentage of the contract price is withheld by the client as a safeguard against remedying defects. Half is released at project completion, and the other half is released following the expiry of a defects liability period. In preparing contracts, the debate is generally focused on the percentage of retention that is to be applied, and the question of whether or not retention is appropriate is not considered.

Is the time now right to review this practice?

The Issues

The retention of money has a considerable impact on cash flow for contractors and subcontractors, and many have experienced delays in the release of retention monies at the end of a project without justification. Research carried out in the United Kingdom in 2017 found that 71% of contractors surveyed experienced delays in receiving retention monies over a three-year period, with over half of those surveyed

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