PERCEPTIONS OF THE RETENTION SYSTEM IN THE CONSTRUCTION INDUSTRY

Abstract

The retention system of withholding a portion of payment to contractors and subcontractors is a peculiar feature of the building industry. In the past decade or so there has been much discussion about the practice of retentions in the US and UK construction industries. Anecdotal evidence without concerted research suggests that problems exist within the practice in the New Zealand construction industry, which this study will address. Retention practice affects the whole construction supply chain, but the effect the practice has on each party varies significantly. Thirteen interviews were carried out with experienced construction industry professionals, including clients, contractors, subcontractors and consultants. An analysis of their recorded views and perceptions revealed diverse views. Most agreed that problems with retention are very serious, the worst affected being the subcontractors who do not have much control or say. However, they said, in the absence of any better alternative, the practice is working well in its current form. Further research will work out some alternatives to the traditional retention practice so as to create more balance and fairness for all the parties involved in the supply chain.