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Civil contractors welcome retention payment announcement

9 September 2014
Media release

Civil contractors welcome retention payment announcement

Civil Contractors New Zealand (CCNZ) has welcomed the Government decision to make changes to the practice of construction firms withholding ‘retention’ payments.

Currently the developer and main construction firm can hold up to 10 per-cent of the sum owed to a sub-contractor, interest free, for the duration of the project as a guarantee of the quality of the work.

An issue arises when the developer or main contractor puts this money at risk by using it as working capital, or for another project which then fails, leaving the subcontractor unpaid.

CCNZ executive officer Malcolm Abernethy said: “Retention monies being used as working capital have resulted in significant losses for many sub-contractors when developer and main contracting firms go into liquidation.

“Under the new system proposed by Dr Nick Smith, the funds will be safeguarded by being held as if in a trust instead.

“These proposals are a very welcome move and a much-needed improvement to the Construction Contracts Act.

“Many of our members wait a long time to have retention payments made, especially those preparing the site, foundations or structural elements, who are required to wait until the final completion certificate is issued with no guarantee that the money is still there to cover the retention payments due. The huge losses suffered by sub-contractors through the Mainzeal collapse highlighted the urgent need to overhaul the retention system.”

Civil Contractors New Zealand is the new industry body formed by the integration of the New Zealand Contractors’ Federation and Roading NZ.

ENDS

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