Construction companies not complying with new retentions law

6 August 2018

Nearly one third of NZ construction companies not complying with new retentions law

The NZ Specialist Trade Contractors Federation (NZSTCF) is concerned by findings of the 2018 BDO Construction Survey, which revealed that nearly one third of construction companies in New Zealand don’t seem to be complying with the new retentions law.

Graham Burke, President of NZSTCF, says this is not good enough and the sector and Government need to act.

“We advocated for a new retention regime to better protect subcontractors when events, such as the Ebert Construction collapse, happen. The new regime came into effect on 31 March last year and we are waiting to see its impacts on the sector,” says Burke.

“While we have been assured that Ebert retentions are available, we are concerned that this is not the case with a large proportion of companies. The recent survey by BDO revealed that many companies are not complying with the law. Subcontractors need to use the powers in the act to protect themselves and the Government need to hold contractors who do not comply to account.”

Burke says non-compliance with retention law is just one of a myriad of issues facing the sector.

“The system is broken and we need a new model. We have had more than 20 years of financial failures. There is not enough cash in the system, contractors have no certainty, margins are too low and they are taking on too much risk,” says Burke.

Burke says NZSTCF is committed to working closely with the industry to transform the sector.

“No one is winning in the current environment. Head contractors are being forced to tender fixed prices on open ended projects, which is a particular problem on design and build projects. Tenders are being agreed with minimal documentation as far as scope combined with incredibly complex contracts which push all risk from the client to the contractor and supply chain.

“The construction sector is failing to understand and manage risk. This is having a huge impact on our members – the subcontractors, who are too often being left unpaid for the work they have done.

“The current approach is unsustainable and will result in more subcontractors leaving the sector. At a time when New Zealand needs more capacity in the construction sector, we believe this should be a major priority for both Government and the industry.”

ENDS

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