BuildLaw BuildLaw: Issue 23, March 2016 | Page 23


The Scottish Construction Procurement Manual which applies to the central government sector in Scotland, sets out the need for those procuring construction works to employ project assurance measures to protect the public purse from becoming liable, but it does not specify that this should necessarily be achieved by the use of cash retentions:

“Decisions should be project based and processes should be proportionate to the specific circumstances of the project…Cash retentions or other traditional means of assurance should not prevail purely by default”.

The manual also lists some sensible alternative project assurance measures to cash retentions which are already used on a wide range of projects, not just in public procurement – such as retention bonds, performance bonds and parent company guarantees. Retention bonds are a win-win as the contractor has the monetary protection it requires and the sub-contractor keeps hold of its cash (and with the cost of the retention bond usually being factored into the price of the works). It also suggests that lessons could be learned from the trial of project bank accounts in Scotland and questions whether similar trust accounts might be used to administer retentions.

With pressure from lobbyists increasing and the government now launching a review of this area, both legal and industry reform may well be possible.

This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, please go to www.law-now.com

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