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Retention - Letter of Advice
- Module
- M2CPM2 (M2CPM2)
- Institution
- Nottingham Trent University (NTU)
Letter of Advice
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Letter of AdviceMKM Project Managers,
25 Ellendale Park,
Ellen brittle 356 E8,
United Kingdom.
6 February 2023
The Head – Leisure Activities,
Newark and Sherwood District Council,
NG24, Castle House,
Newark NG24 1BY,
United Kingdom.
Dear Sir/Madam,
RE: Retention Provisions in Contracts – Recommendations for the Project
As you may be aware, the contract for the Construction of the Newark and Sherwood Fitness and
Leisure Centre was awarded to Messrs. R.G. Carter Construction at a sum of £10,000,000.00 for a
duration of fifty-two (52) weeks. The works are to be procured using the design and build
approach.
Having noted your concerns regarding the unfair retention provisions in the standard forms of
contract, we hereby wish to provide you with an outline and recommendations on the project as
follows;
1. Retention – what it is, its purpose and challenges.
Retention is an amount in percentage form of the certified amount due to the contractor on an
interim payment certificate, that is deducted from the paid amount and is retained by the client.
The purpose of retention is to provide the client with security to ensure that the contractor
completes the work properly and returns to correct the defects, should there be any during the
Defects Liability Period (DLP).
Half of the retention is released after practical completion is certified and the remaining half once all
the defects are corrected and certified. Retention is applied to the value of the works, including
variations or changes. Release of retention varies in each contract, depending on whether there is
sectional or partial completion. However, most contracts allow for partial release once the client
takes partial possession. A delay in the release attracts charges like simple interest. Some
challenges are;
➢ Usually involves large amounts which affect the cash flow in the supply chains.
➢ Delays in payments due to an unforeseen occurrence in the main contract or subcontract.
➢ Risk of non-payment due to a client or main contractor insolvency.
➢ Incorrect identification of defects.
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