Retentions in the residential sector

When, if ever, do or would you use retentions for subcontractors? If not, what do you do to ensure the quality and speed of yoursubbies’ work

Firm: Spectrum Construction

Principal: Isaac Driver

Location: Auckland

Staff: 9

We do some light commercial work and for those jobs, I use retentions. For residential work, I don’t normally, as I’ve built up a working relationship over time with all of my subcontractors.

If I don’t know someone, I might make use of retentions because I can’t be sure about the quality of their work.

I also use them on larger jobs, because it helps give the client confidence that if something goes wrong, they’re not going to be left holding the can once their final payment clears. 

If I do use retentions, it’ll only ever be a small amount such as 1% or 2%. If during an inspection we find something that has gone wrong, I’ll have a discussion with the subcontractor concerned to figure out what went wrong and whether it’s their fault or was beyond their control.

Generally, though, because we have such a good relationship we can sort it out pretty easily and, because we’ve worked together for so long, we all understand what we expect from one another.

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Firm: Kainui Builders

Principal: Stu Burman

Location: Thames Valley/Waikato

Staff: 3

I don’t really use retentions, but I might on a big job.

Most of our work is alterations and renovations; we only tend to build one or two homes a year.

I’ve also worked with most of my sub trades for years.

I trust them and they trust me. I still inspect their work regularly on each job, but there’s never many issues – they know I’m a fussy bugger and work accordingly!

I haven’t sat down yet and had a good read through what the incoming changes entail, but generally I think they’ll be good for the industry.

One advantage of a retention is that it does provide subbies with another incentive to do a good job, but because of the relationship I have with my people, they’re not really necessary for us.

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Firm:  Todd Grey Building Ltd

Principal: Todd Grey

Location: Mount Maunganui

Staff: 6

No, I don’t use retentions because I’ve used my sub trades for so long that we know what we’re going to get from them.

I do quality checks before they file their invoices and that gives me the opportunity to raise any concerns before making payment and, because of the strength of our relationship, they always sort any issues that do come up in a timely manner.

The only time I’d ever use a retention would probably be if I was taking on a new subcontractor, or the client wanted to withhold money from me – as the main contractor, I’d want to spread that load across the sub trades. That’s never happened yet, though.

We generally only have one or two large jobs on at a time, which makes staying on top of inspections easier than if we were a larger business. For bigger companies, I think retentions would be useful as it makes your subbies more accountable when you’re not in a position to be making regular inspections.

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Email your answer with your full name, contact phone number, company name, number of full-time staff and the city or town in which you’re based to editor@pmundersconstruction.co.nz. All responses must be submitted by 25 May 2017. The answers to this question will be published in Under Construction July 2017.