Recommendations include introducing new laws to establish a statutory custodial retention deposit scheme. This type of ringfenced account would protect cash from client or main contractor insolvency as well as the cash being used for other purposes.
The working group also wants to see a new automatic retention release system introduced.
This would see cash released at the earliest opportunity unless a clear issue had been identified and timetable for resolution agreed.
It also advises the Scottish Government to issue a retention best practice policy note by January 2022 and drive compliance on public sector contracts.
The working group also recommends that work should continue to consider and implement removal of retentions from contracts as achieved by Network Rail.
The working group was set up to make recommendations as part of the Scottish Government review on retentions.
The report efound that at any one time in the Scottish construction sector there are retentions worth around £124m with half being released at practical completion and half at the end of the defects liability period.
Engineering services contractor umbrella body Actuate UK has backed the reform plan.
Steve Bratt, CEO of ECA and lead on Actuate UK’s policy group on business practices, said: “Retentions abuse is still widespread across the UK and one of Actuate UK’s aims is to achieve full abolition of the practice.
“However, we recognise that certain steps should be taken towards this and we are therefore really pleased that the working group’s recommendations provide a clear framework for action and we look forward to industry and Scottish Government moving quickly to implement them.”
Alan Wilson, Managing Director of electrical trade association SELECT, said: “We welcome this report and its recognition of the seriousness of the ongoing issue of retentions.
“While we would obviously like to see retentions abolished completely, these recommendations are certainly a step in the right direction and we hope the Scottish Government brings them to fruition.
“We also welcome the requirement for contracting authorities to publish their retentions policy and, if they deviate from it, to be made to explain how and why.”
