Department for Business, Innovation and Skills
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Plans to improve construction payment practices launched
Plans to improve payment practices throughout the construction industry were unveiled today by Industry and Regions Minister Margaret Hodge. The sector is one of the UK's biggest industries, accounting for nearly nine per cent of the economy. It has improved payment practices over the past decade but problems remain.
The consultation, developed with broad industry support and involvement, builds on the current system and seeks to:
* Introduce greater clarity and transparency into the statutory payment framework to enable construction companies to better manage cash flow;
* Encourage parties to resolve disputes by adjudication; and
* Identify how the costs and benefits of the package can be evaluated.
The consultation was launched by Minister for Industry and the Regions, Margaret Hodge in conjunction with Andrew Davies, the Welsh Assembly Government Minister for Social Justice and Public Service Delivery.
Margaret Hodge said:
"It is essential for the construction industry that we have in place a system which delivers fair payment practices. The framework set out in the 1996 Construction Act has delivered some improvements but recent industry surveys say that poor payment practices continue to be a key issue for many in the industry. We must change that. I believe this package represents good progress in securing a better payment system for the industry.
Andrew Davies said:
"These proposals are intended to support the current effectiveness of the Construction Act and the fine balance between the range of interests it has been able to strike. They represent a focused set of amendments which are designed to address specific weaknesses which have been identified in the current operation of the Act"
Sounding board member Peter Rogers, Stanhope plc said:
"I am delighted that this consultation is being launched today. The proposals it contains have been subject to detailed scrutiny by the sounding board, as well as more widely by the industry. Fair payment must underpin more integrated working practices. The construction industry now has the opportunity to consider measures which should be in the better interests of all of us." Guidance remains the preferred route to improve the operation of construction contracts and further legislative intervention is suggested only where it is absolutely necessary. Prompt and fair payment practice throughout construction supply chains will help the construction industry to adopt integrated working as the norm.
This will be achieved by:
On adjudication
* improving access to the right to refer disputes for adjudication by:
* applying the legislation to oral and partly oral contracts
* preventing the use of agreements that interim payment decisions will be conclusive to avoid adjudication of interim payment disputes
* ensuring the costs involved in the process are fairly allocated
On payment
* preventing unnecessary duplication of payment notices
*
clarifying the requirement to serve a section 110(2) payment
notice
* clarifying the content of payment and withholding
notices
* ensuring the payment framework creates a clear
interim entitlement to payment
* prohibiting the use of pay
when certified clauses
On suspension
* improving the statutory right to suspend performance by allowing the suspending party to claim the costs and delay which result.
These proposals are intended to be proportionate amendments to the existing framework to address specific issues that have arisen during the nine years the Construction Act has been in operation.
Legislation to implement the proposals emerging from this consultation will be introduced as soon as Parliamentary time allows.
Notes for Editors
1. This consultation covers the primary legislative proposals in detail as well as the consequential amendments that will need to be made to the Scheme for Construction Contracts (England and Wales) Regulations 1998.
2. Copies of the consultation document are available from the DTI website.
3. DTI established a sounding board to consider proposals to amend the Construction Act. Sounding board members did not represent specific sectors of the industry but were asked to assist in view of their personal knowledge, experience and access to industry networks. The sounding board has been invaluable in assisting with the preparation of the proposals. Its members were Richard Bayfield, Chris Dancaster, Richard Haryott, Sir Michael Latham, HH Humphrey Lloyd QC and Peter Rogers CBE.
4. It was originally intended to introduce proposals using a Legislative Reform Order (LRO) under the new Legislative and Regulatory Reform Act 2006 but due to the importance and significance of the plans it has now been that it would be more appropriate to introduce these proposals using primary legislation.
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