The government's Construction Act review has made big shifts in the past year, but all the politically controversial issues are still in play
In this column on 16 September last year, I described the background to the 2004 review of the Construction Act, and how the process worked in practice. Four months later, the industry has been able to see the latest official summary of the comments received by the DTI, and also to read some more specific proposals by ministers. Some of the policy announcements are different from those floated in the March 2005 consultation document. We are now promised a further DTI consultation paper "in spring 2006", with government "conclusions" in summer 2006 "in time for" the 2006/7 parliamentary session. I use quotation marks deliberately, because none of the timescales originally intended have been met so far, and I doubt if these later ones will, either.
In fairness to the DTI, which has worked most assiduously on this project since chancellor Gordon Brown launched it in his 2004 budget, it is highly controversial, technical and complicated. Hardly a week goes by without lawyers and other experts scanning the issues minutely. That detailed scrutiny will certainly continue up to, during and probably after any parliamentary action.
I am a member of the "sounding board" of six people announced by construction minister Alun Michael last month. I have always sought to be impartial throughout this review process, and insisted that all views be heard during it. So, if I draw attention now to the government's changes of mind between the March consultation paper and last month's update, it is to point to real political problems for ministers, not to pass any judgments on their eventual decisions.
There are four significant changes. The first relates to the proposal by Graham Watts' adjudication working party that the law relating to the application of the Construction Act to unwritten or half written contracts should be clarified. Last March, the government declined to make the law clearer, but now it is considering it further. The Construction Industry Council feels that this issue needs political action. The government says that would require new legislation, not just a regulatory reform order. I expect continuing pressure to amend or strengthen section 107 of the Construction Act.
Two other adjudication proposals have also been rethought. Last year, the DTI was sympathetic to the idea of clarifying the independence of the adjudicator and giving them the right to rule in certain circumstances on whether they have jurisdiction or not. Both are now rejected. The independence issue can be dealt with by guidance, the DTI says, and the jurisdiction problem must remain one for the courts. Over jurisdiction, the DTI was undoubtedly influenced by the public criticism of specialist judges, who were critical of the original qualified support in the March 2005 document. We will hear more about this, especially from the specialist contractors. Jurisdiction issues have been a regular source of challenge in the courts to adjudicators' decisions, although the courts have normally supported the adjudicator.
I am a member of the ‘sounding board’ of six announced by construction minister Alun Michael
On payment, there is one big change. Last March the DTI was minded to outlaw cross-contract set-off, (as recommended in Constructing the Team in 1994). Now they regard the change as, potentially, too litigious, and more suitable for a contractual clause preventing it. The SEC Group will certainly lobby strongly for the statutory outlawing of such set-offs.
There are also two apparent payment decisions which will be highly political. The government is still considering banning "pay when certified" clauses, and it has rejected making "pay when paid" clauses inoperative where there is an upstream insolvency. These two issues produce conflicting commercial attitudes between the main contractors, represented by the Construction Confederation, and the specialist contractors' umbrella bodies, the SEC Group and the National Specialist Contractors Council.
MPs can expect plenty of letters about all this. The decision on whether to do anything will be decided by the government on political grounds. That is how ministers and their MPs are motivated to act on industrial matters, of little interest to the public. I will examine these political pressures in another column.