The proposed changes to the Construction Act payment rules are all very clever, but they won’t wash in the down-to-earth world of construction. We want something simpler
Changes to the Construction Act were recently introduced to parliament. All very exciting. Except that the procedural rigmarole will now lead the bill on a long and winding path through the House of Lords, then the Commons again, so don’t hold your breath. I confess that a copy has been on my desk for some weeks. I keep picking it up and reading the proposed “payment rules”. If I’ve tried to read them once, I’ve tried 20 times. When eventually I did, with heroic effort, get all the way through, I reached but one conclusion: they won’t do. They are far too clever. Whoever drafted it is ever so, ever so smart. I bet they know their Chaucer and their Homer, and are an admirer of Karl Otfried Müller. But I bet you a pound to a pinch of plaster that the joys of British Gypsum’s guide to drylining and plasterboard erection have escaped them.
So let’s look through the eyes of an adjudicator at the sticky issue of getting paid. I have one or two fundamental beliefs. First, almost all contractors know that they need good, loyal subcontractors working on their sites. Second, that they know that if they don’t pay their subbies, those lads get all out of shape. So when the cash comes down from the employer, they will (believe me) pay the subcontractors because that is what makes things work in construction. And let’s have another truth while we’re at it. Nothing in the first Construction Act in 1998 killed off “pay-when-paid”, despite what the act says. Builders still, and will forever more, pay their subbies when they get the cash from the employer. Got it? Of course you have. These are everyday truths.
The drafters knows their Chaucer and Homer. But I bet you that British Gypsum’s guide to drylining and plasterboard erection has escaped them
From an adjudicator’s point of view, this latest bill for building could do a good deal to make payment work ever so much more smoothly … for interim accounts at least. Let me tell you how.
I want the new payment rules to provide me with two sheafs of paper. One will be a notice from the payee saying what they consider to be the amount due in the next interim payment and the basis on which that sum is calculated. The second will be a notice from the payer saying what they consider to be the amount due in the next interim payment and of course the basis on which that sum is calculated. Put these two notices, these two “bases” for payment, in front of the adjudicator and three hours later you will have your binding decision. I would simply ask: “Which ‘basis’ do I find more convincing?” Choose we adjudicators can; decide we adjudicators will!
All I want the payment rules to say is that both payee and payer will send each other a payment notice indicating the sum due and a few papers explaining the basis. Go no further in the new act than that. If you like, you can put a gloss on the machinery by saying, for example, that the payee must serve up their notice a week before the payer or certifier. But that’s all. The new act need say nothing about bringing the inevitable differences to the adjudicator; just leave it to the disappointed party to take that initiative. If they like, they can do it the very next day. But the adjudicator’s job must simply be to decide on the matter using the “basis” in the two notices.
It’s almost utopian, isn’t it? A simple framework, where every construction contract has a mechanism for determining what payment will become due, and when, and the final date for payment. Then every payee and payer (or certifier in place of payer) will give a notice not later than five days after the “due date”. The difference between the sums in the two notices is a dispute that can be placed before an adjudicator.
Builders still, and will forever more, pay their subbies when they get the cash from the employer. Got it?
I bet you can, at once, see who will “win” when the two bases comes to the adjudicator. It will be the party that has put its back into compiling its paperwork. The surveyor or manager who carefully measures the work done, and shows it, will win over a party that looks and sniffs. The party that explains a variation and then carefully applies the valuation rules will win unless the other party explains their view of the matter more carefully. This is a competition of competence and it is refereed. The machinery is oh so easy and cheap. What’s not to like? Come on parliament, look sharp.
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple