Will we ever have an industry in which well-run subcontractors do not continually face financial ruin because they happen to work for a contractor that goes bust?
It’s a pertinent question for two reasons. The first is the news that Benson, which collapsed at the end of last year, owed £23m to 3000 suppliers (see page 20). Second, for the first time since the Latham report and the subsequent drafting of the Construction Act, we can envisage a period where possibly, just possibly, the balance of power shifts in favour of the small firm.
The opportunity is there because the ODPM is reviewing the workings of the Construction Act and the Treasury has set up a fair payment taskforce. The SEC, which represents specialist engineering contractors, has been lobbying both departments to provide its members with statutory armour. It has also been talking to the National Audit Office, which is running a health check on the sector.
Specialists will see the first fruits of this work in a fortnight, when the government publishes a consultation paper on the reform of the Construction Act (see page 52). This will look at the act’s payment rules – but the odds are against the introduction of effective protection for the victims of Benson-style collapses. The key proposal is the mandatory setting up of project trust funds. This idea was floated by Latham 11 years ago, and promptly blown out of the water by the clients. There seems no reason to believe they would accept it now – although it should not be out of the question for public sector contracts. Another possibility is a mechanism whereby clients would pay subcontractors directly if the main contractor went bust. This would be hard for even a sympathetic government to introduce as it contravenes the principle that all unsecured creditors be treated equally.
Where the odds are shorter is, surprisingly, the act’s pay-when-paid rules. Currently, a firm can withhold payment if the party paying it goes bust. Straws in the wind suggest this clause, inserted to protect main contractors, may be removed. This would shift markedly the balance of risk, and unleash a screaming catfight. The question then is simple: whose interests are more important – the main contractor’s or its subcontractors’? Or, to put it another way, which of them can lobby the loudest?
Denise Chevin, editor
The Prince and the cavalier
You can well understand why, 21 years after Prince Charles kicked architects squarely in the middle of the dinner they’d invited him to, they’re a bit nervous around him. This week, he had go at “our cavalier attitude” to the built environment, and the next day RIBA president George Ferguson scrambled to defend his members – despite the fact that they hadn’t been attacked. Charles was talking about “our” failure to connect the built environment with the population’s health and well-being. He went on to say: “We have to think much more carefully about healthcare environments.” Well, this is exactly what the King’s Fund, CABE, NHS Estates and many architects also believe. Where they may have a quarrel is with Charles’ familiar view that healthy environments have to be traditional ones. It’s hard to see architects signing up for that.