Changes to payment provisions receive criticism from industry bodies

Reforms to the Construction Act were announced in the House of Lords today with new alterations that will make life easier for subcontractors.

The Local Democracy, Economic Development and Construction Bill aims to reform the Housing Grants, Construction and Regeneration Act 1996, proposing alterations that would favour subcontractors over main contractors.

There are few changes to the proposals suggested in July. These included:

o Removing the requirement that construction contracts be in writing

o Introducing a proper framework for adjudication costs

o Removing restrictions on which party can issue payment notices, giving greater power to subcontractors

o Introducing a “fall back” provision, which will allow contractors to issue a payment notice if the payer fails to do so

o Banning “pay when certified” clauses

o Reinforcing the right to suspend work in the event of non-payment

The overall difference is a general simplifying of the act with many of the complicated wordings removed.

Rupert Choat, partner at CMS Cameron McKenna said the bill showed the government was taking the industry seriously. “More than anything it shows the government's willingness to make legislation in this area”.

But he said it also made clear the government had failed to listen to feedback from the industry, which had warned against clauses focusing too heavily on the payee.

Stephen Ratcliffe, chief executive of the Construction Confederation criticised the amendments, and said he believed the new payment provisions to be largely unhelpful.

“While we have always broadly supported amendments to the adjudication provisions,” he said, “we do not believe that the new payment provisions are helpful and they have certainly not achieved any consensus within the industry.

He added that the proposed payment provisions were “poorly drafted”, would not help contractors of any size, and would particularly hurt SME main and sub-contractors.

“They do not reflect the world in which contractors operate nor do they show much understanding of how payment works within the construction industry,” Ratcliffe said.

Rudi Klein, chief executive of the Specialist Engineering Contractors Group, however, said the payer was still getting “two bites of the cherry”.

He added that he was disappointed there had not been more changes to adjudications, and called for a single procedure for them instead of the various procedures currently in existence.