Government consultation paper hailed as a ‘bold’ approach by industry leaders as it tackles contentious issues
Industry figures this week hailed the government’s review of the Construction Act as a “bold” step, as it outlined a series of measures to reform bad payment practices.
The consultation paper Improving Payment Practices in the Construction Industry, published by the Department of Trade and Industry on Tuesday, also put forward proposals to tighten up the adjudication process.
Two key reforms that have been extensively lobbied for will clarify when a debt has arisen and will see contractors reimbursed for costs incurred when projects hit delays.
Sir Michael Latham, chairman of the Construction Act review panel that met last year, praised the government for not shying away from contentious issues, such as protecting the supply chain from insolvency.
He said: “The government has been very bold in taking on matters where there was no consensus between industry sectors in original discussions.
We are concerned that it will be difficult to find a consensus
Stephen Ratcliffe, Construction Confederation
“There were strong feelings on both sides of the debate, and the government has tried to reflect all views rather than ignoring them. It also goes further than I expected to address payment.”
Latham’s praise for the scope of the review was echoed by industry figures. Stephen Ratcliffe, Construction Confederation chief executive, said: “We welcome the opportunity to contribute our views on these important issues and will participate fully in the consultation exercise.”
However, Ratcliffe warned that the industry must not block progress. He said: “We are concerned that, because of the diverse views held across the industry on some of the payment issues raised, it will be difficult to find a consensus. There is also some doubt whether all the items are appropriate for review and what benefit there would be if amendments were carried out.”
Some industry groups feel the government could be pushed further, particularly over protection for companies against main contractor or client insolvency. The document stops short of banning pay-when-paid clauses in these cases, a stance that has annoyed specialist groups.
The government has been very bold in taking on these matters
Sir Michael Latham, Construction Act review
Rudi Klein, chief executive of the Specialist Engineering Contractors’ Group, said: “I welcome the fact that the majority of issues discussed in the review have been aired. But we are unhappy about the lack of protection of supply chains from insolvency upstream. This is important after the collapse of firms such as Ballast and Spectrum.”
Klein and Latham said they were disappointed the recommendations on adjudication procedures did not offer stronger guidance.
Latham said: “We would have liked something to say that if a contract is not wholly written, parties can still refer a case to adjudication.”
Construction Act review at a glance
- To include a definition of when a debt occurs
- Withholding notices to state the remaining amount that the payer intends to pay
- Right to reimbursement for suspended work, covering remobilisation costs
- Pay-when-paid clauses remain effective in upstream insolvency proceedings
- An adjudicator has the power to rule on their own jurisdiction on whether there is a dispute
- An adjudicator can overturn interim payment decisions