Payment prompts

t every meeting of the Joint Major Contractors Group (JMCG), senior HVCA adviser Rod Pettigrew reports on the work of the Specialist Engineering Contractors’ (SEC) Group. Chaired by Trevor Hursthouse, the SEC Group is a powerful lobbying organisation. Its campaign over the last four years on retentions has been particularly effective.

Payment is always an important issue. It is an all-consuming headache for every ECA and HVCA firm. It has traditionally been seen as a punch-up between main contractors and their specialist subcontractors, with the builders portrayed as the bad boys who do not pay on time or offer the appropriate amount.

In truth, the angst flows all along the supply chain. The builders complain that the clients do not treat them properly and the JMCG members voice continued concern about how the payment flows to them from their builder employers. I have also attended several meetings at which members of the HVCA’s Ductwork Group have expressed dismay at their experiences at the hands of JMCG members. No doubt this problem is repeated at every level of subcontract on site.

The SEC Group has made these concerns known to the Government on many occasions. In his Budget speech in March 2004, Chancellor Gordon Brown announced that the Government would review the operation of the adjudication and payment provisions in the 1996 Construction Act “to identify what improvement can be made”. He made it clear that this review had been set up as a result of “concerns expressed by the construction industry on unreasonable delays in payment”. Those concerns came principally from the SEC Group and its sister organisation for trade contractors, the National Specialist Contractors Council.

The Government review was commissioned by the Chancellor, activated and assisted by the Construction Sector Unit in the Department of Trade and Industry, and reported to ministers. It was not at all like the review that I undertook in 1993/4. That was a joint government and industry review, carried out by one person and on which neither party would necessarily take any action if they did not agree with its conclusions.

Directly after the Budget, the Cabinet Office suggested a number of issues for the 2004 Review. These had arisen from a quick survey of regulation of the industry that it had undertaken for the Chancellor prior to the announcement.

There was another determining factor. The Government made it clear that ministers would wish to use the new legal option of Regulatory Reform Orders, by which burdens can be lifted from an industry by a statutory order, rather than involving the months of parliamentary procedure and debate that a new Bill requires.

Payment is always an important issue. It is an all-consuming headache for every ECA and HVCA firm

Such orders cannot impose hotly controversial changes. They have to be based on industry consensus, following widespread public consultation.

The first step was to set up a review panel. It was deliberately chosen to represent a wide spread of interested parties: government, professional consultants, main contractors, specialist engineering and trade contractors, clients, the industry in Scotland and expert construction lawyers.

The main work was done by two Working Groups. One dealt with adjudication and was chaired by Graham Watts, chief executive of the Construction Industry Council. The other was concerned with payment; its chair was Richard Haryott, a vice president of the Institution of Civil Engineers. Both Groups had similar membership to the main review panel.

The timescale was very tight. The panel first met in April, and the subgroups were required to report to it by the end of the summer. On 17 September I sent the reports of the two Working Group chairs, together with some thoughts of my own, to construction minister Nigel Griffiths (EMC, Oct, p7). This information is available at www.dti.gov.uk/construction/hgcra/hgcralead.htm.

What happens now? The review has done its work. Both Working Group chairs produced consensus recommendations that could be dealt with in a Regulatory Reform Order, if the Government so decides. They also highlighted deep disagreements, especially on payment issues, which cannot. The Government has published its proposals for consultation and possible action next year. It is all to play for and the SEC Group is sure to be involved.