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Construction Industry (Payment Practices)
The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths): I am pleased to announce that today, with Edwina Hart AM, the Welsh Assembly Government Minister for Social Justice and Regeneration, I have launched a joint consultation on "Improving Payment Practices in the Construction Industry".
The consultation proposes a number of amendments to part 2 of the Housing Grants Construction and Regeneration Act 1996 and the Scheme for Construction Contracts (England and Wales) Regulations 1998.
The proposals are aimed at improving the ability of parties to a construction contract to:
reach agreement on what should be paid and when given the work done under the contract or, where they cannot agree, to make an informed referral to, or response at, adjudication;
manage cash flow and enable completion of work on the project in the event of problems such as defaulted payments, disputes or insolvencies elsewhere in the supply chain; and,
refer disputes to adjudication without disincentives such as avoidance, frustration or unnecessary challenge.
Fair payment practice is something everyone agrees with and a fair payment culture underpins any progressive and modern industry.
This consultation considers a number of issues around the key principles of improving the ability of people in the construction industry manage cash flow on construction projects and to bring about effective delivery, on time and to budget. It provides the opportunity for the whole industry and its clients to come together around a shared set of proposals.
The consultation considers issues and proposals identified during Sir Michael Latham's initial review of the Construction Act, published in September 2004. Following the announcement of the review in the Budget in March 2004, I appointed Sir Michael to
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produce his report with input from the construction industry representative bodies and other stakeholders. Sir Michael's report raised some key issues. While the continued support of the construction industry representative bodies is vital to the effectiveness of this consultation process, we also hope to build a wider and deeper consensus on how to improve the construction contracts legislation and payment practices in the construction industry.
We have come a long way since the announcement of the review in the 2004 Budget and I hope this consultation process can take the dialogue within the industry further forward over the coming months.
The consultation considers 14 key proposals for amending part 2 of the Housing Grants Construction and Regeneration Act 1996 and the Scheme for Construction Contracts (England and Wales) Regulations 1998. These are:
Introducing a right to reimbursement for the costs of suspension and remobilisation and providing additional time for remobilisation under Section 112 of the Construction Act
Allowing stage payments under the scheme for construction contracts to be made for materials in advance of their arrival on site
Preventing the use of trustee stakeholder accounts to suspend an adjudicator's award pending litigation other than when the recipient is involved in insolvency proceedings.
Providing the adjudicator with the power to rule on certain aspects of his own jurisdiction and providing a right to payment in cases where the adjudicator stands down due to lack of jurisdiction.
Providing the adjudicator with the right to overturn "final and conclusive" decisions where these are of substance to interim payments only
Applying provisions on adjudicator independence from the scheme for construction contracts to all adjudications in section 108 of the Construction Act
The consultation period will close on 21 June 2005.