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Memorandum submitted by the Federation of Small Businesses (FSB) and the Specialist Engineering Contractors (SEC) (LD 02)
PART 8 - AMENDMENTS TO THE CONSTRUCTION ACT.
The Local Democracy, Economic Development and Construction Bill - which is currently making its way through Parliament - has been introduced in part to amend the construction contracts legislation contained in Part 2 of the Housing Grants, Construction and Regeneration Act 1996 (often referred to as the Construction Act). This was designed to improve payment security across the construction sector.
Given that the overwhelming
majority of firms in the
FSB and SEC Group agree that improving cash flow within the construction industry is a priority especially during the current economic recession. We support changes to Part 8 of the Bill as follows:
· Simplification of the payment notice procedure is important. As drafted the Bill is complicated as the payment notice can come from both directions. The Bill needs to address this by allowing payment notices to come only from the payee to the payer. We are not aware of any other industry where the paying party, in effect, invoices the party who has just carried out the work. This is further compounded by the fact that the paying party is given the right to issue a second notice to reduce the amount that they have stated will be paid in the first notice. There should be a straightforward approach to payment whereby the party that does the work starts the payment notice process. · Any notice from the paying party that reduces the amount to be paid must be issued within 14 days of the due payment date. · The practice of pay when paid arrangements should be completely outlawed; the provision in the Construction Act enabling the paying party to refuse to make payment to the supply chain when their own customer has gone into insolvency must be abolished.
June 2009 |