黑洞社区

Sweeping proposals to reform payment practices have come under fire from main contractors, which have taken exception to government plans to change the Construction Act to give extra protection to subcontractors.

The DTI issued a revised set of changes to the Construction Act on Monday, after spending six months analysing industry responses to its consultation on payment and adjudication procedures. The essence of the proposals is that the reforms will give subcontractors greater power to demand payment from main contractors.

Alun Michael, the DTI minister in charge of construction, said: "In the wake of the consultation it seems clear there are procedural and commercial obstacles currently affecting the construction market in the operation of contracts under the legislation."

Michael acknowledged that some industry groups would be unhappy but defended the department's stance. He said: "Some elements of the package offer more to certain sectors than others. There is sometimes no easy answer but the developing consensus within the construction industry and its stakeholders remains a realistic aim to improve certainty in the payment and adjudication framework."

The proposals, which have been attacked by main contractors, include:

• Clarification of what payment is due and when: under the act at the moment there is no legal requirement for a main contractor to clarify when it intends to pay a subcontractor. Under the revised act there would be a timetable.
• Removing pay-when-certified clauses: the main contractor is now only obliged to pay the supply chain once work on the main contract has been certified complete by the client. Under the reformed act this would no longer be the case.
• Allowing subcontractors to claim for losses when suspending work over payment: under the act as it exists, subcontractors are liable for much of the cost if this occurs. Under the reformed act subcontractors could claim compensation for their losses and expenses.

John Bradley, the Construction Confederation's director of legal affairs, criticised most of the proposals as unnecessary. He said: "We would urge that any further regulation is fully justified particularly as the government claims it wants to reduce red tape and burdens on business."

The confederation particularly objected to proposals to clarify when debt was due, saying the burden could restrict parties' ability to contract. It also criticised the government's announcement that it would consider restricting or removing pay-when-certified clauses, which allow main contractors to withhold payment.

Both moves were hailed by specialist groups, including the NSCC and the Specialist Engineering Contractors Group. Rudi Klein, chief executive of the SEC Group, said: "The DTI is edging closer to a solution to the payment problem, particularly establishing when a debt is due. Their way of dealing with the problem is maybe over-complex, but it is heartening that it is getting to the nub of the problem. Addressing pay-when-certified clauses is also to be welcomed."

Suzannah Nichol, chief executive of the National Specialist Contractors Council, praised the proposals. She said: "It's fabulous that the DTI is moving to change the legislation."

David Pollock, director of the Electrical Contractors Association, also hailed the changes. He said: "Many of the key issues that concern our members have been identified in the consultation report."

Sir Michael Latham, who chaired the original review of the Construction Act and acted as adviser on the proposed amendments, said: "Clearly there are sections of the industry that are disappointed. There is still all to play for and no doubt they will make their views known."

The government intends to publish the proposals as a consultation document in the spring, allowing industry time to respond for the 2006/07 parliamentary session.

Both sides will lobby the government over the changes, with subcontractor groups continuing to seek measures on issues such as the absolute removal of pay-when-paid clauses, which can still be employed in cases of upstream insolvency.