6 January 2009 01:08

Changes to the "Construction Act" The Second Consultation.

In June of this year the then Department of Trade & Industry introduced the second consultation period for changes to the Housing Grants Construction & Regeneration Act 1996 ("the Construction Act").  In the forward to the consultation document Margaret Hodge stated that the second consultation period on a "full package of measures" would "improve transparency and clarity in the exchange of information relating to payments thereby enabling parties to construction contracts to manage cash flow better; and to encourage parties to resolve disputes by adjudication".

The consultation document which runs to some 92 pages appears to look at the problems encountered by the construction industry in seeking to follow the requirements of the Act and, which requirements have led to a considerable number of challenges in the courts relating to the interpretation and operation of the Construction Act. "

The proposals set out in the consultation document are as follows:-

To improve transparency and clarity in the exchange of information relating to    payments to enable the better management of cash flow

To encourage parties to resolve disputes by adjudication where appropriate

To improve the right to suspend under the contract

In order to achieve this it is intended that they will be implemented by way of the following:-

In respect of adjudication -

Ensuring the costs involved in the process of adjudication will be fairly allocated

Improving access to the right to refer disputes to adjudication by applying legislation to oral and partly oral contracts

Preventing the use of agreements that interim payment decisions will be conclusive to avoid adjudication on interim payment disputes

In respect of payment -

Preventing unnecessary duplication of payment notices

Clarifying the requirement to serve a Section 110 (2) payment notice

Clarifying the content of payment and withholding notices

Ensuring the payment framework creates a clear interim entitlement to payment 

Prohibiting the use of pay when certified clauses

On suspension -

Improving the statutory right to suspend performance by allowing the suspending party to claim the costs and delay that result.

The Government has stated that this is not a major reform of the Construction Act, but rather the proposals are intended to be "proportionate amendments to the existing framework to address specific issues that have arisen during the nine years the Construction Act has been in operation".  This is to be welcomed and it is clear from the second consultation that the Government has been prepared to listen to the complaints raised by the construction industry as to the problems they have encountered in operating the Act as it currently stands.

The consultation period ends on 17th September when the responses will be considered and thereafter the appropriate legislation drafted.  It is however exceedingly unlikely that due to pressure on parliamentary time these new changes will not unfortunately be with us for some time.

Sarah Shemmings
August 2007

 

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