DEPARTMENT OF TRADE
AND INDUSTRY News Release (P/2007/121) issued by The Government News
Network on 20 June 2007
Plans to improve
payment practices throughout the construction industry were
unveiled today by Industry and Regions Minister Margaret Hodge.
The sector is one of the UK's biggest industries, accounting
for nearly nine per cent of the economy. It has improved payment
practices over the past decade but problems remain.
The consultation, developed with broad industry support and
involvement, builds on the current system and seeks to:
* Introduce greater clarity and transparency into the statutory
payment framework to enable construction companies to better
manage cash flow;
* Encourage parties to resolve disputes by adjudication; and
* Identify how the costs and benefits of the package can be evaluated.
The consultation was launched by Minister for Industry and the
Regions, Margaret Hodge in conjunction with Andrew Davies, the
Welsh Assembly Government Minister for Social Justice and Public
Service Delivery.
Margaret Hodge said:
"It is essential for the construction industry that we have
in place a system which delivers fair payment practices. The
framework set out in the 1996 Construction Act has delivered some
improvements but recent industry surveys say that poor payment
practices continue to be a key issue for many in the industry. We
must change that. I believe this package represents good progress
in securing a better payment system for the industry.
Andrew Davies said:
"These proposals are intended to support the current
effectiveness of the Construction Act and the fine balance between
the range of interests it has been able to strike. They represent
a focused set of amendments which are designed to address specific
weaknesses which have been identified in the current operation of
the Act"
Sounding board member Peter Rogers, Stanhope plc said:
"I am delighted that this consultation is being launched
today. The proposals it contains have been subject to detailed
scrutiny by the sounding board, as well as more widely by the
industry. Fair payment must underpin more integrated working
practices. The construction industry now has the opportunity to
consider measures which should be in the better interests of all
of us." Guidance remains the preferred route to improve the
operation of construction contracts and further legislative
intervention is suggested only where it is absolutely necessary.
Prompt and fair payment practice throughout construction supply
chains will help the construction industry to adopt integrated
working as the norm.
This will be achieved by:
On adjudication
* improving access to the right to refer disputes for
adjudication by:
* applying the legislation to oral and partly oral contracts
* preventing the use of agreements that interim payment decisions
will be conclusive to avoid adjudication of interim payment disputes
* ensuring the costs involved in the process are fairly allocated
On 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 which result.
These 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.
Legislation to implement the proposals emerging from this
consultation will be introduced as soon as Parliamentary time allows.
Notes for Editors
1. This consultation covers the primary legislative proposals in
detail as well as the consequential amendments that will need to
be made to the Scheme for Construction Contracts (England and
Wales) Regulations 1998.
2. Copies of the consultation document are available from the DTI website.
3. DTI established a sounding board to consider proposals to
amend the Construction Act. Sounding board members did not
represent specific sectors of the industry but were asked to
assist in view of their personal knowledge, experience and access
to industry networks. The sounding board has been invaluable in
assisting with the preparation of the proposals. Its members were
Richard Bayfield, Chris Dancaster, Richard Haryott, Sir Michael
Latham, HH Humphrey Lloyd QC and Peter Rogers CBE.
4. It was originally intended to introduce proposals using a
Legislative Reform Order (LRO) under the new Legislative and
Regulatory Reform Act 2006 but due to the importance and
significance of the plans it has now been that it would be more
appropriate to introduce these proposals using primary legislation.
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