Act now or else...

It is almost a year since the government finished its first round of consultations about the review of the Construction Act and still we wait to hear when the new act will be unveiled and what will be in it.

This is getting serious. One of the industry’s biggest and, sadly, most enduring problems is payment. No other sector seems to have so much trouble simply getting paid for what it does. We have an absurd situation where disputing parties often can’t agree when a debt actually becomes a debt. If you can’t establish that, you can’t begin to use the legal processes to appeal for payment or resolve the dispute.

For everyone’s sake this needs to be sorted out. The consultation on the revised act, which was intended to include a new payment mechanism, has been delayed and is now likely to be published some time this month. The looming deadline for completion of the 2012 Olympic venues has increased the pressure for a resolution, but the government does not seem to have been infected by everyone else’s sense of urgency. Yet our ability to deliver major infrastructure projects, such as the London Games venues, depends on some semblance of harmony breaking out between contractors, sub-contractors and clients. Payment disputes lead to delays and extra costs – all of which could be fatal to the Games.

Lack of resources is part of the reason why this review process is taking so long, but I fear that this is also regarded as a pretty low priority for a government confronted by a mass of major legislation in its next session ahead of the impending resignation of a prime minister.

However, 2012 is now only five years away and the original plan was for the main buildings to be completed by 2011. If the constructors are tied up in disputes over payment and lawyers are crawling all over the projects, you can be sure of a white-knuckle ride that will put the Athens experience in the shade.

Not the answer

We can hardly be accused of rushing the government into something. The introduction of statutory adjudication with the enforcement of the original act in 1998 was widely regarded as a major step forward for the sector – but there have been some perverse rulings from the Court of Appeal that have undermined adjudication in a number of cases.

If constructors are tied up in disputes over payment you can be sure of a white-knuckle ride to put the Athens experience in the shade

Also, it is simply unwieldy for every dispute – often over relatively trivial amounts of money – to be referred to adjudication, which was not intended to help value the work carried out, but to provide a quick and inexpensive dispute resolution process without constant recourse to expensive and lengthy legal proceedings.

Too often builders will shelter behind the act or ignore its ‘spirit’ in order to force unfair conditions onto subcontractors. Under the terms of the existing act, contractors should be paid in pre-agreed monthly instalments and an adequate mechanism should be in place to agree when a payment becomes due and how much it is. In practice, this is often still not happening and that is what the revised act must tackle.

A mechanism that makes subcontractor payment enforceable by law without recourse to adjudication every time would go a long way to smoothing out the disputes process, keeping projects on track and safeguarding cashflow for SMEs, who are the most vulnerable when payment is unfairly withheld.

Of course, there are instances when a subcontractor’s work is not up to standard and should be put right before payment is made. If there is a genuine dispute, that is when adjudication can come into play.

Our concerns are shared by more than 200 MPs, who supported an Early Day Motion calling for improvements to payment, and it was Gordon Brown himself who, in 2004, agreed that the provisions of the act be re-examined.

However, we are now in 2007 and we are still not entirely sure whether the new payment mechanisms are even under consideration. They must not only be considered, but also enshrined in the new act so that the industry can move forward and take on the big challenges the government wants us to tackle.