New dawn fades

Although the Construction Act was launched a year after Labour came into power, it was, as Tony points out opposite, Tory legislation. It was the baby of Robert Jones, the minister for planning and construction, introduced in response to the 1994 Latham report.

There was cross-party support for the bill, but Nick Raynsford, Labour’s spokesperson on construction, felt it had a gaping hole, as it made “no provision for the establishment of trust funds to guarantee payments” as recommended in Sir Michael Latham’s report.

After he became minister for construction, Raynsford brought the act into force. In a House of Commons debate in February 1998, Raynsford said: “If there is clear evidence of abuse we shall stop it. There is widespread agreement that there must be monitoring.”

In May 2000, Raynsford voiced more concerns: “It is widely accepted that the act has made things better. However, there are still some problems and we shall consider those as we review progress.”

One glaring problem was that pay-if-paid clauses remained and were not outlawed, so employers could avoid payment if a third party payer became insolvent, the very problem that Latham’s trust funds were to have resolved. Jones had planned to carry out a review of insolvency in the construction industry but he never did this and neither did Labour.

In June 2000, Raynsford invited the old Construction Industry Board to review adjudication. Following this, in April 2001, the old DETR published a consultation document on changes. These included proposals for a single statutory procedure and the outlawing of the cost provisions that required a referring party to pay the other side’s costs irrespective of the adjudication’s outcome.

Then Raynsford departed to become local government minister and the rot set in – over the next few years we had four ministers and the DTI assumed responsibility for construction among its myriad other responsibilities.

Since then, evidence has accumulated that the act needs surgery. Payment periods have increased from 76 to 88 days. Almost 60% of subcontractors experience delays or abuse on government projects. In contrast, 86% of firms in other sectors are paid on time. Evidence has also mounted of the increasing costs of adjudication. A Hammonds survey indicated that for disputes up to £10k the average adjudicator’s fee was 12.4% of the sum claimed, and the Construction Confederation said the cost of enforcement ranged between £25k and £75k. More adjudications are now between clients and main contractors than main contractors and subcontractors, suggesting that, for the latter, adjudication has become less accessible.

It was the chancellor, not the DTI, that announced a review of the Construction Act in his March 2004 Budget. Latham was appointed to carry out the review, but by then the Brownites were beginning to doubt whether the DTI had a future.

By the time of the first consultation on changes to the act in March 2005, Latham’s proposals had been watered down. Although there was consensus on most of the issues, the changes were ignored and diluted further.

Is there anything here that tells us about the past 10 years of Blair? Like most governments that have been in power a long time, reforming zeal has become lost along the way. The question is whether Brown will re-ignite the fire. Margaret Hodge is charged with putting matters right, but will she be there after Brown takes over? If not, the review could end up being that and no more.