Construction Act fails to protect

Engineering contractors are demanding amendments to the Construction Act to ensure it provides the specialist sector with adequate protection against non-payment from main contractors.

Legal experts are currently revising the Construction Act. The Act is intended to cover payment laws, but specialist engineering firms claim that in its current form it does not protect them against non-payment.

Rudi Klein, chief executive of the Specialist Engineering Contractors Group, said the organisation will be submitting a proposal for main contractors to provide a bond promising payment in exchange for a bond that underwrites a contractors performance.

He said: “We’ll be proposing that when a payer [main contractor] wants a performance bond, then the payer would be obliged to provide a payment bond guaranteeing payment to a payee [specialist contractor]”

Klein said the SEC wanted the review of the Construction Act to solve payment problems. “We want the review to get rid of the pay-when-paid and pay-when-certified clauses”.

The SEC proposed the revision because several specialist engineering firms had got their fingers burnt in a number of recent high profile main contractor insolvencies.

Klein said the problem was that clients select a specialist contractor who then gets paid by a main contractor: “Clients appoint an M&E contractor, but this M&E contractor ends up being paid by a middle man [the main contractor].”

A small number of M&E firms are already refusing to work without an upfront payment from clients, for fear that they will be out of pocket if companies higher up the supply chain go bust. Klein said Mechelec, a subsidiary of the RTT group is one such company that had secured upfront payment from a client.