DTI launches consultation on payment practices

The proposed changes will be introduced as primary legislation rather than a legislative reform order, which means it will go through Parliament as a bill rather than being amended by ministers. This will delay the introduction until mid-2008 at the very earliest, and some heads of industry believe this could lead to proposals being diluted or lost.

The consultation 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 Specialist Engineering Contractors Group (SEC) welcomed the consultation.

Industry and Regions Minister Margaret Hodge, who announced the proposals, 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.”

Hodge launched the consultation in conjunction with Andrew Davies, the Welsh Assembly Government Minister for Social Justice and Public Service Delivery.

The DTI has proposed the following changes:

On adjudication

Access to the right to refer disputes for adjudication will be improved 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.