Last-minute amendment as bill passed by Commons will reduce investment risk for PFI consortiums

The PFI industry was given a potential boost by a last-minute amendment added to the Construction Bill as it was passed by the House of Commons on Tuesday.

The change to the Local Democracy, Economic Development and Construction Bill allows consortiums to take part in PFI schemes without fear they will suffer huge adjudication decisions against them.

The amendment gives the government the flexibility not to enforce provisions in the 1996 Construction Act, which allowed subcontractors to take a PFI company to adjudication, despite the fact disputes between the PFI firm and public authorities had to go through lengthier and more costly court proceedings. The industry had argued this increased the investment risk and discouraged banks from lending money for PFI projects.

Marc Hanson, partner at law firm Ashurst said: “At the moment, the less discouragement there is for a bank to lend, the better. If this power were used to get over those particular barriers, that would be hugely beneficial for the industry.”

The RICS separately welcomed the removal of a different clause of the bill, which would have made the referring party in adjudication responsible for all the costs of the process. The RICS argued this would not allow SMEs fair access to adjudication. It called the change a “small but important victory for common sense”.

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