Survey of 700 firms shows major payment difficulties remain one year after the Construction Act came into force.
The Lobby Group representing subcontractors wants to see three major changes to the Construction Act, all relating to payment problems.

After commissioning a survey of 700 firms, the Constructors Liaison Group is planning to send construction minister Nick Raynsford a report on what it sees as the shortcomings of the act.

The CLG is set to call for:

  • The banning of pay-when-certified clauses, which allow contractors to delay paying specialists until after they have deemed their work to be up to standard
  • The banning of stakeholder accounts, whereby cash awarded by an adjudicator is kept until a dispute is finally settled, possibly years after a court case or arbitration
  • Changes to the act's insolvency provision. This says contractors are allowed not to pay a specialist if the client goes bust.
CLG legal adviser Rudi Klein declined to discuss the contents of the report, but he said the survey showed that the act was still not having its desired effect.

He said: "Well over 80% of the subcontracts we were told about put in a provision which unfairly elongated the payment period for subcontractors in some way, whether it was through pay-when-certified or something else." Klein said that up to half the contracts picked up by the survey did not comply with the act at all, often because smaller clients and contractors had not heard of its provisions.

And he believed that half the bespoke contracts issued by the UK's top 50 contractors incorporated stakeholder accounts to hold up payments awarded after adjudication.

However, Construction Confederation director of legal services Clare Edwards said her group would fight every step of the way to prevent any banning of pay-when-certified clauses. She said these were vital to contractors' cash flow, and added that it would be wrong for firms to have to pay subcontractors when clients were not paying them.

"We would resist changes in this area very strongly," she said. "We have very strong arguments to refute the case the CLG will be putting forward." The survey, which was carried out by both the CLG and the University of Northumbria, also revealed that tendering abuse was still widespread.

Only 12% of tenders said any method of assessment other than price would apply. They said that, in 94% of cases, tenders had to be returned within three weeks, contradicting best-practice guidance.