Gordon Brown announced last month that the Construction Act (officially known as the Housing Grants, Construction and Regeneration Act 1996) is set to be amended. According to the Department for Business, Enterprise and Regulatory Reform the proposed changes could save the industry £1 billion by improving payment frameworks.
The key amendments worth highlighting are:
• Removing the requirement that the construction contract needs to be in writing in order for the Act to apply. The effect of this will be that contracts that are currently barred from being referred to adjudication will be able to be dealt with by adjudication.
• The introduction of a statutory framework to calculate which party in adjudication should bear the costs of it. Currently a stronger party can contractually oblige a weaker party to bear all of the costs regardless of the outcome of the adjudication. The effect of this is that a weaker party may feel that the cost of adjudication, even where it has a good claim, is prohibitive and therefore make it less willing to bring a claim.
• Prohibiting agreements that state that interim or stage payment decisions are conclusive. The effect of this amendment is to ensure that disputes regarding stage payments are not barred from adjudication.
• Providing clarity and certainty for payees in relation to statutory payment framework to include the “due dates” and “final dates” for payment.
• Amending provisions in relation to the right to suspend for non-payment. It is proposed that the Act is amended to include a right to recover payment for the reasonable costs of suspending work as well as an entitlement to additional time for the period of suspension and remobilisation.
The Department for Business, Enterprise and Regulatory Reform has indicated that parties have until 12 September 2008 to provide them with comments on the proposed amendments.