In summary the new proposals include:

• Introducing a requirement that certification of the sum due, by either one of the contracting parties or a third party, becomes an essential feature of contractual payment mechanisms.

• Removing the section 110 (2) requirement for a payer notice.

• Introducing a right to apply for payment if a certificate is not issued by the due date.

• Making certain payment mechanisms, including pay-when-certified clauses, ineffective.

According to Alun Michael: “These changes will improve the existing framework which clearly makes a valuable contribution to fairness in the way construction contracts are agreed and operated.”

The current proposals form part of the analysis of responses to the joint consultation "Improving Payment Practices in the Construction Industry" that was launched last year by the then Construction Minister, Nigel Griffiths. At that time he observed that: “Fair payment practice is something everyone agrees with and a fair payment culture underpins any progressive and modern industry”. According to Alun Michael this issue is one that all the responses have recognised. There were 356 responses in total. These responses can be viewed on the DTI’s web site.

The consultation proposed a number of amendments to Part II of the Housing Grants Construction and Regeneration Act 1996 and the Scheme for Construction Contracts (England and Wales) Regulations 1998.

Further proposals are to:

• Enhance the existing right of suspension under the Construction Act to allow the suspending party to claim for loss and expense.

• Prohibit the use of trustee stakeholder accounts for awards made by adjudicators.

• Make final and conclusive clauses unenforceable where they apply to decisions under the contract that are of substance to interim payments only.

• Take forward the Government's existing commitment to make contractual agreements on adjudication costs unenforceable and to provide a statutory framework for allocating them, including cases where adjudicators resign in response to a challenge to jurisdiction.

According to the DTI the next step will see the Government working with the construction industry over the coming months to ensure that, when amendments are published for further consultation, they are based upon a clear and thorough understanding of all the issues.

The DTI will be developing the proposals with the aim of ensuring that they match the needs of the construction industry and its clients, as well as the strict requirements of the Regulatory Reform Order framework.

To develop the proposals in detail and better understand their potential impacts in advance of further consultation, the DTI will be working with a sounding board over the coming months. Attendance will be on an invitation only basis. Members will include construction industry representative bodies such as the Immediate past chairman of the Society of Construction Law, Chairman of the Royal Institution of Chartered Surveyors' Dispute Resolution Faculty Board, Sir Michael Latham, His Honour Humphrey LLoyd QC (Barrister and arbitrator specialising in construction law), Chairman of Constructing Excellence.

At the time of going to print a post-consultation event, organised by the DTI for the construction industry to consider the way forward with the industry has not yet taken place. An update will be provided if relevant.

Improving Payment Practices in the Construction Industry considered 14 key proposals for amending Part II of the Housing Grants Construction and Regeneration Act 1996 and the Scheme for Construction Contracts (England and Wales) Regulations 1998 aimed at improving the ability of parties to a construction contract to:

• Reach agreement on what should be paid and when, given the work done under the contract or, where they cannot agree, to make an informed referral to, or response at, adjudication.

• Manage cash flow and enable completion of work on the project in the event of problems such as defaulted payments, disputes or insolvencies elsewhere in the supply chain.

• Refer disputes to adjudication without disincentives such as avoidance, frustration or unnecessary challenge.

The DTI intends to introduce changes to the Construction Act by Regulatory Reform Order (RRO). Assuming it is possible to implement the measures through this mechanism, the DTI intends to issue a final package of amendments for further consultation in Spring. A further update will be provided when a revised statement to take account of any further changes or new developments is issued.

Common Commencement Dates 2006

We have received a number of queries regarding the current statement of forthcoming regulatory changes. By way of reminder, common commencement dates (CCD’s) were introduced by the Department of Trade and Industry (DTI) to provide business and stakeholders with more clarity and awareness about regulatory changes to be introduced. The aim was to help them to plan and budget for new measures and so reduce costs. The DTI also aimed to give more stability and certainty to companies, employee representatives and individuals.

CCD’s were first piloted by the DTI in 2004 (in the area of domestic employment legislation). They were so successful they were first extended to three further areas in 2005 and as of 2006 they have been rolled out to all domestic policy areas.

We have reviewed the statement and can confirm that no specific CCD’s have been fixed of relevance to the commercial construction industry. A revised statement will be issued by the DTI in July to take account of any changes or new developments.

In addition to announcing the changes to be introduced on either 6 April or 1 October, the statement lists changes to domestic law where:

1. The implementation date has been previously announced.

2. Legislation is introduced to comply with international agreements.

3. Sector specific legislation is historically introduced at certain periods of the year.

Additionally, it also lists changes arising from European law that do not fall within the CCD process.

The current statement of forthcoming regulatory changes sets out the following:

1. Changes to take effect on 6 April 2006

2. Changes to take effect on 1 October 2006

3. Regulations not aligned with the CCD timetable

4. European Regulations not aligned with CCD timetable

5. Other key activity by DTI that will impact on 2006 and beyond

A further update will be provided in July when the DTI issues a revised statement to take account of any further changes or new developments.

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